Guide to Succession Planning for Business Owners
- Will Grant
- Aug 13
- 9 min read
Updated: 6 days ago
Succession planning aims to prepare your business for a leadership change by outlining transition options, aligning personal financial goals, and supporting continuity in the face of retirement, unexpected events, or planned exits.
In essence, succession planning is about answering one critical question: What happens to your business when you're no longer the one running it?
Will Grant is a Senior Wealth Manager with 360 Financial. He earned a Bachelor of Science degree in Finance from Miami University and holds his Series 7 and 63 licenses through LPL Financial and his 65 license through 360 Financial.
Preparing for a Sale, Exit, or Transition
Whether you plan on retiring or simply want to plan for the unexpected, you need a succession plan for your business.
But a succession plan isn't just about making a transaction or an “exit." Instead, it’s a thoughtful strategy that aims to ensure continuity and supports your next phase of life.
As a business owner, you've poured your heart and soul into building something bigger than yourself. You've spent decades building something that your clients and employees rely upon. When it’s time to step away, you want to know it’s in good hands—whether that’s a family member, a key employee, or an outside buyer.
Succession planning for a business is also about making sure your personal financial goals are aligned with the business transition, so that both the company and your future are on solid ground.
When doing your succession planning, you need to answer questions such as:
Who’s going to run this place?
What are my options?
Who do I want to have running the business?
What will enable the business to thrive after I retire?
When you near the end of running your business, what happens next is just as important as everything that came before.
Why Is Succession Planning Important for Business Owners?
As a business owner, you've spent years—if not decades—building something that supports not just you, but your employees, customers, and community.
Your business is more than a job. It's a livelihood for many.
That’s why it's so important to ensure your business doesn't fade away when you're ready to step back. Succession planning helps protect what you've built and provides continuity for the people who rely on it.
According to U.S. Census data, more than 51% of business owners are aged 55 or older, meaning hundreds of thousands are approaching retirement. Yet many are unprepared. PwC’s 2023 U.S. Family Business Survey found that 36% of family business owners don’t have a will, and 64% lack formal exit or entry provisions in their succession plans.
Without proper planning, these transitions can disrupt livelihoods and even local economies—making succession planning not just a personal priority, but an economic one.
The good news? If you’re already thinking about your succession plan, you’re ahead of the curve. With the right guidance, you can create a thoughtful plan that safeguards your legacy and potentially sets your business up for long-term success.
What Is Business Succession Planning?
Succession planning is about what happens to your business when you're no longer running it.
The most critical questions to answer when doing your succession planning are: Who’s going to run this place, and what are my options?
Typically, there are three main paths:
Sell to an outside company or investor.
Sell to a key employee who could take the business further than you did.
Sell to a family member.
Each option comes with its own set of considerations.
One major challenge is when you have one of your children involved in the business while your other children aren’t. It can be particularly challenging to make things feel fair.
If you don't have family members involved in running the business, your biggest challenge may be finding the right buyer and ensuring you have a plan in place for after you exit.
Real Case Study: Brad and Gloria Sell Their Business to Family and Retire with Financial Confidence
This case study will walk you through the process our long-term clients, Brad and Gloria*, went through to sell their business.
Problem
Brad and Gloria* had spent decades building a successful company and were ready to retire.
The big question they faced was: Who will take over the business?
They were weighing the decision between selling to an external buyer at full market value or to their nephew, who was interested but would likely purchase at a slightly reduced price due to the family connection.
The decision wasn’t just financial—it had implications for their retirement plan, their family dynamics, and their long-term financial clarity. To complicate things further, Gloria had some health concerns, and one of their top priorities was staying in their large, newly purchased home through retirement, regardless of any future healthcare needs.
The Succession Plan
Brad and Gloria ultimately decided to sell the business to their nephew and his business partner.
They wanted to keep the business in the family while still ensuring they could retire comfortably. The challenge was to structure a deal that supported both goals. They needed clear financial modeling to compare outcomes. They needed a transition strategy that would not only aim to secure their future but also set up the next generation of owners for success.
*This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.
Key Elements of a Strong Succession Plan
A strong succession plan comes down to three key elements.
First, it starts with the owner's outlook—deciding who you want to take over the business. That could mean selling to an outside buyer, a trusted employee, or a family member. That decision shapes everything else.
Second, you need to understand the value of your business, or what you want it to be worth when the time comes. If you have a high-cost lifestyle or specific retirement goals, that sale value has to support those needs.
And third, there’s the personal side: what does life look like after the business?
Many business owners tie their identity to their work, so it's essential to plan for that next chapter with real intention. This is where business planning and life planning have to align.
Elements of a Succession Plan
Key Element | What It Means | Why It Matters |
1. Owner’s Outlook | Decide who will take over. | This foundational decision shapes the structure, timing, and emotional dynamics of the entire plan. |
2. Business Valuation | Determine what the business is worth or what it needs to be worth at transition. | A higher valuation may be necessary to support retirement goals or a particular lifestyle. |
3. Life After the Business | Define what the next chapter looks like, both personally and financially. | Many owners identify with their work; planning well in advance helps business owners feel purposeful post-transition. |
Succession Planning vs. Exit Strategy
While people often use the terms interchangeably, I see a distinction between succession planning and an exit strategy.
