Why you don’t sell a small business the way you sell a large one

To grow, a large company specialises. It creates departments that deal exclusively with one area: production, sales, accounts. It defines through procedures how those departments work together. It puts in place systems to manage a large workforce where not everyone knows everyone, to communicate, and to delegate decisions.

In short, it has ways of working that have been analysed and set down, clearly defined roles, manuals describing how to do this or that. A whole set of arrangements that reduce its dependence on the individual. That is what large organisations are like, and it is generally absent from small ones.

That, in essence, is what makes handing over a small or family business so particular: the human element simply cannot be set aside.

Six features that complicate the handover

Without being exhaustive, here are the main things that make small businesses distinctive when it comes to a transfer. They are not necessarily all present at once in any given company.

• Power is concentrated in the owner. He or she often masters every trade: selling, buying, production, management, personnel. There are no specialist departments to lean on. This makes it harder both to find a buyer and to train them and hand over responsibilities.

• The owner is close to the staff. He knows them all, often their families too. He is with them every day. As a result he has no need for formal communication about the company’s priorities: he sets the example and is the reference point, so there is no system thought out in advance for training newcomers, and no procedures explaining how each task should be handled.

• Recruitment fills today’s needs. The owner will generally prefer technically competent staff, at the expense of qualities such as independence, the ability to learn and to question oneself, the capacity to move with the technology and the market, and above all the willingness to take on responsibility. Unfortunately this deepens the dependence on the owner’s own profile.

• Being a generalist is compulsory. And that is not within everyone’s reach.

• The owner is close to his market. He knows his customers and his competitors. So he has neither the habit nor the need for formal strategic thinking about his position: in reality he does it constantly, by instinct. But how do you hand that over to a buyer?

• The accounts are arranged around the owner’s personal income, and his interests are mixed with those of the company. This complicates valuation, makes price negotiations difficult, and in the end costs the seller money.

All of this holds true whether you are looking for an outside buyer or handing the business to your family. Solutions exist, through approaches designed for this kind of company and taking these features into account.

Nady Bilani