Succession planning at all stages

Originally published by Raymond James.

It turns out that no matter what stage of business you are at, it’s never too early to think about succession planning.For most business owners, especially entrepreneurs who have founded their business, the word succession is inextricably linked with retirement. For that reason there are many myths around succession planning – including the most prominent “I’m not ready to retire.” However, it turns out that no matter what stage of business you are at, it’s never too early to think about succession planning.

Early stage.

Exiting a business for an early-stage entrepreneur is somewhat unusual and may be focused at this point on preparing for some type of unplanned exit. For that reason, it’s good to have succession contingency plans in place for leadership, as well as life insurance to provide for loved ones. To take a more sophisticated approach, however, making sure there are legal structures in place to protect an operating business is equally as crucial. Wills and even complex estate planning tools often do not cover an operating business.

Protecting an operating business in the event of an unplanned exit achieves two goals. First, it provides a harmonious realignment and ensures value and equity in the company remain intact by reassuring customers, clients and employees that your business will continue to run as usual. Second, it preserves equity and potential income from your business for loved ones.


  • Seek out a professional for life insurance, estate planning and trusts
  • Create an early stage exit plan
  • Talk to an attorney to make sure your business operations are protected


  • Leave succession an unplanned question
  • Rely on life insurance and estate planning to take care of loved ones and protect the operation of your business
  • Put planning off because retirement is years in the future

Middle stage.

At this stage you may have a robust business – you’re out of the early or startup period and operations are running smoothly. You may be in a growth phase, possibly acquiring other businesses or expanding by investing in technology or infrastructure.

The middle stage may have a long runway for succession planning. It blends the practicality of having plans in place in case of a sudden, unplanned exit and looking ahead at the course and growth of your business over the long haul.


  • Revisit plans put in place at the start of your business to make sure they’re still relevant
  • Consider your ideal time frames for exiting your business
  • Develop talent at your company who could take over when you decide to exit


  • Put off planning until months before you’ve decided you want to exit
  • Become so focused on day-to-day operations that you lose sight of the big picture
  • Assume that plans you may have had in place five or 10 years ago still apply

Exit stage.

In this stage, you’ve decided you want to exit the business you’ve worked so hard to build. You’ve created a timetable and may have a date in mind for exiting that’s one to five years out. Valuation, equity and how you can continue to realize income are top of mind.

But first, how are you feeling?

This stage comes with a lot of emotions. Not only are you attached to a business you’ve nurtured from idea to startup to maturity, you’ve likely got your identity wrapped up in your role as a business owner and are emotionally connected to its history of growth and success.

Redefining yourself post-exit, whether you are retiring or going on to new ventures, is important. Take some time during succession planning to attend to this normal mix of emotions and think through what the next act looks like for you. Careful planning about your life in tandem with succession planning can mitigate a sense of loss and add excitement to looking forward to what’s next.

Key financial issues.

The key financial issues you’ll want to work through with your advisors, accountant, attorney and family are many.

  • How much is enough, after taxes, with plenty left over to fund your desired lifestyle and estate planning objectives. Home in on your lifestyle goals and the associated expenses.
  • Who will you sell to or pass the business on to? A key employee group, family or third party? What are the tax implications of a sale or transfer?
  • Will you immediately exit or transition out over time?

Your options.

You and your advisor can tap in to strategies that will help refine your plan. Options could include specialized trusts (e.g., revocable living trusts, intentionally defective grantor trusts, grantor retained annuity trusts) and self-canceling installment notes and intra-family loans. Some assets will require more legal coordination to handle properly during the legacy planning process, such as real estate, intellectual property, and certain types of stock, business partnerships and promissory notes. Your advisor can help you understand the advantages and considerations of each.

Together, you’ll also want to think through how to provide an inheritance for a child who is unwilling or unable to be active in the business, as well as your plans should you have to leave the business before you’re ready (e.g., disability, divorce, distress or disagreement).

Raymond James and its advisors do not offer legal or tax advice. You should discuss any legal or tax matters with the appropriate professional.




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