Family business succession is more than picking the next CEO. It’s a handoff of ownership, relationships, and responsibility. When the plan isn’t solidified or written down, even small choices can create tension and lead to rushed judgment. A written plan helps keep everyone aligned and keeps you focused on growing your business's value. Below are five steps that will help you clarify your desired outcome, define who does what, and map a transfer roadmap that fits your timeline. Start simple, then refine it as the business evolves.
Set The Outcome and The Timeline
Many family firms move forward without a written succession plan. In fact, only 34 percent said they had a robust, documented, and communicated succession plan in place.
To start, get clear on what you want the handoff to look like and when it needs to happen. Then write it down.
A good place to begin is with these four questions.
- What do you want your role to be in one year and in five years?
- What should stay in the family and what can change hands?
- What does the next leader need to own, and what can be shared?
- What events would speed up the transition?
Your timeline matters because it shapes
the kind of work you do first. A valuation shows what the business is worth today, while an evaluation points to what can grow in value over the next few years.
Separate Ownership from Leadership Roles
Family business transitions get messy when ownership and leadership are conflated. Many families want the business to stay in the family, and the best way to do so is to separate ownership of the equity from day-to-day management.
Write down the roles you are actually handing off, like ownership rights, leadership authority, oversight and accountability. When responsibilities are clear, decisions move faster and conflict drops. Transitions are smoother when firms document how key decisions get made and map who is responsible for each leadership seat.
If the next CEO is not the next majority owner, that’s fine. Put it in writing and move forward.
Get Clear on Value and What Drives It
Succession planning is easier when you can point to a baseline value and explain what moves it. Start with a formal business valuation. That will answer what the company is worth today using accepted approaches, and it should include a report explaining the logic behind the number. It also shows how revenue trends, margins, customer mix, and risk factors shape your company’s value.
Pair the valuation with an evaluation. Instead of landing on a single value, an evaluation considers performance, risk, and value drivers to help you prioritize what to improve over the next few years. This work also helps close the valuation gap, which is the difference between what owners believe the business is worth and what the market will pay. 78 percent of businesses say protecting the business is their top long-term goal, and a value driver review turns that goal into a plan.
Build The Ownership Transfer and Funding Plan
This is where you get specific. Decide how ownership will move and when. It might stay with the next generation, be transferred to key leaders, or be distributed to employees through an employee stock ownership plan (ESOP). A partial or staged transfer can also keep continuity while the next owner grows into the role.
Then pressure test the structure. Earnouts, working capital adjustments, and management rollovers can shift value and your after-tax outcome. Run scenarios with your tac, legal, and valuation team early.
Finally, map the money. Bank financing, seller notes, and investor partnerships can make an internal transfer workable. Deal structures like partial acquisitions or seller rollovers can help close the gap.
Communicate, Execute, and Review
Execution is where most plans stall out. Build a transition calendar and assign an owner for each milestone. Treat the handoff like a project with dates and check-ins. Decide which changes to implement now and which to leave with the owner until the final handoff. Tie down dates to leadership duties, signing authority, and key client relationships.
Communication is next. Start with family, then key leaders, then customers and partners. Customers will ask what your plan is. Consistent messaging reduces noise. Disciplined massaging keeps your team and customers informed. It’s also good to spot issues early so you can reduce surprises that can slow diligence or negotiation. Review the plan once a year and after major changes.
Step 5: Governance and Communication
Succession planning works best when someone owns it. In many companies, the succession leader works with a board or advisory group that reviews leadership and follows a written plan that names successors and explains how authority shifts, so the business can keep moving.
This sounds simple, but 43 percent of board directors have no formal succession plan for the chief executive officer. Also, around 60 percent of failed transitions stem from breakdowns in trust and communication, not technical tax or legal issues.
That is why governance and communication go hand in hand. Regular, open conversations with family members and key executives, backed by a written plan, help reduce uncertainty and support a smoother handoff.
What to Do Next
Succession planning works best when it is written, shared, and tied to dates. Too many families still rely on informal handoffs. A clear timeline, defined roles, and a baseline company valuation give you a starting point, while an evaluation points to what will increase value before the handoff.
Ready to get a clear understanding of your business value and next steps?
Contact SHG to discuss a valuation, evaluation, and a plan that fits your goals.
