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Business Succession Planning – give me the skinny!

Business succession is the process of implementing several estate plan and business strategies that will assist in the successful transition of a business. Transitions take place for different reasons. It may be when the business owner is ready to take on a different role within the business, at the business owner’s retirement, or at the owner’s passing away. No matter the reason, a well thought out succession plan will help ensure the transition to the next generation of the business is smooth.

When should a succession plan be established?

Business owners should consider their succession plan as they start their business.  This seems odd to think about how to get out of the business while just starting out. And succession planning does not need to be a concrete plan, but instead, it should be a consideration that helps shape the goals of the company. 

What considerations should be included when establishing a succession plan?

When the time comes to put the business succession plan in place, the business owner should consider why they are selling or transitioning and to whom are they selling or transitioning.  Carefully consider your retirement goals, your succession plan, and your inheritance goals.  Not every business owner wants to exit their business in the same way – that is okay. Consider your short-term and long-term goals for the business and for your personal growth or retirement.  Seeing your goals on paper will help to see the big picture and align plans to get there.

Choosing the successor.

It is important to keep in mind how you see your business running in the future.  And furthermore, who will be at the helm. Careful consideration should be given to the successor. Who is capable of stepping into the shoes of the business owner and running the company?  During this stage of planning, it is beneficial to consider all options.  There are four options for the who – a family member, a key employee or business partner, a third-party outsider, or close the company altogether.  When looking at the successor, consider each individual’s skill set and their ability to pay for the business.  When the successor is a family member, the challenge becomes balancing the need/want to “gift” part of the business to the next generation and the need/want for money to either fund the retirement or pay for the surviving spouse to live off of should the business owner pass away. Selling the company to third-party may be one of the best options to maximize the value of the company. However, locating a willing and qualified third-party purchaser for the company brings another layer of complexity and due diligence.

Identifying key aspects of the business.

Once a successor is identified, key aspects of the business need to be identified.  These key aspects are done in the due diligence period of the transition and during transition negotiations.  The major aspect is the value of the business. A business valuation is beneficial whether you intend to sell to a third party, liquidate the company, or transfer the business to a family member. A business valuation expert can provide the most accurate valuation for your business. Business valuations are based on several factors - revenues, earnings potential, assets, debts, goodwill, and current market value. Along with a business valuation, other key components of the business will be reviewed and updated. 

Don’t go it alone.

It is important to gather a team of trusted advisors consisting of an attorney, an accountant, financial planner and a banker/lender.  A team of trusted advisors will help you achieve your goals that you mapped out above.” 

For more information about Business Succession Planning, join us on April 28th for a free seminar. Learn more at:


written by guest writer:
Bethany Cross
Rinke Noonen