When heading toward a sale of a closely held business, there are many mistakes owners can make that will affect that often once-in-a-lifetime liquidity event.

Lewisburg Printing Company Board Member and Executive Vice President Kirk Kelso was with the company when it was acquired by Radial Equity Partners early in 2021. Looking back, Kelso says that in a family-owned business that has been around for more than 120 years, there are a lot of dynamics that come into play. He says it was a small group — three to four in the family-owned company — that came together as a board and made decisions regarding the company. When that group came to the conclusion to take the business to the next level and mitigate some of the risk from the family's financial side, Kelso says it meant getting everyone on the same page.

"That sounds easy, especially when you're talking about a life-changing sum of money for the parties that were involved, but it's not as easy as you think," he says. "There are personalities, there are expectations."

In Lewisburg Printing's case, there were family members not actively involved in the business but were reaping some of its rewards. That had to be factored into the discussion, which made communication key.

"As we went through this process, outside of the financial due diligence, that was the biggest challenge for us was getting everyone on the same page and adequately explaining to all parties involved, to include the generation prior to us, what they could expect," he says

In terms of wealth and estate planning, he says it's critical to have open communication and be as specific as you can regarding your plans and why you're doing what you're planning to do.

"In other words, if you're planning to sell, to grow the business through acquisition, or if you're planning to exit as a family, which in our case we did not — we're still operating the business —then how are you going to take care of those that were not involved in the business, in our case, going forward and get their buy-in?" Kelso says. "It's very complicated. And it's not necessarily always an easy path to go down because when you mix personalities along with the legacy, in our case, that we had, it takes some maneuvering, to say the least. So, I would just encourage anyone going through this to be a specific and forethoughtful as you can as you go through this process."

While the focus for most, understandably, is often on the transaction itself, which can take a lot of the owner's time and energy to complete, BNY Mellon Wealth Management Vice President and Family Wealth Strategist Marty Babitz says that can lead to a critical oversight.

"What's often neglected — and this is the big mistake that some families make — is neglecting or ignoring the second aspect or the second track that they're really running on in the sale of the business, which is the pre-sale planning for the family for the once-in-a-lifetime unique opportunity for family wealth transfer or for family legacy impact — something that can make an impact for many generations to come from the standpoint of reducing death taxes and allowing the post-sale proceeds to grow as well as designing a plan that will have multi-generational impact," Babitz says

There are four reasons, he says, why the pre-sale planning opportunities are neglected. One of them is uncertainty around what life will look like for the business owner's family after transitioning from being a business owner family to a financial family. A second reason is not knowing what options are available for wealth transfer planning, some of which will not be available once the business is sold. That can include the possibility of retaining some control over the post-sale proceeds. A third issue is sellers often don't have the right advisory team in place for the wealth transfer and estate planning side of things that can be done pre-sale. And the fourth issue is owners often don't think or plan far enough ahead for wealth transfer opportunities. Those can make a huge difference for their family from a tax perspective as well as maximizing and optimizing the proceeds, which if done right could have an impact for many generations.

Kelso and Babitz, along with Troutman Pepper's Daniel McDonough and BNY Mellon's Bryan McGrath, spoke at the Philadelphia Smart Business Dealmakers Conference about the preparation and exit phases of a well-structured transaction. Hit play to catch the full panel discussion.