10 Key Questions for Business Owners to Start Succession Planning:
What will happen to your business without you?
That can be a tricky question that many business owners eventually have to face.
Yet, far too many admit they don't have a formal succession plan. About 61% of family businesses do not have a documented succession plan.1
Why?
Many business owners say they haven't put together a succession plan because:
- They're uncertain about their business's future (32%).2
- They don't know where to start (32%).2
- They can't identify a suitable successor (26%).2
Below are some critical questions for business owners to ask themselves to bridge these gaps and kick off business succession planning with more confidence.
10 Questions for Business Succession Planning & Why It Matters
Knowing what to concentrate on in business succession planning can help you start in the right direction. By considering the essentials, you can minimize the risks of overlooking crucial factors.
Here's what to ask as you get involved in succession planning for your business.
1. What are my long-term goals for the business?
Define your vision for your business. Your vision will help you paint the picture of the future you want for your company beyond where it is today. As you consider your answer to this question, think about whether you want to eventually:
- Sell the business
- Pass it on to family
- Transition the company to employee ownership
Your goals can highlight your values, mission, and what you want for your legacy. Your goals can also lead you to better strategies for preserving the business's identity, proactively addressing challenges, and drafting your succession plan.
2. Who are my potential successors & what are their qualifications?
Identifying capable and interested candidates early in the process can allow you to upskill your potential successors while thoroughly evaluating the degree to which they align with the company's values and long-term vision. Preparing a successor early in the process can promote continuity and minimize risk during transitions while highlighting opportunities for training and mentorship. It is also essential to carefully prepare your successors and team for leadership transitions.
Taking a forward-thinking approach to your successor(s) can instill confidence in your employees, stakeholders, and customers through many transitions and disruptions.
3. What is the timeline for succession?
For many reasons, a clear timeline for handing over the reins to your business is essential. It can set the framework for training, financial planning, and communication strategies. This timeline can help you avoid rushed decisions due to an unexpected event, build processes to support leadership transitions, and position all key players for a smoother transition.
Without a timeline, transitions can become rushed or chaotic. This chaos can interfere with operations, profits, and stakeholder confidence.
Creating a realistic schedule for your succession plan can strengthen the business's foundation to support sustainable success by mitigating risks, maintaining stability, and giving everyone ample time to adapt to change.
4. How much is my business currently worth?
Knowing your business's value can give you a baseline for critical financial decisions. The better you understand your business's value, the better you can set realistic expectations. When you better understand your business's value, you can create a stronger case when negotiating with your successors. You can deal with your successors better when you enter negotiations with better information regarding your business.
In addition to negotiating the deal itself, a valuation can also help with tax planning, retirement funding, identifying areas for improvement in the business, and maximizing potential value before the sale. A solid idea of your value can allow you to make more strategic decisions than you would otherwise be able to.
5. How will the transition impact employees and stakeholders?
Succession can impact employees, customers, and business partners. If you do not manage a business transition well, it can reduce employee productivity, which could shake up stakeholder confidence.
Understanding and addressing potential impacts that could arise as a result of the transition allows business owners to maintain transparency, foster trust, and promote a smooth transition by strategically engaging employees and stakeholders to strengthen their commitment to the company's future and position leadership shifts as positive steps forward for all parties involved.
6. What are the tax implications of my succession plan?
Transitioning a business can trigger tax events, significantly impacting how much you take home after closing.
Developing a tax strategy early in the process may open up more options for mitigating tax burdens. Many business owners consider leveraging gifting exemptions, establishing and funding trusts, and structuring installment sales as they develop succession plans. Understanding how your transition will be taxed and getting a plan together early in the process can help preserve more of the business's value while ensuring compliance and smoother financial transitions.
7. What role, if any, do I want to have after the transition?
Some business owners prefer a clean break, while others want to stay involved as advisors or consultants. Define what type of ongoing involvement you want in the future so you can set clear expectations for all parties while also tailoring the dynamics of the transition around whether you:
- Envision stepping away entirely
- Plan on taking on an advisory role
- Want to stay involved in day-to-day operations
The more clarity you have on what you want your future role to be, the more confidently your successors can take the reins while:
- Ensuring continuity
- Preserving institutional knowledge
- Striking a better balance between maintaining your legacy and empowering the next generation of leadership to succeed
8. What contingencies do I have for unexpected events?
Life is unpredictable, and unexpected circumstances can disrupt even the best plans. Some events that can be detrimental to your business if not accounted for in advance may include sudden illness, death, economic downturns, or an unplanned departure of a key leader. Develop contingencies to stabilize your organization, mitigating risks while protecting the business's operations.
9. Do I have the necessary documents in place?
Legal and financial documents can be essential to executing your plan effectively and avoiding disputes. Many business succession plans involve agreements like (and not necessarily limited to) buy-sell agreements, wills and trusts, and powers of attorney. Documents like these are the foundation of a smooth and enforceable business transition. Putting them in place gives you more certainty that family and successors will respect your wishes.
When properly designed, these documents should:
- Provide clarity,
- Protect all parties involved
- Minimize possible delays or complications
- Pave the way for dispute-free business transfers
10. How will I communicate the plan to stakeholders?
Transparency and clear communication build trust and reduce uncertainty among employees, family members, and key partners. That's because thoughtful communication can:
- Create a deeper understanding of the changes
- Help all essential parties get familiar with their role in the process
- Maintain trust and stability among employees, customers, and investors
- Address concerns, outline expectations, and build support for new leadership
- Reduce uncertainty, foster collaboration, and create a positive foundation for the business's next chapter
Planning for the Future You Want Can Start Now
Establishing an effective succession plan for your business can lead to long-term success and smoother transitions when inevitable disruptions occur. It can also give you a more viable way to start putting key pieces in place for retirement.
As you do, some experienced guidance can go a long way toward building a more comprehensive business succession plan — and working through some of the thornier issues that may arise as your plan comes together.
Sources
- Bright Strr, 2023 [URL: https://brightstarcp.com/family-business-research-and-resources/]
- Investment News, 2024 [URL: https://www.investmentnews.com/retirement-planning/as-clock-ticks-on-succession-boom-a-third-of-business-owners-dont-have-a-plan/254355]
This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets. This material was developed and produced by Advisor Websites to provide information on a topic that may be of interest. Copyright 2025 Robert Engel.
