Succession Planning 101

It’s critical to follow these six steps to protect your business—and your family.

By Eric Duffee

Here’s a shocking but true statistic: 100% of business owners will exit their businesses someday. The only question is whether that exit will be planned and seamless or chaotic and destructive.

Succession planning, also called exit planning, is the process where a business owner creates a planned transition for the continued success and viability of the business—one which benefits the owner, the owner’s family, the owner’s employees, the company’s key customers, suppliers and other business relationships, and the community at large.

It goes without saying (but we’ll say it anyway): Every business needs a succession plan. So how can you make sure to put the success in your succession plan? These six steps will help.

1. Overcome the obstacles to progress

Many succession plans never get implemented simply because the business owner never even gets started with the planning process. While almost all business owners know succession planning is critically important, they often can’t or won’t act. Why is that?

Well, there are a lot of reasons:

  • Succession planning is new and unfamiliar territory for most business owners
  • The owner has difficulty articulating goals or reconciling conflicting goals (as will be described in more detail)
  • Concerns about future income and cash flow
  • Concerns about retaining control
  • Concerns about maintaining confidentiality vs. need to involve key people in the process
  • Fear/uncertainty about the future and the business owner’s continuing role/identity
  • Working “in the business” is much more fun and interesting as well
  • Planning takes too much time and costs too much money to realize
  • Concerns about how the plan may affect key people (spouse, children, key employees).

We can’t move ahead with any planning until we’re able to get the business owner comfortable with each of these points. We do that by addressing each one head-on and having open and honest conversations. Many times, the business owner is stuck because he or she can’t articulate their concerns, and nothing happens until those concerns are expressed, acknowledged, and addressed.

While all the concerns above are extremely important, one of the common concerns that holds up a succession plan is the business owner’s uncertainty about what a business transition means for the owner’s personal identity.

It’s unrealistic to assume that a business owner who has put his or her heart and soul into the business for 40 years will simply walk away and sit on the beach. In addition to the business owner’s financial security in retirement, a detailed and specific plan is needed for the business owner’s personal life.

It goes without saying (but we’ll say it anyway): Every business needs a succession plan.

What will they do with their time? How will they interact with the business after the transition (if at all)? What will their identity be after the transition?

Many business owners won’t be able to articulate these concerns, but you can be sure they do exist and need to be addressed head-on. Once we identify and address these roadblocks and the business owner is ready to move ahead, it’s time to start formulating a plan.

2.) Start with the goals

That’s pretty obvious, right? Yes, but what we’re talking about here is getting really deep into the goals before doing anything more. What are the owner’s goals for the business? What are the owner’s goals for the family? What does the owner want to do after the transition? What is the owner’s retirement needs and wants? Notice that many of these goals speak directly to the concerns raised in the questions in the first step.

We find that the normal business owner has multiple goals they are trying to accomplish through the transition. Some common goals include: providing for the owner and their spouse’s retirement needs; preserving the company and the owner’s legacy; “doing no harm” to succeeding generations; maintaining confidentiality (particularly with employees, customers, suppliers); minimizing taxes; and preserving family harmony.

Seems simple enough, but the challenge is many of these goals conflict with one another. For example, most business owners have a fundamental goal of maintaining family harmony. But what happens when there’s only one family member capable of continuing the business? Which goal trumps: maintaining family harmony or ensuring that the right person is empowered to lead the business into the future?

To have success, we need to first uncover the business owner’s goals—some of which may not be stated. Identify where conflicts exist among those goals, and then determine how to reconcile those conflicts and prioritize the goals we will seek to satisfy through the plan.

And remember . . . perfection is the enemy of the good. Instead of seeking perfection, strive for a plan that adequately achieves most of your key goals. We can always revisit the plan down the road and make further tweaks as needed. However, if perfection is the goal, we’ll never get any plan in place, and that will be a certain disaster.

3.) No two succession plans are the same

Every business is different. Every family is different. So, it stands to reason that every succession plan will be different. While that seems like a very simple concept, it’s easy to fall into the trap of assuming that the plan your friend implemented at their company will work just as well for you.

The good news is that when we identify the goals and reconcile any conflicts among those goals, there’s almost certainly a strategy we can come up with that will work well for your unique situation.

The important point is to keep an open mind throughout the process. Many business owners have a predisposition to a particular strategy, only to find out there’s a strategy that actually works better in this specific situation.

And what exactly are those strategies?

4.) You have lots of choices—get educated about them

Most business owners gravitate toward two of the more common exit planning options: pass ownership to a family member or sell the business outright to a third party. In reality, there are a number of other exit-planning options:

  • Gift or sale to one or more family members
  • Sale to current business partners or management team
  • Sale to an employee stock ownership plan (ESOP)
  • Outright sale of business to a third party
  • Sale of minority equity interest
  • Sale of majority equity interest
  • Dividend recapitalization
  • Orderly liquidation.

To make things even more interesting, there’s an almost unlimited number of different variations of each of the above. Each of these offers its own benefits but also presents its own challenges.

As was stated, the one-size-fits-all approach never works. One business may be a perfect candidate for an ESOP while another is a terrible ESOP alternative. The key here is that you can’t really know which strategy works for you until you get educated about what your options are. A team of qualified professional advisors can help you identify what’s right for you. Speaking of which . . .

5.) Succession planning is a team sport

Succession planning is a uniquely complicated process. Creating and implementing a succession plan requires expertise in many different disciplines including business, law, accounting, finance, valuation, tax, estate planning, family dynamics, and personal coaching.

You need the right team to help guide you through the process. Depending on your specific situation, you may need an accountant, investment banker, business banker, financial advisor, valuation professional, business attorney, estate planning attorney, and family counselor.

And each of these people must have specific expertise in helping guide business owners like you through the succession process. Sometimes that means your current advisors may not be best suited to help you.

Start by finding one trusted advisor and ask them to help you assemble the right team. Then, make sure that the team is empowered and encouraged to work together and share information collaboratively. There’s no room for silos on the exit planning team.

Finally, hold your team accountable for keeping things moving, and encourage them to keep you accountable, too. Momentum is important; once the planning process begins, we want to minimize roadblocks and distractions that prevent the plan from being executed.

6.) The best day to start succession planning is today

Your business wasn’t built in a day. Your succession plan won’t be completed in a day either. But one bad day (i.e., your untimely death) combined with a failure to plan could mean instantaneous disaster for your business and financial ruin for your family. So, why wouldn’t you do everything you can to protect your business for now and into the future? Start the planning today!


Is succession planning complicated? Yes. Does it take a lot of time and effort? Yes. Is there anything more important than planning for the future of your business and family? Well, the answer to that question is up to you.

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Eric Duffee is an attorney at Kegler Brown Hill & Ritter in Columbus, Ohio. He serves as outside general counsel to a number of private businesses and his practice focuses on nearly all the needs a business will have throughout its lifecycle, from startup and formation through capital raising and exit planning, including M+A, corporate finance, intellectual property, and succession planning. He can be reached at