It’s easy to overlook succession planning. Your company is busy, your team is stretched, and the next chapter for your business can wait. But retirement dates come faster than expected, and leadership gaps can crop up overnight.
Succession planning is more than picking who comes next. It is a strategy that ties together leadership, ownership, and exit goals, enabling the business to transition with confidence and protect value along the way.
Still, many owners don’t have a clear plan for what happens when they step away. In fact, about half of the owners either expect to close their business or say they have no plan or are unsure. This post walks through real-world succession examples for small- and mid-sized businesses, along with the practical moves that made the handoff smoother.
The Framework Behind Every Good Succession Story
Succession planning works when you treat it like a strategy, not a last-minute handoff. You need to clarify your personal and business goals before you discuss successors or buyers. This means aligning ownership, leadership, and exit goals so the company can move through a transition with confidence. Separate management succession from ownership succession. One is who runs the company day to day. The other is who controls the equity over time.
Keep a long view and think about where you want the business to be in five to ten years. Put numbers around the plan with a formal valuation. This will become your baseline for structure and liquidity goals.
Example 1: The Surprise Leadership Gap
When a founder or senior leader steps away unexpectedly, the business does not have time to debate titles. The goal is to keep decisions moving and keep people calm.
Start with three moves.
- Name an interim decision maker and spell out what they can approve today.
- Pull together a simple playbook for roles you cannot afford to lose, with key contacts, access, and recurring deadlines.
- Communicate early with your team and your top customers, and stick to what is known.
Many companies skip this preparation. In fact, only
39 percent of businesses have a formal development plan for future leaders. Transitions also tend to derail when trust and communication break down, and account for
60 percent of failures.
Example 2: Founder Retirement And A Management Buyout
A founder who has led the business for decades usually wants more than a clean break. They want continuity for customers and the team, plus a fair path to liquidity. A management buyout (MBO) can be a good fit when a trusted leadership group is ready to step up and carry the culture forward.
The smoothest transitions are staged. A phased retirement plan gives the founder time to coach the next leader, transfer key relationships, and capture how big decisions get made before they step back. It also gives the company time to tighten reporting and address gaps that buyers and lenders will ask about.
Financing is often the sticking point. Many MBOs rely on outside funding and can be more complex than a straightforward sale. That is why you should start planning three to five years before an anticipated sale.
Example 3: Family Succession
Some families want ownership to stay in the family, while leadership goes to the best-fit operator. That starts by separating management succession from ownership succession. It also keeps family relationships from carrying the full weight of operations.
In practice, a next-generation owner may step into a board seat while a non-family member chief executive officer (CEO) runs the day-to-day. The transition holds together when roles and authority are documented and discussed early on. Family succession needs structure and a clear leadership plan to avoid friction between generations.
Only 34 percent of US family businesses have a robust, documented, and communicated succession plan. The fix isn’t complicated. Build a leadership roadmap, invest in development, and maintain a steady governance and communication cadence.
Example 4: Employee Ownership Through An Employee Stock Ownership Plan (ESOP)
Some owners want liquidity while still keeping the business independent. They also want a transition that keeps the team invested in what comes next. An ESOP can accomplish this goal. ESOPs are an internal transfer option that can help preserve culture as an owner steps back.
At its core, an ESOP is a defined contribution retirement plan that invests primarily in employer stock. Employees build ownership through their plan accounts over time. It is also a federally regulated benefit plan with fiduciary oversight, which adds structure and accountability.
The Patterns Across All Four Examples
The best succession plans start with alignment. Ownership, leadership, and exit goals need to point in the same direction, or the plan becomes reactive. Clear objectives come first, then you map options and build a roadmap for who leads and how equity shifts.
The next common thread is proof. A formal business valuation gives you a baseline and keeps exit goals grounded in real numbers. Strong reporting and credible projections also matter because buyers and lenders price what they can trust.
Finally, clear governance and communication ensure a smooth handoff. Written authority and visible leadership development reduce uncertainty during the transition.
Putting the Plan to Work
Succession planning is a set of choices about people, ownership, and timing that keeps your options open as the business grows. Start with clear goals and back them up with a formal valuation. Then keep it practical. Build a roadmap, write down how authority shifts, and talk about it early and often.
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.
