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Not All Succession Plans Are Created Equal


Every privately held and family-owned business can bank on a change in ownership and leadership at some point in its lifecycle.  With the baby boomer generation at or near retirement, there is an above average wave of ownership and leadership changes expected in all privately held companies in the near term—yet, studies show most privately held companies haven’t developed a formal and written succession plan.

As the owner of a closely held or family-owned business, you may be thinking about what’s next for your business, family, and future.

How well you manage and prepare for a succession event may be the decisive factor in the overall financial success of your business and its stakeholders.  Wisely managing this event will help you capitalize on the fruits of your labor.  Failing to plan for this event could throw your future into a tailspin.

While some of you may believe succession for you and your family is years away, can you and your family sustain an unexpected event that accelerates the timing of this transition?

Developing a holistic succession and continuity plan that protects your family can provide peace of mind and reassurance to you and all your stakeholders.  Given the obvious need and benefits of developing a succession plan, why do so many fail to do so?  First, day-to-day operational demands seem more urgent than “long-term” succession planning.  Second, more often than not, leadership hasn’t been through a succession event, and the lack of knowledge and experience related to developing a plan can easily lead to procrastination.

It’s also important to remember not all succession plans are equal, and while a well-developed succession plan can perpetuate success, a poorly designed succession plan can lead to failure.  While there are many, some common reasons why succession plans fail include:

  • A failure to consider the perspective of all stakeholders, including shareholders, leadership, and family
  • Developing a plan by starting with a review of liquidity options, instead of developing goals and objectives first
  • A singular focus on tax driven planning versus goal driven planning
  • Failure to resolve conflict within business or among stakeholders
  • Failure to pick and/or train a qualified and capable leader(s) to succeed current leadership

An effective succession plan should include a thoughtful approach that accounts for the interplay among business, ownership, and family.  If done correctly, a succession plan will align with your goals while addressing contingencies, gaps, and opportunities.

As previously mentioned, many business owners fail to address succession due to lack of time and experience.  Therefore, we suggest beginning the process by identifying a lead advisor who can manage planning and implementation.  This will help you efficiently use your time to develop a thoughtful and comprehensive plan.  This advisor should have experience in succession planning and a solid understanding of the interplay among the business, ownership, and family.  This advisor also should have a developed process and toolkit for navigating these relationships.  Also, the right advisor will readily seek assistance from other qualified advisors at various points in this process.  The lead advisor won’t be an expert in all fields—if they claim to be, we would exercise extreme caution—but will be able to identify potential needs and access the right professionals.

If you selected the right lead advisor, your process generally begins with discovery.  During this phase, the advisor works with you to gather information, identify needs and stakeholders (which typically doesn’t just mean shareholders), and clarify objectives.  In the second phase—integrated planning—your advisor will work with you to compare your current state to your desired state and identify gaps, opportunities, and risks; prioritize needs; and develop a road map to meet business, ownership, and family objectives.  A critical component of succession planning is clarifying stakeholder objectives and reconciling differences when possible.  The final phase of the process is implementing the plan you’ve developed.  It’s critical for your lead advisor to be involved in this process.

Note that some action plans developed in the first two phases may not be acted upon immediately.  For example, if the first two phases identified the need to enhance your business’s value prior to a sale, at least two action plans may result.  The first—the development and implementation of a business process improvement plan—should be acted upon immediately.  The second—going through the process of selling the business—will come several years later.

It’s also important to remember that succession planning doesn’t always revolve around planning for an ultimate sale to a third party.  In fact, in many cases it doesn’t.  Through the succession planning process it is common for the stakeholders to decide they want to remain “independent.”  In that case, succession planning is just as, if not more, critical.  Developing a plan to transfer ownership and remain independent requires a thorough evaluation of the facts, goals and objectives.  Also, remaining independent highlights the need to develop, retain, and/or attract the necessary leadership to perpetuate the business.

The brevity of this article means we have only scratched the surface on the issues and topics related to the development of an effective succession plan.  However, we do want to leave you with one final thought—an effective succession planning is a never-ending process that requires re-evaluation as circumstances change.  Succession planning likely will always be a concern (as it should be), but having a plan in place will hopefully give you the peace of mind to get a good night’s rest.

tonyThis post was co-authored by Tony Giordano, President and Managing Director of BKD Corporate Finance. He can be reached at

BKD, LLP, one of the leading CPA firms in the country, has developed BKDnext®, a consultative approach and solution for privately held businesses to address their succession planning needs.  Tony joined BKD Corporate Finance in 2007. He has more than 25 years of experience providing mergers and acquisitions, corporate finance, bankruptcy transaction and financial advisory services.  He previously founded Santana Partners, LLC, a Denver-based investment banking consulting firm. Tony is a graduate of Fairfield University. 

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