You have spent 20, 30, maybe 40 years building your business. It supports your family. It employs your community. And someday, whether you plan for it or not, you will step away.
The question is whether your business survives that transition. Without a plan, the statistics are grim. Only about 30% of family businesses survive into the second generation. By the third generation, that number drops to 12%.
Start Earlier Than You Think
The biggest mistake business owners make with succession planning is waiting too long. A good succession plan takes 5-10 years to execute properly. If you are within five years of wanting to step back, the planning should already be underway.
The Three Big Questions
Who Takes Over?
This seems obvious in a family business, but it rarely is. Just because your child works in the business does not mean they are ready to lead it. And just because they are your child does not mean they want to.Have honest conversations. Assess capabilities objectively. Consider whether the next generation needs outside experience first. Some of the most successful transitions we have seen involved the heir working elsewhere for 5-10 years before returning.
What Is the Business Worth?
You need a formal business valuation. Not what you think it is worth. Not what your neighbor sold his business for. An actual valuation from a qualified professional that accounts for your revenue, profits, assets, industry multiples, and growth trajectory.This number drives everything else. The tax implications. The buyout structure. The estate planning strategy.
How Do You Transfer It?
There are multiple paths. You can gift shares over time using the annual gift tax exclusion. You can sell the business to the next generation through an installment sale. You can use a trust structure. Each has different tax implications and different levels of control retention.The Tax Implications Are Significant
Without proper planning, the tax bill from a business transfer can be devastating. Estate taxes, gift taxes, capital gains taxes. We have seen families forced to sell the business just to pay the taxes on transferring it.
Work with a CPA, a tax advisor, and an estate attorney together. We partner with your tax preparer and advisors, keeping your financial records clean and accurate so they can build the right strategy. These disciplines need to align.
Document Everything
The institutional knowledge in your head is the most valuable and most fragile asset in the business. Document your processes, your key relationships, your vendor agreements, your pricing logic. If all of that walks out the door with you, the business loses enormous value overnight.
The Emotional Side
This is the part nobody talks about in the planning guides. Letting go of a business you built is profoundly personal. Your identity is tied to it. Your daily routine revolves around it. The transition is not just financial. It is emotional.
Give yourself time. Phase out gradually. Find what comes next before you leave what came before.