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Succession planning

There’s been a lot of research done on business owners and their top business planning priorities. But the one statistic we don’t need research to prove: 100% of business owners will exit their businesses some day.

View the 2025 Business Owner Perspectives Study.

Only 36% of business owners have identified their successors.¹

Only 4% of business owners have completed their succession plan.¹

Communication is the key to succession planning

Many business owners have thought about who will take over their businesses, but have not had meaningful discussions to ensure the successor has a passion for the business. Watch how a family-owned hardware store is planning for its transition and how each owner has their own opinion on who would be best to take over the business.

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The Real Business Podcast

Tune in to our podcast to explore effective business succession planning strategies and ensure long-term success for your company.

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Case study

Bringing success to family succession

In the mid-1980s, Joe and his brother Mike built a successful precision manufacturing company from the ground up. Twelve years later, circumstances changed and they were ready to bring in the second generation to help run the business. The trouble was, they weren’t sure how to do it smoothly.

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FAQs

There are internal and external transition options. Inside options include a sale or gift to family members, sale to an existing ownership partner or key employee, management buyout, and an ESOP (Employee Stock Ownership Plan). Outside options include a sale to a third-party, private equity sale, and liquidation. There are pros and cons to each exit strategy. You’ll need to spend time not only in the selection process, but also giving consideration to how your chosen exit strategy will impact your future income needs.

No, only children working in the business should get the business. The children working in the business should not be forced to share in the decision making and profits of the business with siblings who have no involvement. Instead, children not involved in the business should get other assets of equal value. Estate equalization is a strategy that helps ensure all of your children get a fair and equitable share of your estate while keeping the business in the hands of the decision makers who are running it day to day.

When choosing a successor, your decision should be based on who can do the best job — not on prejudice, biases or a sense of entitlement. There are some basic traits you should look for in the individual you choose to take over your business, which we call the 5 C’s: Character, Confidence, Capability, Competence, and Commitment. Sometimes the right successor isn’t in the business today and owners need to make the hard decision that’s in the best interest of the business to either hire outside management or sell the business to a third party.

Choose the right successor is critical to the long-term success of your business. To adequately prepare them for assuming the leadership role in the business you should Implement a successor development plan begins with an assessment of the successor’s current skills and interests, and defines what additional experience, education, and training must be achieved. In addition, successors should ideally spend 3-5 years gaining work experience outside the business and utilize a mentor outside the business to act as a coach, advisor, and educator.