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Lack of a Succession Plan Is a Small Business Blind Spot That Can Leave Your Company and Your Family in the Dark


By Stewart C.W. Weiner

Owners of family-held or small businesses intuitively understand the importance of planning. Budgets, inventory, purchasing, marketing, strategy, and capital investment all require thoughtfulness and foresight to ensure the company is positioned for success during the next quarter, next year, and the years that follow. That is why it is surprising that so many otherwise sophisticated small business owners – even those who have prepared a personal estate plan – do not plan for the inevitable day when they are no longer actively involved in their company, whether due to retirement, incapacity or perhaps death. 

The lack of a clear and comprehensive business succession plan can greatly endanger your company’s financial health and goals as well as your own personal financial and retirement goals. Neglecting to address what is to happen to the management and ownership of your business in your absence will almost surely increase the likelihood of chaos and conflict and threaten the continuity and ongoing viability of the business you have spent a lifetime building. 

Two-Thirds of Family Businesses Do not Have a Clear Succession Plan

If you have not yet prepared a business succession plan, you are not alone. PwC’s 2021 US Family Business Survey revealed that only 34% of family-held businesses in the U.S. have “a robust, documented and communicated succession plan in place.” 

Given how business and personal objectives are at stake and risk, why do so many owners ignore succession planning? It is likely for the same kind of reasons that so many otherwise successful and responsible individuals fail to put together an estate plan: thinking about a time when you are no longer around, for your family or your business, is not an easy thing to do. But building your business was not easy either. 

Questions Your Business Succession Plan Should Address

The approaches and tools you use in your succession plan will vary depending on many factors, including your business and personal goals, the size and complexity of your business operations and asset portfolio, your family’s interpersonal dynamics, and their involvement and interest in the business. But specifics aside, a well-crafted business succession plan should allow you to answer “Yes” to these fundamental questions: 

  • Is there a written Shareholder Agreement, Operating Agreement, or Buy-Sell Agreement that sets forth how ownership interests in the company can or will be sold, assigned, or transferred?
  • Have I identified, prepared, and named a capable and willing successor who can and will take over management of my company if something happens to me tomorrow?
  • Is there a plan for ownership, governance, and control of the company in my absence?
  • Is there a document clearly defining the roles and responsibilities of shareholders, partners, or members?
  • Does my company have sufficient liquidity and/or capital to prevent a forced sale? 
  • If I am relying upon my equity interest in the business to meet my retirement needs, can I ensure I have sufficient income and cash flow for those needs? 

Take Care of the Business of Taking Care of Your Business

Whether you are in the early stages of your career and still building your business or have succeeded in developing a well-established business with retirement on the horizon, there is no time like the present to plan for tomorrow. The legal, family, tax, and financial implications of a turnover in leadership and ownership can be overwhelming. It will take time to reflect, strategize and develop with the assistance of your business succession planning attorney, accountant, and other professionals a business plan that you are comfortable with and can implement. 

But by starting now, you can ensure your business and family needs are prepared for the uncertainty of the future. To start the process of preparing your business succession plan or for a review of your existing plan, please contact Stewart Weiner at Maddin Hauser.