What Is Business Succession Planning?

Jack J. Shaffer
CFP, CLU, Ch.F.C.

Business succession planning is a process to arrange for the successful transition of a business to a new owner that maximizes the value while minimizing taxes and costs. And at the same time reducing the stress and emotional turmoil that often accompanies such a transition.

It differs from a common sale of the business in that the successor/buyer is usually pre-determined years in advance. The successor/buyer may be a partner or key employee but could also be an heir – usually a son or daughter, or other family member.  The latter is usually the case where the enterprise involved is a family business with one or more generations of a family represented amongst the employees or shareholders.

It is important that there be a team approach in design and implementation of a business succession plan.  This team should include professionals from the fields of accounting, legal, investment and insurance.  To have a truly effective succession strategy the team members should also have a great deal of experience in working with these types of plans or at the very least have access to resources to assist them.

There are many benefits to business owners who undertake this planning, including
a smooth transition of the business, enhancing the estate left to the heirs, and maximizing the value of the business.

It is never too late to start planning for business succession but often it is left much too late.