Planning for the Succession of Your Business: Step by Step

By Cynthia Adams Harrison, Managing Director—Center for Private Business Owners

Owners of privately held businesses who think about succession are very often confused or intimidated about how to start. It can seem overwhelming, and procrastination is sometimes the default for those who already have the huge responsibilities involved with running a business.

Below we provide ten step-by-step tips designed to help guide you through the process of succession planning for your business.

1. Prepare

Research effective succession planning processes and approaches and understand best practices for private businesses. Replay our recent webinar for additional insight: Value Series for Private Business Owners: Getting Your House In Order – Preparing for Business Succession.

You can’t do this on your own. Engage a trusted advisor to recommend external expertise. There are professionals who can work together as a multi-disciplinary team to streamline succession steps. We highly recommend having a family business advisor to coordinate all the multi-function efforts.

2. Decide what is possible and what is not

It’s common for owners of privately held businesses to believe that if they don’t have family members to take over their business, then the only option is to sell. Sometimes this is true. Often, however, other arrangements and new leadership can ultimately continue a family business legacy and create a bridge for the next generation.

The most important factor for you as an owner to consider is making sure you’re doing all you can to create business value. Waiting too long or not long enough for succession planning could ultimately decrease value, which is unnecessary and irresponsible.

Brainstorming ideas and realities with a trusted advisor often leads to effective outcomes.

3. Assess the health of the business

Reviewing all financial, strategic and operational functions of the business is integral to understanding what needs to be improved and how current and potential value will drive decision-making.

4. Assess personal and business financial readiness for a transition

The succession process moves through different stages and action steps and must be designed to meet your needs as owner and those of your business. Decisions must reflect that both your personal needs and the health of the business are complementary to desired outcomes.

5. Speak with your significant other, partner or spouse

As you begin to learn more about succession and have brainstormed ideas with a professional, share what you have learned with your partner or spouse. If there are children involved through biological, adoption or blended families, considerations must be made concerning family relationships, and your partner or spouse will have an opinion. Get them involved early in the process. We cannot state more clearly the importance of this.

6. Assess the interest and skill sets for key leadership positions

Succession planning is the perfect time to assess key leadership positions and roles. Reviewing what has been effective and what needs to be implemented for future growth are opportunities to secure a strong leadership team for the future, family and non-family.

7. Effectively frame the initial conversation with family members and non-family senior leadership

Planning how you frame the initial conversation with family members will be important. Change in any form, even positive, can bring stress and uncertainty. If you organize the meeting with a confident and thoughtful agenda, it will go a long way to ease family members into the discussion.

This holds true for introducing succession planning to key non-family senior leadership. Make sure these stakeholders are also aware of your timeline and the need to keep this information confidential until you are ready to disclose the plan to other employees. The timing of when you disclose this information is as important as how you do it.

8. Educate family and non-family senior leadership on the outline of a plan

Succession is unique for each private business owner and their families. Reviewing with family members the process you have been engaged in and considerations that were made, as well as asking for their input, will be helpful so they are aligned and understand the reasoning behind the planning. As a result, your family will most likely be helpful in supporting you through the process.

Again, outline your process and considerations for non-family key senior leadership and ask for their suggestions in the planning process and execution of the plan.

9. Create a transparent transition plan with reasonable timelines … then stick to it

A succession plan which is detailed, action driven and reflects accountability will be easy to follow and implement.

10. Integrate the plan into the day-to-day activities to increase its effectiveness and maintain momentum

Scheduling routine meetings and activities to help keep everyone on task will go a long way to assure that succession goals and objectives are met.

Get Started

Succession planning can be intimidating and seem complicated for many busy business owners, but following our ten step-by-step tips should help get you started. With effective support, external expertise, and a thoughtful road map, successful planning can continue the family legacy and create exciting new chapters for your cherished business.

Contact Us

If you have any questions, please contact your PKF O’Connor Davies client service team or:

Cynthia Adams Harrison, Ed. D., LICSW
Managing Director
Center for Private Business Owners | 914.575.2744