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Matthew January Blog

For better, for worse.

For richer, for poorer.

In sickness and in health.

To love and to cherish.

Till death do us part…

 

…Or till we fall out of love, grow apart, barely speak and become adversaries with a family, a business and employees stuck squarely in the middle.

 

Unfortunately, it happens – a lot. Statically more than 50% of marriages end this way today. Divorce is not something that anyone thinks about happening to them when they are in the throws of early love and taking those vows noted above.

 

Divorce can be one of the most emotional of the 5Ds because when your best friend becomes your adversary, there is a lot of pain and feelings that complicate the issues of dividing up the assets and moving on from each other.

 

As mentioned in the disabled life blog last month, preparing for this 5D is much easier to do early on; in this case, when everyone still loves each other. Not terribly romantic I know, but it’s necessary when your largest asset is a business. Even if your significant other is not involved directly or does not share ownership in the business, it is still an asset and can become a part of the financial outcome of your divorce.

 

And that is just from the perspective of an individual owner. The odds of divorce impacting the business grow exponentially when if you have multigenerational leadership.

 

Now that I’ve laid this not-so-happily-ever-after scenario out, here are some things you can do to prepare:

 

• Have the right team of advisors: an estate attorney, business attorney, CPA firm, business coach, financial advisors, M&A firm, etc. They will help you determine what documents you need to protect the family and create an equitable division of assets

 

• Develop governance to guide all family members – those who are active in business and those that are not

 

• Make time for the crucial conversations while everyone gets along and can have level-headed discussions

 

Having prepared for an unpleasant situation like divorce, you will have agreed to certain things before you married, such as ownership, transition, and valuation formulas, if one is needed.  This way if/when it comes up, you will have agreements to provide clarity when feelings of hurt, anger or guilt cloud communications­.

 

Divorce is stressful enough, so the more you can plan out and document ahead of time, the easier it will be to part ways as amicable as possible. Most importantly, being prepared will help you use up less head space, allowing you the ability to focus on the things – and people – that are important.

 

Having a plan for dealing with the 5Ds (Death, Disability, Divorce, Distress or Disagreement) is like a pilot having a parachute. You will be better off having it and not needing it, than needing it and not having one.

Matthew Baran profile picture
Matthew Baran

Matthew is a Senior Business Advisor at Compass Point Consulting and provides hands-on consulting & coaching to help family businesses close performance gaps; give owners practical, actionable tools that drive growth; deliver training to develop leaders and position the business for successful ownership transition – all on their terms.

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