Succession Planning Process

Jul 24, 2019Business, Business Consulting

Are you a business owner? Is your main focus the day-to-day operations of your business? Do you plan to retire in the next 10 years? If you answered yes, continue reading because this article is for you.

The succession planning process is often overlooked until it is too late. Don’t let this happen to you!  As a CPA firm specializing in closely-held and family businesses, we work with our clients to help them set goals for their business’ future and create a plan for things changing unexpectedly.

Below are five items you should be thinking about during the succession planning process.

Succession Planning Basics

1. Realistic Planning

  • It is important to create a succession plan that is realistic. Make time for open and honest assessments of the business, financials, employees and post transition involvement.
  • In our experience, many owners are hesitant to discuss the future of the business in which they will not be involved, but it takes time to develop a plan. We recommend our clients have a realistic succession plan in place throughout the life of their business. An effective succession plan is ongoing and routinely modified to fit the business needs. 
  • Advice: Be honest with management, employees and yourself. A plan will only be successful if you are willing to provide realistic solutions. 

2. Shifting Control in Management Decisions

  • We understand giving up power in an existing business is hard to do. A common perception is only you are capable or qualified enough to perform certain tasks. This may be true at the moment, but does not need to be for future operations.
  • The process of succession planning is designed to help you “let go” operationally and financially. Regardless of how comprehensive the plan, if you are unwilling to let go, transition of management decision-making will be an ineffective process.

3. Engage Senior Leadership

  • Proactive succession planning involves senior management. This is important because these individuals serve as a pool from which a successor candidate may emerge and in some cases, several of these individuals may assume new duties once you depart. For these reasons, engaging senior leadership throughout the succession planning process helps provide alternative solutions and buy-in to the plan.
  • Advice: If current management is not a viable option, an outside source is always an option. But remember, a major benefit of finding someone from within the business is their understanding the current system.

4. Flexibility

  • While having a comprehensive plan is essential to a successful transition of your business, it is also important to be flexible. Remember, a succession plan is a living, breathing document that may need to be adjusted depending on a variety of circumstances. While the strategy behind the plan rarely changes, the details may have to. For this reason, it is important that all involved in the planning process be flexible when dealing with the unexpected.

5. Tax Planning

  • Tax planning is an important part of the succession planning process. You need a plan for how you will manage the tax liability generated by the influx of income upon a potential sale or other methods for transfer of the business ownership. It is critical to understand the financial aspect of a business transaction. While the above items discuss the mindset or approach that should be taken, this is tangible.
  • Advice: When negotiating the terms of the transaction, it is crucial to keep taxes in mind. The last thing you want is to give the government more taxes than is necessary due to poor tax planning.


Succession planning is not an easy process. It requires the guidance and direction of a team of professionals to ensure both you and your business are in the best position possible. If you have been thinking about starting a succession plan, then Smith Schafer wants to help.


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