Start family ownership transition before things get dicey

Families that don’t take the time to write, discuss and agree on a succession and transition plan are almost always destined to meet with heartache.

Families that don’t take the time to write, discuss and agree on a succession and transition plan are almost always destined to meet with heartache.

Misunderstandings, disagreements and unintended consequences litter the highway of poorly executed family succession plans.

Here is a case study: The father, who owns 100 percent of the business, is in his late 50s and has some life insurance. He has an inflated view of the business value, although the business is doing well and is profitable.

The father and his son have had “discussions” that they will work together for another seven years. Then, the son will buy the business and basically fund his father’s retirement with a 10-year note.

As in all too many cases, this plan is mostly dad’s blueprint, because they have only talked in circles about the topic.

It is important to note, 50 percent of all exits are not voluntary. Life is inherently messy.

Just like the guy in the Allstate commercials, things come along and create “mayhem.” Would your business (and family) survive the 5 D’s?

Death – Who is going to run the company if you don’t show up tomorrow? Will employees stay? Will the bank continue to support the business?

Disability – Will the company keep running profitably if you can’t work?

Divorce – It happens. Will the impact ripple out beyond the immediate family to affect the lives of your employees?

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