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  • Writer's pictureEric Williams

Is it time to fire a family member?

Do you own a family business?Do you want to be able to sell it to a third party within the next few years? Are there any employees who you wouldn't hire or retain if they weren't family members?

If you answered "yes" to these questions you aren't alone. However, some people think that if they are going to sell, anyway, why not leave the under-performing family member in place until the business is sold? That way it won't create family relationship problems and the buyer can decide whether they will retain the person or not. While this passive strategy is probably the easiest, it might not be a good idea.

If this family member is a non-performer, for every dollar paid to him for which he isn't producing a return, it will reduce value by multiples of that dollar. The nephew who spends more time golfing and playing computer games than doing sales and marketing, but who is paid $75,000? That may result in a sales price of half a million dollars less than you might achieve if you terminate him a couple of years in advance of a sale.

Such an employee also may be an impediment to a sale. A buyer is going to carefully evaluate staff. If they are unimpressed with your nephew, that will reflect poorly on the business, and will also add to the buyer's list of things they need to fix (i.e. need to hire a new marketing and sales person).

OK, so let's say you know you should terminate the nephew, but how do you do so without creating a problem in the family? The Wall Street Journal had an article several years back with tips on how to do this: How Do You Fire a Family Member?


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