Succession: preparing a business to be passed on

01

Start earlier than feels necessary

Succession is not only retirement. Illness, a move, or a new opportunity can force a handover sooner than planned. Preparing over several years gives you choices; preparing in a crisis removes them.

02

Decide what passing on means

Common paths each carry different financial, legal, and family consequences.

• Transfer to a family member, by gift, sale, or a mix.
• Sale to employees or managers, through a buyout or an employee ownership structure.
• Sale to an outside buyer or another local owner.
• Orderly wind-down, if the business depends on you alone and cannot be transferred.

Ask each person you hope will take over, directly and early, whether they want to.

03

Make the business less dependent on one person

The more of the business that lives in writing, the easier it is to hand over.

• Write down core procedures, supplier and customer relationships, passwords held securely, and recurring deadlines.
• Identify the key relationships only you hold and begin introducing a successor.
• Gather contracts, leases, licenses, insurance policies, and entity records in one place.
• Keep clean financial statements for several years, which also helps with valuation and lending.

04

Understand value and readiness

A professional valuation can estimate what the business may be worth, and the result depends on earnings, assets, risks, and the market. Ask what would raise value and what would lower it, such as heavy reliance on you.

Test whether a successor is ready: let them lead real decisions while you are still available to coach.

05

Put the legal pieces in place

Work with an attorney and tax professional licensed in your state on documents such as these.

• An operating or shareholder agreement that addresses death, disability, and exit.
• A buy-sell agreement that sets how an owner’s share can be purchased and at what price.
• An estate plan with a will, powers of attorney, and, where appropriate, a trust.
• Beneficiary designations and insurance that match the plan.

Taxes on a transfer can be significant and vary with the method and your facts. Nothing here guarantees a tax result.

06

Plan how the transfer will be paid for

Successors rarely have the full price in cash. Options include seller financing, bank or SBA-backed loans, installment payments, or a gradual buyout. Each shifts risk between buyer and seller, so model the cash flow for both sides.

07

Talk it through with the people it affects

Family, employees, and long-time customers each have a stake. Say what you plan, what is still undecided, and when it will be decided. Unspoken plans are where family conflict usually starts.

A simple timeline helps: this year, document and talk; next, value and choose a path; then, sign, finance, and transition.