An exit strategy is largely transactional—it's about completing the sale and walking away with the proceeds. Succession planning, on the other hand, is more comprehensive. It’s a written, intentional strategy aimed at ensuring the business is set up for success after you’re gone. It's not just about cashing out; it’s about leaving a legacy.
A strong succession plan considers the business's future, the well-being of employees, and often, the continuity of family involvement.
What Is the Most Common Challenge When Doing Succession Planning?
The biggest challenge I see in succession planning is when one child is involved in the business and others are not.
That dynamic creates emotional complexity.
How do you structure things fairly and avoid long-term resentment?
Timing is another key issue: when is the right moment to sell, and will the proceeds be enough to fund retirement? These are not easy questions to answer on your own.
What Is the Role of Insurance and Buy-Sell Agreements in Succession Planning?
A buy-sell agreement is a legally binding contract that outlines what happens if an owner dies, becomes disabled, or exits the business.
A buy-sell agreement is often funded by life insurance.
A buy-sell agreement is created so that if a business owner passes away, their share of the business can be purchased by a designated successor. This aims to protect both the future of the business and the financial interests of the surviving family members. These agreements are best established well in advance.
In fact, they're sometimes put in place a decade or more before the intended transition.
For example, let’s say that you’re a business owner and want someone in your company to take over. Your spouse has no interest in running the business. A buy-sell agreement can then provide clarity and security.
If you pass away, the life insurance policy pays out, and those funds are used to buy your ownership share. Your spouse receives the value of the business interest, and the successor takes over without disruption. This provides continuity for employees, clients, and the company itself.
Insurance Example
My family has first-hand experience with the benefits of proper succession planning.
My grandfather died unexpectedly. He owned a printing company and was the sole breadwinner for the family. He had eight kids, and my grandmother was pregnant at the time. Luckily, my grandfather had life insurance with his business partner, who was able to buy out his share. The proceeds of the sale went to my grandmother. And that money supported the family for the rest of the kids’ upbringing.
This is an example of how estate planning and succession planning can help ensure that your family is taken care of even during the worst-case scenario.
Legal and Financial Considerations to Address Early
It’s critical to get your legal and financial foundation in place early.
That means reviewing your ownership structure and formalizing agreements. You'll also want to work closely with an attorney and a CPA. Without that groundwork, even the best succession plan can fall apart. Don’t wait until you’re ready to sell. Instead, start those conversations years in advance.
How to Value Your Business Before Succession
Knowing what your business is worth and what you need it to be worth is key.
A formal valuation gives you a baseline, but your lifestyle and retirement goals may require a higher target. At 360 Financial helps clients connect the valuation to their broader financial plan, so the business can support their next chapter.
Communicate Your Succession Plan Clearly
You can have the best plan on paper, but if it’s not clearly communicated, it can create confusion or even conflict.
Whether you’re transitioning ownership to a family member or key employee, setting expectations and being transparent from the beginning builds trust and prevents surprises. That conversation is just as important as the numbers.
Where to Get Support for Business Transition Planning
You don’t have to navigate this alone.
A strong advisory team, which includes a financial planner, attorney, and CPA, makes all the difference. 360 Financial helps coordinate across all these areas so your business succession plan works both on paper and in real life.
The goal is simple: clarity, continuity, and financial clarity for everyone involved.
Business ownership is stressful. And you're probably juggling more than enough. You shouldn't have to go through the succession planning process alone.
Common Questions
What are the main steps in the succession planning process?
Start by identifying your ideal successor and timing.
Get a business valuation and align your financial goals. Draft legal agreements, plan for tax implications, and communicate the plan clearly. Finally, support the successor’s transition to leadership while ensuring your personal financial security is built into the process.
Do I need a small business succession plan?
Yes—even small business owners need a succession plan.
Without one, your business could face major disruption in the event of death, disability, or retirement. A clear plan aims to protect your employees and clients.
How can I set up an employee stock ownership plan?
Setting up an ESOP involves working with an attorney and a valuation expert to create a trust that holds company shares on behalf of employees.
You'll need a formal plan, a funding strategy, and ongoing compliance with IRS rules. It’s a great tool for transition and employee engagement, but it’s complex, so plan carefully.
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About the Author
William Grant
Will Grant enjoys empowering people to make informed decisions and seeing the positive impact his guidance can have on their lives.
Prior to joining 360, he spent seven years serving hundreds of clients at a boutique RIA focused on healthcare executives with equity compensation and then at a large, independent RIA. He earned a Bachelor of Science degree in Finance from Miami University and holds his Series 7 and 63 licenses through LPL Financial and his 65 license through 360 Financial.
Will lives in Minneapolis with his fiancée, Melissa. In his free time, he enjoys competing in triathlons, golfing and is an active member of the Minnesota Leadership Council for the Chick Evans Scholarship Foundation, of which he was a recipient.
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About 360 Financial
360 Financial is an independent wealth management firm with a team of specialized financial advisors and financial planners. As fiduciaries, 360 Financial’s advisors provide services to business owners, entrepreneurs, and professionals. We help investors with sudden wealth, retirement planning, tax planning, estate planning, and business financial planning.
Headquartered in Minnesota, we serve investors across the US with online and in-person wealth management and financial planning services.
360 Financial and LPL Financial do not provide business valuation or legal services. Please consult your legal advisor regarding your situation.
