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Planning for Success: How to Create A Succession Plan

As seen in Westfair Online

While 88% of business owners believe their family will control their business in five years, statistics from Family Business Institute show that only 33% of businesses survive to transfer to the next generation, and only 10-15% continue to the third generation. Many factors contribute to these statistics, but businesses primarily fail to establish smooth exits due to a lack of planning. With proper planning, you can create a successful and effective exit plan. Here are a few key steps which will guide you towards a successful exit.


Creating, designing, and implementing any plan will take time. This investment of time will provide you the ability to be proactive as opposed to reactive. Plans must be put in place with the flexibility for adaptation and change, and they should be re-evaluated consistently and monitored to adapt to new circumstances. They must also include a contingency strategy in case of sudden events such as disability or death.


Communication is key in all aspects of succession planning and is essential in order to keep your strategic plan unified and aligned. One way to accomplish this is by seeking input from involved family members, key employees, and professionals. Avoiding friction between key employees and family involved in the business is vital. Consistent communication can greatly help to make sure everyone is working towards the same goals, with the same enthusiasm for success and trust between parties.


What do you envision the future to look like? What are your business goals? What are your retirement goals? Do you need to sell the business? Are you or your spouse dependent on the business for cash flow? Identify early what you are looking to accomplish – both personally and professionally. Establish these goals regarding next generation management, retirement, and keeping the family business in the family to address these issues early in the planning process.


Once you have established your goals and objectives, you can then take the next step to create a successful strategic plan. There are a number of options for a successful exit:

  • Family Succession - Transfer the business to a family member(s)
  • Internal Succession - Sell or transfer the business to one or more key employees or co-workers, or sell to employees using an Employee Stock Ownership Plan (ESOP)
  • External Succession - Sell the business to an outside third party, engage in an Initial Public Offering (IPO), strategic merger, or investment by an outside party


Exiting a business successfully is a challenging process for everyone involved. Once a decision is made to follow a particular succession path, all parties must be prepared for the transition. There has to be unity around the goals and objectives. This begins with identifying successors and identifying active and non-active roles and responsibilities for all family members. Working together in a cohesive manner will help members make joint decisions about how to manage the company, and ultimately deliver success. A successful transition could also result in a lower tax impact for all parties with proper tax planning.


Most business owners don’t think about who will run the business in the future; they are too busy with the day-to-day operations of the business. It is essential that a business owner avoid succession planning issues such as delaying the plan, hastily implementing the plan, skipping goal setting, or ignoring collaborative professional help. Owners who do not plan properly may inadvertently give up control of their legacy. They could be forced to sell the business at a much lower price than its true value, encounter disputes over its control, and become subject to excessive taxes.

When one of the owners dies, does their ownership transfer to someone with no connection to the business? Will that person want to be involved? Will they have the capabilities to be involved? Will they be accepted by other owners and key employees? These situations are ripe with potential conflict and friction that could devastate the future of the company. With thoughtful, detailed planning now, all of this could be avoided.


Citrin Cooperman works with business owners every day who focus on their company’s day-to-day business objectives and are challenged to make the time for succession planning. With careful preparation, a business owner can work with a group of advisors such as accountants, lawyers, and business and insurance brokers to start planning for a successful exit in the future. 

Howard Klein, leader of the Trust and Estate Services Practice, is a tax partner with more than 30 years of experience in the areas of tax, financial, estate, and succession planning. Howard can be reached at

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