Succession Planning 101: Start Sooner Than You Think

As the average age of U.S. business owners continues to rise—with over half now older than 55—the next decade is likely to see a significant wave of retirements. Yet many owners remain unprepared when it comes to handing over the reins of their companies. Whether it’s due to uncertainty, procrastination, or reluctance to give up control, succession planning is often delayed far too long.

Starting the process five to ten years before retirement is widely recommended. This lead time allows for careful consideration of tax strategies, estate planning, and identifying future leaders—whether they’re family members, internal employees, or outside buyers.

Navigating Family Business Dynamics

In family-run companies, succession planning can be especially complex. One of the biggest challenges is a lack of open communication. Misunderstandings between family members often stem from assumptions and unspoken expectations rather than actual disagreement. Without clear conversations about future roles, ownership, and responsibilities, trust can break down and derail the transition.

It’s also common for some children or relatives to be involved in the business while others are not. Managing these differences fairly and transparently is essential. Upfront communication about intentions, roles, and outcomes can prevent resentment and confusion later.

Many Don’t Know Where to Begin

A surprising number of business owners haven’t even started the process. Some simply aren’t sure how to go about it. Reaching out to trusted advisors—such as accountants, attorneys, or financial consultants—can be a helpful first step.

These professionals can guide owners through the legal, financial, and structural elements of planning. Early preparation typically reduces costs and prevents problems later on, especially in situations involving ownership disputes or unexpected events.

Another benefit of early action: it provides clarity and reassurance for employees, who may otherwise feel uncertain about the company’s long-term future.

Practical Tools and Strategies

Succession planning involves more than picking a successor. It may include drafting agreements that address decision-making authority, setting up mechanisms to resolve conflicts, or creating buy-sell arrangements for shares in the business.

From a tax planning perspective, there are several tools business owners can use to reduce future liabilities. For example, certain tax codes allow for the sale of company shares with favorable tax treatment, and real estate associated with the business may be exchanged under specific provisions to defer taxes. Trusts can also be established to support the next generation while optimizing tax efficiency.

Collaboration Is Critical

A successful transition requires a coordinated effort from multiple professionals. Legal experts, accountants, financial advisors, and business consultants often work as a team to ensure nothing is overlooked. If a sale is part of the plan, valuation experts and brokers may also get involved.

Another important factor is the owner’s financial readiness for retirement. A financial analysis can help determine what the owner will need to live comfortably and ensure that the succession plan supports that goal—without sacrificing long-term financial security.

Considering a Sale

Succession doesn’t always mean passing the business to a family member or long-time employee. In fact, only a small percentage of family-owned businesses survive into the next generation.

In some cases, selling the business may be the best choice. But doing so requires planning as well. Potential buyers are more attracted to businesses that are not overly dependent on the current owner. Building a solid leadership team and developing systems that can function independently adds value and makes the business more marketable.

Creating a well-documented and organized business can result in a higher valuation and a smoother sales process.

So What Now? 

Whether you plan to pass your business on to family, employees, or an outside buyer, one thing remains consistent: the earlier you start, the better. Preparing now allows time to sort through legal, financial, and personal considerations—reducing stress and increasing the odds of a smooth transition.

Succession planning isn’t just about what happens after you leave. It’s about protecting what you’ve built and ensuring it thrives for years to come.