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Start Your Business Succession Plan With These Tips

Filed under: Estate Planning

Does your small business lack a succession plan? You have company. A recent small-business survey from Nationwide found that half of respondents don’t have a succession plan. Among those without a plan, 47 percent said they didn’t think such a plan is necessary. An additional 22 percent said they didn’t have time or know how to proceed, while 11 percent said they didn’t have time.1

A succession plan is a document that states how you, as the owner, plan on exiting the business and how the business will continue after you leave. It also includes contingency plans in case you’re forced out because of illness, disability or even death. Such a document may not be at the top of your priority list right now, especially if you’re not close to retirement. However, your succession plan can help you make strategic long-term decisions so you can capture maximum value when it finally is time to exit your business.

Below are a few tips to get you started on your succession plan. You’ve worked too hard to build your business for it to be exposed to unnecessary risk. You may want to consult with a financial professional to help you develop your succession strategy.


Identify your goals and priorities.

Financial planning should always be based on specific goals, needs and objectives. Business succession planning is no exception to this rule. It’s possible that you don’t yet know what you want your exit from the business to look like. Below are a few questions to ask yourself to help formulate your goals:


  • Do you want to stay involved with the business as a consultant or adviser? Or do you want a clean break?
  • Would you prefer to be compensated in one lump sum for the business? Or would you like to receive ongoing income throughout retirement?
  • Do you want to sell the business to an outsider or transition it to an internal party, such as a family member or key employee?
  • Are there special conditions you want to place on the business’s future operations?
  • How important is it to you that the next owner retains certain employees or business units?


These questions and many more can help you clarify your objectives. Again, they may be hard to answer right now. However, you can at least start the conversation and think about your future. Once you understand your own wishes, you can then develop a strategy.


Get an objective valuation of your business.

You probably have your own estimate of your business’s worth. However, owners often don’t have the same valuation estimates as outside parties. You’re so involved in the day-to-day operations of your business that you may not have the same perspective as an outside buyer. Also, you may not know the prices of similar businesses or the amount of demand in the buying market. Without that perspective, it can be difficult to generate an accurate valuation.

You may want to hire a business valuation professional to analyze your company and offer an objective, unbiased estimate. These professionals usually have accounting backgrounds. They can offer a valuation and also identify areas for improvement that could boost your sale price. Even if you’re not close to retirement, this valuation could be a valuable tool to help you develop your long-term business strategy.


Start as soon as possible.

You may think a succession plan isn’t necessary because you’re not near retirement. Unfortunately, that approach could be a mistake. Business succession can be a lengthy process. It’s not uncommon for it to take years for a business to find a buyer and for the sale to close. If you’re going to transition to an internal party, you may need to groom your successor before he or she takes the helm. The earlier you start, the smoother that transition will be.

There’s also the risk that you may have to exit the business before you’re ready. What would happen if you were to become disabled or pass away today? How would the business continue? How would your family be compensated for the business’s value? A succession plan addresses that risk and helps you take action, such as implementing a buy-sell agreement with a potential successor.

Ready to develop your business succession plan? Let’s talk about it. Contact us today at Ambrose Financial & Insurance Services. We can help you analyze your needs and implement a strategy. Let’s connect soon and start the conversation.




Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.

17599 – 2018/4/19