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Planning Can Help Put the Success in Succession

Posted on February 1, 2023 by

Rob Dutkiewicz

Rob Dutkiewicz

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Succession Planning TipsIf you are one of the many baby boomers planning to retire in the next few years, you know (or should know) the importance of having a succession plan in place. By preparing now, you can carefully evaluate your options and maximize the value of your business. Here are some basic guidelines to consider along the road to succession.

1. Build a Strong Development Team 

When putting together your succession plan, the good news is you do not have to do it alone. Bringing together the right partners can provide an open exchange of vital information and help lead to a successful transition. This team should consist of you (the owner), your accountant, attorney, an investment advisor and sometimes an insurance representative. We recommend planning several team meetings over time. Often, your CPA can drive this process and help facilitate meetings with the right people at the right time.  

2. Analyze Business and Personal Data 

Ensuring you have good reliable data is imperative. Have the team gather to do this. A lead adviser can help by administering questionnaires and other checklists designed to solicit proper data. This will help evaluate your financial and emotional readiness to step away from the business. 

3. Determine the Value of Your Business

Knowing what your business is worth is a crucial part of a transfer plan. A qualified appraiser will assess the optimal value of your business by looking at things like the overall balance sheet picture, key personnel, market value of physical assets and intellectual property, and a forecast of potential revenue. This step is necessary if an owner is contemplating gift programs to compute potential transfer taxes. These calculations also support general planning purposes. 

 4. Begin With the End in Mind

Buyers tend to view a business’s operations differently than the owner, and as a result will assign a value different than that determined by the owner. For example, an owner may maintain higher levels of inventory than are necessary to operate the business for administrative convenience. A buyer may look at this and want to adjust the business value down because it will require them to maintain higher working capital. By understanding these differences an owner can make strategic changes to their operations which will increase their business value. 

 5. Consider Projected Taxes 

Once the value of the business is detected and a deal structure is determined, the team can start thinking about projected estate and transfer taxes. These figures usually surprise owners. It may entice your planning team to consider possible tax reduction strategies as there are different tax impacts depending on the structure of a sale. 

 6. Identify Successors and Expectations

Your vision should drive this decision. Remember, you do not have to pass ownership and management to the same individual. A good succession plan will recognize various devoted employees. Look for outside suitors if key employees cannot acquire the business. Start by associating with companies interested in an acquisition. Establish mutual respect by developing strong relationships with them. For example, investment bankers can help you identify the pros and cons of an internal vs. external sale.  

 7. Select Planning Tools 

Once successors are identified, the team should select appropriate planning tools. An assortment of tools is available. Gift programs, installment sales, life insurance, trust arrangements, employee stock-option plans and voting agreements are just a few choices. Use the combined technical expertise of your planning team to create the plan. 

8. Hold an Update Meeting

Invite key employees to this meeting. Carefully discuss and describe their roles today and what expectations you have for the future during the succession process. Resolve any discrepancies cited by the group and amend the plan if necessary.  

 9. Put it in Writing

It is not necessary to transcribe an elaborate document. Putting plan objectives and goals in writing simply acknowledges compliance from all parties. 

10. Monitor the Progress of Your Plan

Keep this train of thought: Today’s problems come from yesterday’s solutions. Succession planning is a continual process. Therefore, evaluate your plan periodically. Issues like marriages, deaths, resignations and new employees may change its direction. In the words of John F. Kennedy, ‘Things do not happen; things are made to happen.” Only you can steer your business into its next generation, and you can make it happen with or without a family member.  

Continue the Conversation 

If you would like to learn more about how succession planning can help set you up for success, please reach out. Our team can help you navigate these steps and maximize business valuation.  

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Rob Dutkiewicz


Rob is recognized by clients, the C&M team and colleagues around the world for his pragmatic and thoughtful leadership.

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