Will your SOHO go on without you? 4/19, 2001 SOHO Synapses 7_4.xml Title: End of the line Blurb: Will your SOHO go on without you? Title2: Will your SOHO go on without you? by Joe Farace
Some businesses have a finite life, and this is especially true for family-run SOHO enterprises. Believe it or not, the time to plan for the end is soon after you start seeing those first signs of success. Will you strive to see your legacy carried on after you’re gone? Or will you sell the company you successfully nurtured, and walk away? Let’s examine your options once you decide to move on.
Let the kid take over: A son or daughter are obvious choices for a successor for some family-based businesses. This is especially true if the name on the front of the building is yours. Having a family member running things ensures continuity. For every son or daughter who wants to takes the helm, however, there are many more who just aren’t interested.
Allow a partner to buy you out: If you’re lucky to have partners who have survived those difficult early years, this is the simplest choice. They give you money and you walk.
Sell to a trusted employee: Without a family member to take over our studio, my wife and I offered it to an employee who had, in fact, become a surrogate daughter. She was a talented photographer who was known and liked by our clients. We sold it to her with confidence that the company name would be in good hands.
Employee Stock Ownership Plan: While once popular, the ESOP buyout of United Airlines is a poster child of what not to do. The only way this method works is if all employees are part of the plan, not just some. When flight attendants were cut out of the original deal, their resentment may have resulted in “work actions” last summer, and the threatened strike related to United’s current merger/acquisition of US Airways.
Look for an outside buyer: You can use a broker, but networking through professional organizations or chambers of commerce is a better place to find a buyer. Be aware that once employees get wind you’re going to sell the company, they’ll jump ship like rodents fleeing the sinking Titanic. The troops know that any new owner is going to want his “own people” in key positions. Once they start leaving, the lack of experienced staff members can make any sale difficult.
Become a passive owner: If you don’t need the cash a buyout provides, place a hand-picked CEO in charge, call yourself Chairmen of the Board, and just poke your face in at the Christmas party. There are a few tax complexities involved in passive ownership, so be sure to get your accountant involved.
Liquidate: After all of the above options fail, this is the last, worst resort, and you’ll be lucky to get pennies on the dollar for the company’s assets. Don’t preside at your own post-mortem. Hire a liquidator, let them handle this gruesome task, and walk away with the good memories you have.
Contributing Editor Joe Farace, author of more than 1100 magazine articles and 23 books, sold his photographic studio to one of his key employees. Three years later, she sold it to one of his other original employees, saying it was “a lot more work than she thought.”