The transition of the family business did not go well for Jeff. With borrowed money, he bought out his father and siblings to become the sole owner. In less than two years, the payments become unbearable. Forestalling company failure, the bank calls in his dad to "help out" with the loan payments. Jeff is humiliated and angry.
Jeff is not alone. Seventy percent of business transitions fail or get sold before the second generation gets a chance to lead.
Selling the business to outsiders or buying out the other family members are the only two options Jeff considered two years earlier. Another option would allow him to buy out the family and enable the company to continue earning a profit and bless the community. That would involve Jeff finding like-minded outside investors who would take a minority ownership stake in the company.
The outside minority owners would bring cash, proven leadership, and a network of resources. This would have allowed for the business to multiply its profitability and impact.
Jeff is the norm. He never considered that outside investors take a minority ownership stake in his company. Like Jeff, most business leaders don't consider this option.
Jeff didn't know that there are private equity firms that look to invest with companies like his. Having this infusion of cash, leadership, and a network of resources would be a life-changer.
Business leaders who seek out these private equity firms for a minority ownership stake multiply their chances for success.
Here at Cultivating Impact, we are currently screening companies who generate between one and one hundred million in sales to partner with.
The top values we consider for partnership are:
Is your company profitable?
What are the top three values in your company?
How are these values demonstrated in your company culture?
One investment we are familiar with involves a father who has passed on the family business to his two sons. The father has moved to Florida and takes the dividend checks. But, he also flies in to "dive bomb" the management team and then leaves again for the coast. The boys have grown closer to each other in relationship and values but farther away from the father. It is affecting the family dynamic. They no longer get together for holidays like they used to. A peer advisory group introduces the brothers to a private equity firm who is "spiritually aligned" with their values. They come in as forty percent owners with enough capital to cash the father out and allow the business to continue growing. Most family business transitions fail. It may be that considering an outside equity group is an attractive option. Harry T. Jones P.S. If you are interested, contact us
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