Succession Planning: 4 Key Steps to Ensuring Your Company’s Future

As a business owner, it’s your responsibility to be invested in every aspect of your company. And if you’re like many owners who have built their company from the ground up, you’ve spent years, perhaps decades, honing your business model, developing your products and services, and cultivating relationships with clients.

As many older business owners plan for their eventual departure from their firms, the question we ask our clients is, “Have you invested as much time thinking about what happens once it’s time to step away?”

The number of succession plans being implemented has increased substantially due to the large number of baby boomers preparing for retirement, and a significant number of critical issues must be addressed before handing over the keys. What many people don’t realize is that proper succession-planning can take years. Here are four key steps to take to ensure a bright future for your company in the years to come.

1. Know Your Goals

Knowing your goals may sound simple, but the reality is that getting your desired outcome requires knowing what you really want. What are your life goals? What are you looking for? Legacy? Philanthropy? Family education? What does the future look like? Do you downsize your home or upsize?

Methodically modeling the financial aspects is also important. Consider assets, debts, liabilities and financial-planning. You may have unrealistic expectations. Can I pull the trigger now, or do I need to wait? Business-planning and strategic-planning can help you get a better sense of the potential scenarios.

2. Identify Your Ideal Buyer

There are three main scenarios in succession-planning and transitioning ownership: selling to family, selling to members of your business or selling to an outside third party. If you wish to pass your business on to future generations, you will need to make an honest assessment of the prospective needs of your family and business, the qualifications of any interested family members, and whether the family and your business would be best served by a continued relationship.

If you wish to transition to a member or members of your current firm, focus on the terms as well as the price. Selling your interest in the firm to key employees is one option, it provides a higher degree of employee ownership and helps ensure a smooth transition, with no impact to current clients or the community.

Selling to an outside third party is another potential option. In this case you will need to get your house in order and consider the things that a third party would want to see. You may find it beneficial to consult with outside help regarding the value of your business. A good adviser in the business valuation space may also know of potential buyers.

3. Communicate and Clarify

It is important to communicate with all the interested parties throughout the process. For service companies, such as law firms and accountants, much of the value of the business lies in the employees. It is in your best interest and the interest of your firm to keep open communications with your employees, family members and any other key contingents. This can help provide transparency and mitigate disruption for the interested parties.

4. Build Your Dream Team

The skills that make a successful business person are not necessarily the skills that you need to successfully transition your firm to the next phase. This, paired with the fact that most people only go through the process once in their lives, highlights the need for surrounding yourself with a team of experts.

As succession planning involves a number of different areas, you will want to obtain assistance from your key business and estate planning advisers, including your wealth manager, attorney, accountant, tax adviser, and insurance professional. Meet with them, preferably together, review your succession plan requirements, and direct them to work together as a team to achieve your objectives.

Starting the succession planning process early greatly improves the chances of creating your desired future for your company and loved ones. It is estimated that only 30% of family businesses last into second generation, and 12% into the third generation1. This sobering news reflects the fact that the process of changing company ownership is fraught with potential problems.

Some business owners avoid succession-planning and vow to “die in their boots,” working until the end. This is not a wise decision. The reality is that you owe it to your business, your loved ones and your community to create a succession plan. This will benefit the continuity of your business and benefit your employees and key customers.


1 “Family Business Succession Planning,” Family Business Institute, January 2018.

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