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Keeping family ties together when selling the business

Experts: Prevent financial pain with careful planning

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Thinking about how a sale will affect relatives is a key consideration for a family business owner, says Marc Scudillo.
Thinking about how a sale will affect relatives is a key consideration for a family business owner, says Marc Scudillo. - (NJBIZ)

A family business might have several relatives on the payroll, besides furnishing the owner with a salary, health insurance, company cars and personal loans. But once the business is sold to outsiders, the relatives can lose their jobs, and the former owner’s lifestyle may have to be financed with wealth generated from the sale. Experts said it can take years of pre-sale planning to minimize the economic impact on the extended family.

Marc Scudillo, managing partner of the wealth management and corporate benefits practice at EisnerAmper, said one of his family-business clients had two relatives on the payroll when a buyout offer came in about four years ago. But the price “was not feasible to maintain (the owner’s) lifestyle, so we put the sale on hold.” Scudillo said he and his team developed a business plan to boost the company’s revenues, “to help get a higher price in a few years.”

Additionally, one of the relatives employed by the company wasn’t going to be offered a job with the new owners, so “that individual was able to get some training to transition to a new career,” Scudillo said.

Four years later, the business was sold for 25 percent more than the original offer, and the displaced family member had a new job commensurate with the previous family-business income.

In this case, deciding to sell the business motivated the owner to take steps to make the enterprise more successful.

“The catalyst was the financial repercussions that could have occurred” if the owner had not changed gears, Scudillo said. By spending several years on the transition, the owner could deal with larger concerns like not having to adjust to a lower standard of living, or worry about relatives being laid off following a sale.

E-mail to: beth@njbiz.com
On Twitter: @bethfitzgerald8

Beth Fitzgerald

Beth Fitzgerald

Beth Fitzgerald reports on health care, small business and higher education. She joined NJBIZ in 2008 after a 34-year career at the Star-Ledger and has been reporting on business in New Jersey since 1978. Her email is beth@njbiz.com and she is @bethfitzgerald8 on Twitter.

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