Succession Planning
August 15, 2007

What is Succession Planning?

“Succession planning is a process whereby an organization ensures that employees are recruited and developed to fill each key role within the company. Through your succession planning process, you recruit superior employees, develop their knowledge, skills, and abilities, and prepare them for advancement or promotion into ever more challenging roles.”

How many companies have a succession plan in place?

According to this article, only 21% of small, family-owned businesses have a written plan for succession:

“Failure to plan for ownership succession is the greatest threat to businesses with sales of less than $3 million and the second greatest threat to larger businesses, says the American Institute of Certified Public Accountants….'Too many healthy small businesses don't make it to the second or third generation due to incomplete or nonexistent succession planning,' said Chris Cooper, the program's coordinator. 'In fact, proper succession planning is the single most cost-effective method to maintaining and growing businesses and jobs in our communities,' he said.”

What are some Business Succession Planning Options?

• "Management buy-out
  • Loans or notes from banks
  • Notes or loans from the seller
  • An installment purchase of stock
  • Employee Stock Ownership Plans (ESOPs) 
• Selling to the employees
• Selling to an outsider
• Liquidation"

“Succession planning is about taking control of the inevitable. Eventually, every business owner will leave the business. If no planning is done, lawyers and the government will control the process. But if the owner plans for an orderly transfer, he or she can reduce the taxes paid, get the maximum value out of the business, leave it in the hands of chosen successors and avoid family and business crisis.”