Trouble Thinking About Succession Planning? You’re not alone.

facebooktwitterlinkedinby featherscarecrowI’d unravel any riddle
For any individd-el
In trouble or in pain
with the thoughts I’d be thinkin
I could be another Lincoln
If I only had a brain

From the Wizard of Oz.
Harold Arlen (music)
E.Y. Harburg (lyrics)

What does  Picasso, Jimi Hendrix, Abraham Lincoln and Sonny Bono all have in common? They all died without no estate planning in place. No will. No trusts. No thinking about their final curtain.

It’s not surprising that even the rich and famous are neglectful in this area. A central part of succession planning requires us to think about the consequences of our own mortality— in other words, all of us will need to let go- we can’t take it with us.

The emotional aspects of which family member gets what and how much can be overwhelming. For business owners how to divide the ownership is always a concern.

Do I divide the  business equally so all my children know I love them?

Do I give more to the children who are working in the business than those who are not?

Do I reward a child who is working the hardest in the business with any other perks?

Will the family business survive the next generation?

Ask any owner of a family owned business and it’s likely you hear the same fears and concerns.

Those fears were validated recently in a survey released by the Alternative Board. 62% of owners believe it’s unlikely their business will remain family owned by the next generation. According to the Harvard Business review nearly 70% of family owned businesses last just a single generation.

There is an irony here. You struggle all your life to build up a business, which provided a quality of life which you enjoyed. It was your hope that the business would continue to provide the same enriched life, and wealth as part of your legacy.

Yet it’s not that simple- Is it?

Is there a way of thinking about the long-term preservation of a family’s wealth, and whether there were practices a family could employ using that way of thinking, to overcome the effects of the proverb  “Shirtsleeves to shirtsleeves in three generations?”

James Hughes, the author of Family Wealth; Keeping it in the Family contributes the following thoughts:

  • A family can successfully preserve its greatest wealth, that wealth being the individual human beings who form the family over a long period of time.
  • A family’s wealth consists primarily of its human capital (defined as all the individuals who make up the the family) and its intellectual capital (defined as everything that each individual family member knows), and secondarily of its financial capital.
  • The purpose of a family is the enhancement of the individual pursuits of happiness of each of its members in the overall pursuit of the long-term preservation of the family as a whole.
  • Successful long-term wealth preservation requires the creation and maintenance of a system of governance or joint decision making, to the end of making slightly more positive decisions than negative ones over a period of at least one hundred years.

Business owners are so busy taking care of their business, their often is scarce amount of time to take care of the business of their family. Yet too most, the well being and happiness of their family, including business continuity is important.

While your financial planner, accountant and legal advisor can help you with the technical aspects of succession planning, it’s a good idea to talk about your personal values and seek help to develop a framework to learn how to make sound financial decisions to address the risks associated with family wealth.

As  Descartes said- I think therefore I am.

 

Written by Jaimie Blackman

Jaimie Blackman

Jaimie Blackman has created Sound Financial Decisions ™ powered by MoneyCapsules®, to help guide business owners through the complexities of succession planning.

Jaimie writes “Smart Succession”, a monthly column in Music Inc., and also writes a bimonthly column for Canadian Music Trades magazine. He has spoken at NAMM U Idea Center, and at Yamah’s Succession Advantage.

As a financial literacy educator he has taught at New York University and has lectured at the 92nd Street Y, Marymount Manhattan College, and CUNY.

As President of BH Wealth Management, Jaimie also helps his clients implement investment and insurance solutions which are aligned to their personal values. Visit bhwealth.com to learn more.

To subscribe to Jaimie’s Succession Success: Insights for Music Retailers, visit moneycapsules.com.

The purpose of this post is to educate. Our content should not be construed as advice. If legal, tax or other advice is required by the readers, professional advice should be sought.

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