Family Business Succession Planning

7 Stages to Create a Family Business Succession Plan

According to Deloitte research, 86% of companies say succession planning is both pressing and critical to business success. However, only 13% believe they know how to accomplish it effectively. A great plan helps you:

• Maintain critical professional and personal relationships
• Retain top talent and continue to attract reliable candidates
• Establish a culture of learning and growth rather than expecting future leaders (often family) to know how to lead
• Enhance organizational stability and uninterrupted operations during the transition



Does this sound like the kind of succession you want to achieve? Here are the steps you will need to take to accomplish this.

1. Establish Clear Family and Business Goals

Define both family and business objectives. Aligning these goals ensures your business' long-term vision supports your personal (and family aspirations), promoting harmony and commitment among those involved. To start, communicate your long-term vision and layout where you expect your company to be in 10 years. How does this align with family values?

2. Identify and Develop Potential Successors

Consider each family member's career ambitions and strengths to build a unified direction. Evaluate the skills and leadership qualities of family members. Provide training and mentorship to prepare them for leadership roles. Developing successors requires time and commitment to ensure they are well-equipped to lead the business successfully.

3. Communicate the Plan with Key Stakeholders

Engage family members, employees, and advisors through regular meetings. Open communication prevents misunderstandings and builds support for the succession plan. Involving external advisors can offer objective perspectives and facilitate constructive dialogue.

4. Establish a Clear Timeline for Transitioning

Create a detailed timeline with specific milestones for each transition. While it's important to allow for some flexibility as unforeseen challenges can arise, keeping the timeline on track allows new leaders to learn and adapt to their roles incrementally.

5. Create a Formal, Written Succession Plan

Provide clarity to stakeholders with a written succession plan. This will serve as a reference for upcoming deadlines, roles and responsibilities, and accountability. It allows for no (or fewer) surprises. Everyone understands what will happen next well in advance.

6. Plan for Financial and Tax Implications

Evaluate and meticulously address the financial and tax implications of family business succession planning. You have tremendous small business tax advantages you don't want to miss out on. Do not leave any aspect of this to chance.

Conduct a financial analysis that allows you to implement a tax-efficient strategy to minimize liabilities. Consulting with family business advisors is crucial at this stage if not before, to preserve your family business's financial health through the transition.

This step may include getting a formal valuation for your business and taking steps to maximize the value it represents to potential buyers if you plan to sell your business as you approach retirement rather than keeping it in the family.

7. Implement the Plan and Monitor Progress

Execute your plan per your timeline and continuously monitor its effectiveness. Make necessary adjustments based on stakeholder feedback and company data. Ensure the plan remains aligned with evolving business goals.

Legal and Financial Structures to Consider

During family business succession planning, it's vital to consider the various legal and financial structures that protect your business and the family. For example, buy-sell agreements define ownership transfer terms, while a trust can manage asset transfers and deliver tax benefits. At the same time, estate planning strategies address inheritance issues. Then, corporate governance structures out how decisions will be made. These plan elements can ensure your transition is legally sound and financially smart.

Preparing for a Smooth Transition

A successful transition requires careful preparation and proactive management. We recommend that leaders of family businesses invest in training and development for successors to equip them with necessary skills that may not pick up during the normal course of managing various aspects of the business.



Be sure to establish conflict resolution channels and mechanisms to manage disputes that can arise—especially among siblings, cousins, grandchildren, and other close family who may be part of your family business succession planning strategy in one capacity or another. It's critical to understand family dynamics here to ensure operational continuity. Delegate responsibilities and maintain clear processes and expectations for those taking on more significant roles in the company.

When to Start Succession Planning

As you can see from these steps, it's critical to start planning and executing steps well before retirement. This is not something you want to put off until one year out. We recommend you begin this process at least five to 10 years in advance. This gives you ample time to develop leaders and refine your strategy based on the unforeseen. Then review and update the plan to reflect these changes in business or family dynamics. This ensures your plan continues to unfold in a way that supports long-term goals.

Flynn & Company: Supporting Your Family Business Succession Planning Needs

At Flynn & Company, we understand that succession is a pivotal moment for your company. Successful transitions don't happen overnight. They take years of planning, training, and adaptation.

Our team of experienced CPAs and business consultants is dedicated to helping you steer this ship toward a stable and sustainable multi-generational business. We offer comprehensive financial services from tax planning to leadership development for potential successors to legal structuring and strategic business advice. Our customized services ensure your succession plan preserves your legacy and sets the stage for continued growth within your community and beyond.

Are you ready to secure the future of your family business? Reach out to speak to the experts at Flynn & Company CPA.