5 Get-Started Steps for Your Small Business Succession Plan

As a small business owner, you're crazy busy with everyday tasks that support running a successful company … yet planning for the future is essential to ensure financial stability and growth. This is where Succession Planning comes into the picture.

Succession Planning is a two-fold strategic people/knowledge capture process for safeguarding a company's future. The "people" part of the process includes facilitating the identification and transfer of corporate skills and knowledge, particularly those that are most critical to the future success of the business. The "knowledge" part determines crucial job roles, identifies and assesses possible successors, and provides them with the relevant skills and experiences needed for current and future opportunities.

The Urgent Reality: Why Most Businesses Aren't Prepared

The statistics paint a sobering picture. According to recent research from Gallup, one-third of business owners either don't have a long-term plan or are unsure about what will happen to their business after they leave. Even more concerning, nearly two-thirds of family-owned businesses don't have a documented or communicated succession plan in place—despite the fact that over 50% of small business owners are already 55 or older.

The consequences of this planning gap are significant. Only 30% of family-owned businesses survive into the second generation, just 12% make it to the third generation, and a mere 3% continue into the fourth generation and beyond, according to the U.S. Small Business Administration. Those without succession plans most commonly cite lack of time, knowledge, or resources as reasons for the delay.

Even though you can't plan ahead for every possible scenario, you can formulate a well-thought-out plan that will ensure a smoother transition of leadership/ownership and ultimately help continue your company's prosperity. 

To learn more about the basics of succession planning and get an overview of everything involved in the process, check out this detailed guide.

Why You Can't Afford to Wait

You may be thinking, "But I don't have the time or resources to think about succession planning," or "our company is too young to worry about succession planning." However, recent data reveals a troubling trend: 48% of business owners expecting to leave their businesses in the next five years don't have a succession plan, and the median close rate for businesses listed for sale is only 6.46%—meaning most businesses that go to market struggle to find buyers.

The sustainability of your company and the satisfaction and success of your employees depends on succession planning. Consider this: over 4.2 million Americans will turn 65 in 2025, creating an unprecedented wave of business transitions. With more businesses entering the market simultaneously, competition among sellers could drive down valuations and reduce your options. The time to plan is now—before you're forced to make rushed decisions under pressure.

The most common question from someone new to succession planning is, “Where do I start?” In light of that very relevant question, let’s consider 5 simple steps that can get you started with succession planning right now.

Moving Beyond the Basics

Once you’re ready to go beyond the “5 get-started steps,” there are sub-steps that include more detailed tasks like determining position criticality, assessing retirement risk factor, and developing success profiles. These are areas you’ll dive deeper into once you’re done gathering initial information.

Additional considerations for comprehensive succession planning include:

• Financial and tax planning: Align your sale or transfer strategy with retirement income needs, timing, and legacy goals. Be aware of changing federal and state estate/gift tax exemptions—current exemptions are set to change significantly in 2026.
• Governance structures: Set up family councils or advisory boards for family businesses. Hold structured meetings with all stakeholders and document role definitions, rights, and responsibilities clearly.
• Valuation and market positioning: If you're planning to sell in a few years, adjust your tax planning strategy to maximize the value of your business to prospective buyers. Many businesses run operations for tax efficiency, which can inadvertently lower profit statements and reduce appeal to potential buyers.
• Communication and documentation: A plan is only as good as its documentation and communication. Formalize roles, responsibilities, and timelines. Share relevant information with leadership, family members, key partners, and when appropriate, major customers and suppliers.