Exit Planning Parameters for Family Businesses PPT

This PPT slide, part of the 26-slide Family Business: Third Generations Tensions PowerPoint presentation, outlines the parameters of exit planning for family businesses, emphasizing the importance of establishing a clear ownership philosophy. It categorizes various aspects of exit strategies into a spectrum of control, ranging from loose to tight control.

The first parameter is Timing. Options vary from ad hoc requests at the seller's discretion to structured buyouts that occur periodically, allowing for liquidity events every few years or once per generation. This flexibility in timing can significantly impact the financial health of the business and its stakeholders.

Next is the Prioritization of Buyers. The options range from allowing any eligible shareholder to buy in, to prioritizing branches of the family, with the tightest control limiting sales to the owner's branch only. This illustrates how family dynamics can influence who is deemed eligible to participate in ownership transitions.

Funding options are also critical. Businesses can utilize company funds through equity or debt, or establish a redemption fund, which serves as a liquidity pool managed by the company. Seller credit is another option, allowing for staggered payments over several years, which can ease financial strain during transitions.

Valuation methodology is the final parameter discussed. It can range from market value assessed by a third party to a pre-agreed formula based on key financial metrics. The tightest control option is book value or a multiple of it, reflecting a more conservative approach to valuation.

Overall, this slide serves as a valuable framework for family businesses contemplating exit strategies, highlighting the need for careful consideration of timing, buyer selection, funding, and valuation methods.

EXPLORE MORE SLIDES FROM THIS PRESENTATION

EXPLORE MORE PRESENTATIONS ON

Family Business Sales