This article is the second in our series on the myths related to Business Succession Planning. The first myth was “There will be plenty of time to plan later”. The next myth is “The fairest thing to do is split the business evenly amongst my children”. On the surface this may appear to be the best, fairest and most logical path. It would be nice if the business could be split evenly between the next generation and assume that everyone will see eye to eye on important decisions and will get along as well as they do now. If you’re in a situation where they don’t get along now that should also big a big red flag.

There have certainly been situations where an even split has worked out but those are in the minority. In most cases you should identify one person who will “call the shots”. When choosing this individual you need to objectively review the candidates in terms of their interest, performance in their current position, judgment, potential and leadership ability. That doesn’t mean there isn’t a place for the rest of the children in the business. Just that there is one person ultimately in charge.

There will also be instances were one or more of your children choose not to work in the business.  So they aren’t contributing to the business, but they are well aware that the business may have significant value and will likely look at the business as a source of a future inheritance. In those cases you need to design a strategy whereby they will get a windfall from another source perhaps the family home, money from an investment portfolio or proceeds from life insurance. Either way it is best to have this planned out in advance. The last thing you want to have is a lawsuit among family members.

These are difficult decisions and every situation is unique. You should consult a team of professionals who have experience in succession planning to help you with these difficult decisions. At Sgroi Financial we can bring the necessary resources to the table to help you navigate the process. It’s your life. We can help.