Why Succession Planning Matters

Every business owner will eventually face a pivotal decision: How to transition into the organization’s next chapter. 

In other words, how will they go about preserving something they’ve poured their life’s work into? While retirement should be a time to celebrate years of dedication and success, it takes proactive planning to protect one’s legacy. This includes both their family’s financial future and their company’s lasting strength.

At NCOEC, we firmly believe that because business owners devote so many years to building something extraordinary, their legacy shouldn’t end when they step back to enjoy their golden years. Instead, it should continue to enrich their employees’ lives, strengthen their community, and inspire future generations. 

Through thoughtful succession planning, owners can create a transition that honors their life’s work and also ensures it thrives long after they’ve decided to pass the torch. Let’s discuss the importance of planning ahead and how to start outlining a solid succession planning strategy.

The Silver Tsunami

Did you know that six in ten business owners plan to sell their business in the coming decade? 

This wave of change is coming largely as the “Baby Boomer” generation heads into full retirement. Nearly half of privately held businesses are, in fact, owned by a Boomer. This means that our local business landscape is about to undergo a significant transformation.

Often dubbed the “Silver Tsunami,” this big change in ownership will force a drastic alteration in what small business looks like today. As 2.34 million Boomers head to retire, will they have a succession plan in place? More importantly, is your business – or the businesses you advise – ready?  

Exploring Options for Tomorrow

Retirement can be a reality for business owners, even those deeply embedded in their company’s daily operations. They have choices available to them, and the earlier they begin planning for this transition, the more options they can discover. 

There are several proven approaches to business succession that owners can consider as they map out their future. Some choices for preserving a legacy include:

• Selecting family members to continue the business
• Opting to sell the business to management
• Seeking an outside buyer
• Finding investors or a private equity sale
• Working with brokers (however, only 20% sell)
• Pursuing Employee Ownership options

There is one more option on the table: Closing the business. Without careful planning, that is the alternative most owners don’t want to consider. 

Facing Realities of the Future

Making a solid succession plan provides business owners with much-needed peace of mind. Beyond a solid, planned retirement, this preparation proves essential, in case unexpected circumstances arise that force a transition earlier than expected. Having a clear strategy in place helps protect their legacy, no matter what the future holds.

While succession planning primarily focuses on retirement, it serves as a crucial safeguard against life’s unforeseen challenges such as death, disability or disagreement. Life’s unexpected turns, such as these, can dramatically impact business owners and the enterprises they’ve built. When significant disruptions occur, they can affect not just personal circumstances but also the stability of their business. 

Don’t Leave It All To Chance

At the end of the day, the best proactive planning is to simply begin formulating that plan of succession. For many reasons, it could be a playbook that benefits the business well before the owner’s intended retirement age. A succession plan serves as a dual-purpose strategy, providing a safeguard against unexpected events and ensuring business owners’ wishes are fulfilled when they choose to retire. Either scenario demands careful preparation, after all. 

Want to go deeper into this topic? We’ve developed a comprehensive PDF guide to outline the essential aspects of succession planning and help business owners chart a course that matches their vision for the future. 

After all, the best legacies are the ones that keep growing.