Business Succession Planning: Strategies for Successful Transitions

Business succession and owner transition planning can define your company’s trajectory. With the largest generational wealth transfer in history on the horizon, understanding and implementing effective succession strategies has never been more important.

Business succession and transition are highly involved, but foresight, planning, and adaptability can help improve your personal and business outcomes. Explore key considerations and strategies to use as part of your organization’s succession planning.

Many businesses are not prepared for transition

If your business doesn’t have a transition plan or succession plan, you’re far from alone. Check out these statistics from the Exit Planning Institute:

• Nearly 50% have done no planning whatsoever
• About 60% of owners don't understand what their transition options are
• Almost 80% of business owners don't have a transition advisory board

Meanwhile, about 80% of an owner's wealth is typically tied up in the business. And on average, about 50% of transitions of privately held businesses are involuntary, meaning cases like having to sell last minute to afford the estate tax. Transition and succession planning can help reduce the chances of an involuntary sale and help you potentially retain more money upon sale.

The importance of planning for owner transition and leadership succession

Succession planning and transition planning are not merely about selecting a new leader — it’s about creating options to accommodate unforeseen circumstances. Business, family, or health circumstances can change, and you don’t know all you need to know today to make the right decision ten, five, or even two years from now.

Benefits of owner transition and business succession planning

• Provides continuity — A well-thought-out succession plan allows your business to continue to operate smoothly during transitions.
• Increases business value — By decentralizing operations and reducing dependency on a single owner, your business can increase its market value.
• Mitigates risks — Having a plan in place reduces the risks associated with unexpected changes or challenges in leadership.

Business transition challenges

Transitioning a business — especially a family-owned one — is complex and requires careful navigation.

Common struggles in business succession

• Identity loss — Many business owners struggle with the emotional aspect of letting go, as their identity is often tied to the business.
• Value assessment — Owners may overestimate their business's worth, leading to unrealistic expectations during the sale or transition.
• Resistance to change — Existing leadership may resist new strategies or operational changes, complicating the transition process.

Check out our full on-demand webinar. Planning for Succession Begins the Day You Establish Your Business to explore more.

Strategies for successful business transitions

Every business is different, and so is its transition strategy. But there are some common transition strategies you can explore.

Build a strong advisory team

Create a supportive network of advisors who can provide the necessary guidance to navigate complex transitions. This includes CPAs, transition consultants, financial advisors, and legal professionals.

Owner Decentralization

To provide a smooth transition, reduce dependency on a single individual. This could involve training and empowering a management team to handle day-to-day operations independently.

Get clear on your vision and goals for yourself and the business

As a business owner, you need a clear vision of the legacy you wish to leave behind, as well as what you will be moving towards after you step away. This involves setting long-term goals for yourself and your business, and understanding the impact you want your business to have on your family, employees, and community.

How CLA can help with owner transition and succession planning

Many businesses lack adequate succession planning, but with intentional efforts and the right support, you can turn transitions into opportunities for growth and innovation.

By focusing on creating options, reducing dependency on singular leadership, and aligning personal and business goals, you can help provide a smooth transition to secure the future you are working toward, be that an external sale, securing your legacy for future generations, or any other dreams you may have.

At CLA, we’ve advised business owners in many industries on creating and executing a successful business transition plan. Explore our comprehensive owner legacy services to learn more. 

Contact us

Get tested strategies to improve your business transition. Complete the form below to connect with CLA.