What Now? A Short Roadmap to Successful Succession

Entrepreneurship is a journey. That road is filled with wrong turns and bumps along the way. You don’t really even have a roadmap a lot of the time, and during the years, decades even, of work, it often feels like there is no end in sight. But the reality is, there is an end, and that “end” is…retirement. What happens to your business when you are no longer there? You probably thought we were going to say death. While we will talk about death (just a little, we don’t want to put a damper on your beautiful weather weekend plans), we’re optimists here. We’re tuned into the fact that humans are living longer, and perhaps you, in your 90s, would rather be on a beautiful beach somewhere vs. still crunching numbers in your office.

Let’s assume you’re already thinking about succession, what now? Or better yet, what next? Here’s one roadmap you’ll want to have in your back pocket. ***Alexa, play “Road Trippin” by Red Hot Chili Peppers!*** Grab your favorite road trip snacks and let’s do this! We’ll make some pit stops along the way, but first: let’s develop the itinerary.

Where Do You Want to Go?

Before you start mapping out the future of your business, figure out what you actually want that future to look like. Do you want to sell to a third party? Transfer ownership to family members (do they even want that)? Reward key employees by transitioning ownership to them over time? Do you want to remain involved as an advisor, or would you prefer to hand over the keys and ride off into the sunset?

There is no universal right answer because you, as the business owner, are in the driver’s seat. The best succession plan is the one that aligns with your goals, your family dynamics, your financial needs, and the long-term success of your business. Understanding the destination makes it much easier for the professionals to chart the route.

First Stop: Your CPA’s Office

A succession plan is only as good as the numbers behind it.

Your CPA can help you understand the value of your business, the tax consequences of various transition strategies, and what steps you can take today to make your business more attractive to a future buyer or successor. A transfer to family members may have very different tax implications than a sale to employees or a third-party purchaser. Maybe they’ll suggest that you restructure your entity, as your current tax structure may work now but could hurt you when it’s time to sell. Or, maybe they’ll suggest an F-reorg depending on the different avenues you choose to take.

Your CPA can help answer two of the biggest questions business owners have: “Will I have enough money?” and “How much will I lose in taxes?” Retirement planning and corporate succession planning go hand in hand. It’s never too early to plan for any of this, especially potential tax hits. And on that note: loop in your financial advisor too, they should know if you’re expecting a massive check in the next few years, and can help you protect yourself.

Get a Tune-Up with Your Bookkeeper

Your bookkeeper should come in, in conjunction with your CPA, and clean up your books, ideally, 3-5 years prior to any sale or similar transaction.

Nothing slows down a transition faster than lack of proper financial records and/or messy books. Even if retirement feels a long way off, you never know when a lucrative offer will come around. As a buyer, would you want to sift through a total mess? Whether you are transferring the business to family, key employees, or a third-party buyer, clean and accurate financial statements build confidence and help maximize value. Future successors should be able to understand how your business operates without needing to decode what’s actually going on books-wise. Don’t leave money on the table over something you have full control over.

Exit Right to Your Estate Planning Attorney’s Office

A comprehensive succession plan should address not only retirement, but also disability, incapacity, and death. Who has authority to make decisions if you are temporarily unable to do so? Who inherits your ownership interest and when? Will your family receive the value of the business, ownership of the business itself, or both? If you have a partner, how will they pay for your interest? All of this necessarily impacts your individual plan too.

Your estate planning attorney can help coordinate your wills, trusts, powers of attorney, healthcare directives, and business documents so they work together instead of against each other. The goal is to avoid leaving your family, business partners, and employees scrambling to figure it out through an already difficult time. To be clear, the “scrambling” is often resolved through expensive litigation. Don’t do that to your people!

Stop for Gas with Your Legal Team

Before we even get to the deal table, you should be looping in your legal team. Yes, we’re talking about LOIs. Your attorneys, working alongside your CPA, bookkeeper, and management team, can help coordinate critical items such as creative purchase price structures, earn-outs, succession planning, and, especially in private equity transactions, what executive compensation and transition responsibilities may look like if you’re expected to stay on after closing.

Think of this stop as a chance to fill the tank before the long haul (i.e., the deal negotiations themselves). Getting your legal team on board early is a lot like filling up before a road trip: the sooner you do it, the fewer stops and surprises you’ll face down the road. By looping us in from the start, we can help coordinate key conversations and address potential issues before they become roadblocks. The legal groundwork, corporate housekeeping, and strategic planning done today can help keep the transaction moving smoothly when it’s time to hit the gas.

Enjoy the View: Your Hard Work Lives On

Some business owners assume that they need to close up shop when they retire or that their family can simply liquidate assets when they pass away. But your blood, sweat, tears, and years of dedication have created something of value.

Loop in trusted advisors as early as possible to determine what that value is and how to maximize it over time. With proper planning, your business can continue serving customers, supporting employees, and providing financial benefits long after you’ve stepped away. Whether the future involves a sale, a transfer to family, key employees taking the reins, or another succession strategy, the goal is the same: preserving and capturing the value you’ve worked so hard to build.

After years spent building your business, you deserve the opportunity to sit back and enjoy the view, and as always, if you’ve got questions, you know we’ve got answers!

~ The W + K Team