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Four Steps to a Business Succession Plan Thumbnail

Four Steps to a Business Succession Plan

Studies have shown that as many as 95% of all businesses fail in their first 5 years of operation. For those that survive, keeping things running smoothly requires attention to billing, client service, marketing, managing people and projects… the list goes on and on.  With a little luck and hard work, many businesses become the founding family’s largest asset.  

In working with business owners over the years, my experience is that most have fallen into this trap: there is so much to do to keep the day-to-day operations of the business running smoothly that many of the important big picture items aren’t even on their radar.  Succession planning is one of those issues.  

Author David Grau wrote a wonderful book called “Succession Planning for Financial Advisors”. In it he suggested that a well-executed succession plan can take between 8 and 10 years! This gives you time to fully train your replacement and gradually ease them into the leadership role.  David starts by saying, “If you are just starting your succession planning and hope to retire in 3-5 years, you’re too late”. 

While this book is focused on financial advisors, no matter your industry, succession planning takes time and should not be an afterthought when you get close to retirement.  

What takes the longest in succession planning is training your replacement and helping clients, suppliers and team members get comfortable with the new leader/owner. This is no small task.  I have been through it myself.   

I joined our family firm in 1996 and a few short years later, my parents retired and I bought the business and took over the leadership role.  In my first two years at the helm, we lost 10-15 clients which is about one every two months.  It was very demoralizing for my team and me. 

In reflecting on that time, I can tell you that we handled the transition poorly.  We did almost nothing to prepare our clients for the changes in leadership.  Yes, I was on the team.  Yes, our client’s sort of knew me.  However, they trusted my dad.  They had a relationship with my dad.  Our clients were blindsided by my dad’s retirement and many of them did not have enough interaction with me to build a trusting relationship.   

If you own a business and want to start the succession planning process, the obvious question becomes, “How Do I get started?”  Below are a few simple steps to get the ball rolling.


A good plan can take 8-10 years to implement. I believe we have already established this but it bears repeating: “Start now”.


Talk to your team, successor, family, and clients.  A good place to start is by asking yourself, “If I were to die tonight, would my family’s wealth and the wellbeing of our clients be taken care of with me not around?" Next, work to fully understand their concerns around your retirement or death and what they need addressed to feel comfortable with your not showing up to work anymore.  Share your concerns as well.  Everything should be on the table.

  • Focus on listening to them and take their concerns to heart.  
  • Open communication solves most problems.  These people are your stakeholders.  Without them, you have no business.  It is vital that you listen and address their concerns and vice versa.  Essentially, I’m saying you must work together as adults and come to an agreement on how the succession plan happens.  You are making business decisions and ego has no place in these discussions. 


Once everyone is on the same page, enlist the help of a qualified attorney to draw up a comprehensive plan that addresses the concerns of you and your stakeholders.  The goal of this document is to protect the interests of everyone involved. This plan will address:

  • Instructions, based on your conversations with your family and team, on how the business is to be managed if you die.  Also how clients/customers are notified in the event of your death.
  • Who takes over leadership and/or buys the business?
  • Terms of sale.
  • How the purchase is to be funded.  Is there a life insurance policy?  Are they required to take a loan from the bank?  Is your family going to fund the buyout by receiving payments for several years?  This all needs to be thought through and put-on paper.  
  • Additional concerns including non-compete agreements, definition of disability, how the agreement can be terminated if the parties decide to part ways, and protection of intellectual property.   
  • Do not leave this to chance.  I've heard owners say things like, "I trust my team.  I don't need a document".  This is incorrect and potentially dangerous thinking. Mike Tyson once said, “Everyone has a plan until they get punched in the face.”  Essentially Mike was saying that when the going gets tough plans are difficult to implement.  That difficulty is magnified if you leave your business through an unexpected disability or death without a plan.   With no plan in place, you are putting your business and stakeholders at a big disadvantage that could jeopardize the survival of your business


This may take longer than you expect; especially if your business is based on relationships.  If you are in doubt as to how much time your clients need to process this transition and build a relationship with your successor, err on the side of taking too much time as opposed to taking too little time.  As I stated earlier, my dad and I did not handle this well and the result was suboptimal.  

The bottom line:Your business most likely took a lot of time, effort, and struggle to build.  Make sure to give your successor every possible advantage to keep things running smoothly.  This takes planning, communication, and time.  Your family and stakeholders want to know that you have succession planning covered and deserve that you make this a priority.  


Next blog: Continuity planning.  Succession planning and continuity planning go hand-in-hand. While succession planning deals with who leads your company after you exit, continuity planning deals with making that process as seamless as possible.  The goal is that there be no hiccups to client experience, client service, or team when you’re gone. 

Feel free to reach out to our team if you have questions or concerns on this topic.  My family, business partner and I have gone through this process and understand the struggles that come with tackling these topics.  We will help you sift through the “what”, “when”, “why”, and “how” when it comes to planning your exit from the family business.

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