Some parents are buying a business for their adult kids as part of passing on their wealth. It can work really well as long as the business makes good money, the right people stay on, and the family agrees on everyone’s role before signing anything.
A different kind of inheritance
The Australian recently ran a piece on wealthy business owners buying a business for their adult children as part of their inheritance planning. One founder in the piece sold his tech company, bought a manufacturer, kept the management team in place, and brought his daughter in on the finance side so she could learn how the business actually makes its money. We see a version of this here too. Some buyers who get in touch with us are after a smaller, hands on business to help set up a family member. Cash in the bank gives a child security. A business gives them a job, an income, and a fair bit of education along the way.
What makes it work
At Finn Business Buyers Agents, Australia’s leading business buyers agents, our job is helping buyers find the right business, and the same rules apply when the buyer is a parent. It starts with the numbers. The business needs to be making good money at a price that stacks up, with enough profit to pay your child a fair wage and still return something on the money you’ve put in. Then it’s the people. In the manufacturer example, the existing team kept things running while the daughter learned, and that continuity is worth a lot. Who runs it day to day can look a few different ways: your child steps in for a wage, the family promotes someone from within, or you run it for a while and hand over as your child builds experience. The point in the piece I’d underline is the family conversation. Ownership, roles, and what happens if the business doesn’t suit your child are all much easier to agree on before the money’s spent.
Getting it right
Here’s what I’d do if I was buying a business for one of my kids:
- Let your child help choose it. A business that suits their interests and strengths gets far more of their energy.
- Buy on the numbers. Get a proper valuation and make sure the profit can carry a wage for your child and still give you a return.
- Look for good staff already handling most of the operations and customers, so your child has room to learn without everything resting on them.
- Agree on ownership, roles and the long term plan before you sign, including what feels fair for any siblings who aren’t involved.
We’ve got more than 600 businesses for sale right now, so there’s plenty to choose from. The real work is matching the right one to your child. Would your kids want to run a business? Would you rather leave them cash or something they can build on?
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