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Business Succession Planning: 5 Short Points for Consideration

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For most small business owners, the majority of their energy, consideration, planning, and time goes into the day-to-day work of managing and building a successful business.  Exiting the business, which could be 2 years, 10 years, or 40 years away, seems distant and intangible.

The fact remains, however, that at some point the business must take one of two paths: it must close or it must transfer to new management or ownership.  Setting long-term, specific objectives for exiting from a business isn’t easy; but, considering the future life planning and financial planning goals of the owner aids in preparing the business for the final decision: close or transfer.

The depth of the topic doesn’t lend itself to a short blog post, so we’ll narrow our scope to provide a few points of consideration for those on the long-term path of selling or transferring their business.



Are the key management or production roles filled by members of the owner’s family?  If the family member employees have the interest and the capability of owning and managing the business, can they afford to purchase the business from the owner in the near or distant future?  If a family member will play the role of successor, training and preparation should be a priority and a timeline must be developed.


Disability or Early Death

Are agreements in place to sell the business should the owner experience work-preventing disability or an early death?  Is there a plan in place to care for loved ones and family members who depend on the income of the business?  If planning is not in place, an otherwise healthy business may cease to function without the day-to-day efforts of the owner.



What is the business worth to someone considering purchasing it?  If selling the business to an outside party is the long range goal, what steps can be taken between now and the sale to increase the value of the business?  Valuation and sale price are an important consideration when planning the taxation of the transaction.  The IRS website provides helpful information at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Closing-a-Business.



Most business owners work feverishly to build and maintain their businesses.  Once the business has been transferred, what will the retired owner do to find fulfillment and satisfaction in retirement?  From a financial perspective, it is important to create a plan for retirement income as early as possible.  How will the income the owner received from the business be replaced once he or she is retired?


Who is on the Team?

Selling or transferring a business is likely one of the most important financial transactions a business owner will complete.  Having the right professionals in place to help guide the process is critical.  Important advisers could include CPAs, valuation experts, business brokers, attorneys, bankers, and financial advisers.


We encourage business owners to put consideration to these factors early and often.  If you’re a business owner and would find a conversation about these points valuable, you’re welcome to reach out to us.  We’d love to hear the story of your business and the hopes you have for the future.



wisdom wealth strategies

Andrea L. Blackwelder, CFP®, ChFC and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with Wisdom Wealth Strategies.

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