Fred Sigman is a 55-year-old CEO of a tire distribution business called Sigman Sales Company, previously owned by his father, David.
Fred joined the family business in 1985 and worked his way up to becoming CEO, during which time David gave Fred 50% of the stock in SSC. Fred’s sister, Geri, joined the business in 1990.
David passed away in 1998 and bequeathed his remaining stock ownership to both his adult children. This effectively gave Fred 75% of the company and Geri 25%. As time went on the siblings began to disagree more and more on business matters, which put a strain on their relationship and on their families.
Challenges: Relational Tensions Amidst Business Ownership
- Fred and Geri no longer saw eye-to-eye on the direction of the company and it led to relational issues.
- Because of the dysfunctional relationship between siblings, the business could not operate effectively and key employees were anxious and uncertain about their futures with the company.
- Fred had been paying Geri as if she was a 50% partner in the business, although her responsibilities and ownership stake did not warrant that compensation. This pay level effectively clouded the ownership structure and left the owners and employees with a lack of clarity.
- Fred and Geri were not sure if they could mend the relationship and work together or if they needed to part ways.
- Geri’s husband, Bob, had inserted himself into the situation and caused further tension. Unfortunately, Bob and Geri had over-extended themselves financially and he did not want to see Geri’s position or compensation challenged.
How Would Legacy Planning Advisors Help Someone Like Fred?
Discovery Through Open Conversation
- Family conversations. Legacy Planning Advisors can play a valuable role as an objective third party in difficult family conversations, especially when tensions arise between siblings or other stakeholders. By being part of the conversation, we can help the family explore how the conflict developed, identify whether collaboration is still viable, and support them in working toward a constructive path forward—whether that means continuing together or thoughtfully restructuring roles.
- Uncovering financial troubles. We can meet separately with each party to find out more about their financial situation. We thoroughly assess each issue and individual need to give all parties an opportunity to be heard fairly.
- An equitable buyout. Legacy can bring in additional professionals to provide a fair valuation of the business so that the owners can determine the next steps. By having a clear appraisal, one option would be for Fred to offer Geri a fair and equitable deal to buy out her 25% ownership in the company.
Better Communication and Better Ways Forward for Business Owners
When we work with business owners, we often find that underlying conflicts are complicating the “business of the business.” Issues of ownership, leadership, succession, and exit can detract from important financial decisions critical to the health of the business. That’s why it’s best to start with open and frank conversations.
Bringing in a third party like Legacy for these conversations can help business owners reach an agreement that benefits everyone in a transition or sale, even in the midst of family tension—likely without the need for an attorney.
