Succession and Exit Planning

Succession planning is not just about transferring ownership or a monetization event; comprehensive succession planning navigates all five key areas.


What is succession and exit planning?

It’s a process that helps to facilitate one of two events and sometimes both. First, it is financial planning for the entrepreneur to eventually become financially independent of the operating asset as their primary source of cash flow. Second, it could help the operating asset become independent of the entrepreneur as its primary driving force. How can I walk away with enough cash or how can I get a competitive valuation and rate of return on my business asset?

You will exit your business somehow, someday. It can only happen in one of five ways: Death, Disability, Voluntary Sale, Retirement or Bankruptcy/Orderly Liquidation. Regardless of your method of exit, in order to maximize your value and/or the likelihood the business will succeed you; the business must be managed as if it were for sale on any given day. The same things that are common discounts at the time of transfer in a third-party sale can sabotage an intra-family succession plan or sale to key employees.

As an entrepreneur, your big decisions are inseparable from who you are as a person. So, your decision making is defined by your ability to arrive at unshakable gut instincts. You need a process that allows the subconscious layers of bias to peel away and give rise to pinpoint wisdom about desired outcomes. You need to get to that place of instinctual decision-making you know and trust. While many individuals hire financial advisors to watch over their money and provide insights towards financial goals, entrepreneurs hire succession planning advisors to ensure their exit process aligns with their best needs. Keeping in mind the business owners wealth management and retirement plans, succession planning advisors strive to get the most for their new clients.

Without this level of clarity, you might move forward with estate planning for a little while, but when it comes time to execute, you’ll back away from the table and search for peace of mind. There’s simply too much at stake with your wealth, your business and your relationships to risk faltering. This is why planning and decision making must bump up against objectives in all three realms: relational, operational and numerical.

In order to do this, it must transform from the traditional planning process to a decision-making process. For independent advisors and advisory firms, we all love great planning processes. But for you the entrepreneur, the planning really happens in the background. What you need is a process that allows you to make pinpoint decisions about desired outcomes. Where am I today? Where do I need to go? Who do I feel responsible for? Whose feelings do I need to be mindful of? What are the business and personal risks I want to mitigate? What’s my time frame? Once you create well-defined macro goals, decision making becomes infinitely easier.

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Exploring the Five Key Areas

When a transition process begins with exit planning, or a particular advisory firm driving their unique discipline, chances are that one or more of the Five Key Areas will be left unaddressed.

  • Who are the possible future owners?
  • Who are the possible future leaders?
  • Who are the possible future managers?
  • How do you transfer the strength of your existing culture, and how do you create strength if the glue is not there currently?
  • How will you manage internal relationship transfer, such as your key people, and external relationship transfer, such as vendors, clients and professional advisors?

Effective succession planning addresses all five areas with particular focus on the people at the heart of the process. We do our due diligence to identify those who are essential to driving revenue, and work to institutionalize their contributions. This is a key factor in maximizing the longevity and/or value of the business.

Levels of Succession

Let’s address each level of internal succession and external and the succession strategies for every level::


Ownership succession simply addresses who will be the next generation of stockholders. This doesn’t mean they will lead, manage or run the company. It merely means that they will own the stock and benefit from profits and dividends.


Management succession is a process that allows for the growth and development of emerging talent in an organization. Managers must look at the situation like this: “In order for me to grow, I must find my successor.” Weak individuals may shy away from this while strong team members will embrace it. The cream rises to the top.


In small, family or closely held businesses we need to remember that the “gene pool” is not always the deepest talent pool to pull from when searching for the next generation leaders. Leadership is earned, not bestowed to family members. Furthermore, if you have an organization that has been driven by a dominant personality throughout its history, you may have to look outside of the organization to find a leader that will garner the respect and admiration of the troops in order to maintain business continuity. Promoting from within can be successful, yet in many cases it can be detrimental.


Relationship succession is a crucial and often overlooked piece of the puzzle. Organizations often ride on the backs of strong relationship managers. You need to avoid and plan for problems that could be crippling if one of those people should leave, get sick, die or quit. It’s a process, not an event. A conscious effort must be made to bring new faces into key relationships to shore up the problems that could exist if not addressed.


What makes a company great is its culture. Culture is the vibe or beat that any organization marches to and is driven by strong leaders. In order for a company to stay great, it must stick to the recipe that got it there in the first place. Culture is driven, fostered and controlled by strong leadership and must be backed up by an undying commitment to mission and vision.

The Numbers

Business owner statistics

of owners are not familiar with all exit options


have no formal transition team; 83% have no written transition plan; 49% have not done any planning


have no formal life-after-business plan


have no plans in place to cover illness, death or forced exit


of owners need their company to remain profitable yet 86% have not done a strategic review of their business


Source: Exit Planning Institute

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