The “Family” in your Family-Owned Business

The "Family" in your Family-Owned Business

Advising a client to grow value in their business before an exit comes with more than its fair share of challenges. However, when the business is a Family-Owned entity, you can face even more hurdles. Family-Owned or controlled businesses make up to 90% of all businesses in the United States and represent a large market for CEPAs. As a CEPA, you are certified to manage the personal, financial, and business planning that is involved in a business exit. The CEPA training also covers the nuances in dealing with a Family-Owned business versus a corporate business. Highlighting key stress areas in Family-Owned businesses will provide your clients with more value in their exit plan.

Intergenerational Expert, Thomas Deans, Ph.D., writes in his book, Every Family’s Business, that there are 12 questions for Family business owners to ask during a transition period. Deans discusses how to effectively manage family dynamics while coordinating exit options within Family-Owned Businesses. Whether the transition takes place or not, it is important to set a framework for owners and their family to get the most value from their business.



The first question is one that every business, should be asking:

“What does our business look like in the next five years?”

In asking this question to all family members in the business independently, you see differences arise. Some might wish to sell the business, one might want to acquire a competitor, and another might like to increase overall sales by 15%. This question sets a baseline for future conversations both within the family and with their CEPA and advisory team. Aligning each family member’s personal business goals into an overall business goal is the first step in creating a more cohesive business structure.

Another question that should be asked in a Family-Owned business is:

“I understand that from time to time we will receive unsolicited offers from third parties to acquire the business. Will these offers be considered and accepted at the discretion of the controlling shareholder and supported by the child?”

Any offers from third party buyers must be discussed with every member of the business family. Planning for the future of a business involves a lot of “what if” situations. “What if my son does not want to sell third party?”, “What if the third party offer is so high, it would not make sense to pass on it?”, “What if my daughter wishes to buy the business down the road?” Determining if and when an owner and their family will sell to a third party will eliminate some of the stress that can arise when an unsolicited offer is made.

The most important question listed in Deans’ book relates to business valuations.

“In preparation for the annual update of this blueprint I will arrange for an updated valuation of the business and will calculate whether there is an appropriate amount of insurance in place. I will furnish evidence that this has been done and that estate taxes will not impair the ability of this corporation to function after my death. Yes or No”

The owner of the family business must conduct a business valuation a minimum of once per year to confirm business value and readiness for an exit. Ensuring that the next generation of the business is successful is one of the most important things to do as an owner, especially in a Family-Owned business where the next owner may be a son or daughter. As a CEPA, advise your owners to utilize the Value Maturity Index to determine their business value. This Index should be completed every 90 days to assess and grow business value.

In a Family-Owned Business, you will not only be advising the Owner. You must consider the entire Family’s plan to successfully operate as their business advisor.

Learn more about Family Business Advising in our CEPA Masterclass.