Retirement & Succession
What is succession planning?
A multi-year plan to transition ownership and leadership of a business.
Practical Explanation
Succession planning is the deliberate process of preparing a business for its next owner — internal (family, employee, GM) or external (operator, strategic buyer). Good plans address leadership development, financial structure, tax strategy, and contingency for health or life events.
Real-World Example
A founder works with their CPA and attorney to build a 5-year succession plan with a chosen GM, including phased equity, an installment-sale tax structure, and key-person insurance.
Typical cash required
Mostly absorbed via seller financing.
Experience required
Successor's experience grows during the transition.
Advantages
- ✓Predictable owner exit
- ✓Continuity for employees and customers
- ✓Tax efficiency
Risks
- !Disagreements on valuation
- !Successor backs out
- !Founder cannot let go
Frequently Asked Questions
When should succession planning start?
Five to seven years before the desired exit — the earlier the better.
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