Business owners widely recognize the importance of succession planning, yet prioritizing this essential process can sometimes take a backseat to daily operations.
There are many common reasons for this, from time constraints to discomfort with the topic itself. However, exit planning is a key part of long-term success for any company as it minimizes vulnerability and risks to its overall health.
I sat down with exit planning experts to review the most common succession planning challenges and address six key questions:
Let’s dive in.
Though business owners may work in different industries, produce different products, and perform various services, they often encounter the same challenges regarding succession planning.
Many business owners delay succession planning as they are often more focused on daily operations and short-term concerns that capture their attention. There is also a natural tendency to think there will be plenty of time before succession planning is necessary. However, an effective transition requires careful preparation and thoughtfulness.
By making succession planning a priority early on, business owners set the foundation for a seamless transition that protects the company, employees, and stakeholders.
"Too often, owners see succession planning as something to think about only when retirement feels near. But real leadership is about preparing the business to thrive without you—whether that transition comes in five years or unexpectedly tomorrow. The most successful exits aren’t just timed right—they’re planned right. A thoughtful succession plan is a gift to your people and the future of the business you’ve built." - Rob Dillon, CEO, OwnersEdge
Confusion can occur when there is a lack of clarity in a leadership transition. While this often affects the internal working environment, it can also negatively impact the external perception of the company, from vendors to customers and even the broader community.
The next leader should be prepared prior to stepping into the new role. This should include ongoing development that allows new leaders to step confidently into the position, allowing them to grow and thrive.
“Without a clear and purposeful succession strategy, businesses risk internal conflicts, talent gaps, and a decline in overall stability.” - Lynnette Fritz, Chief Human Resources Officer, OwnersEdge
A business leader takes more than an office nameplate and coffee cup home on their last day. Long-standing leaders leave with years of experience, insights, and have developed key internal and external relationships.
A structured and identified knowledge transfer approach will help businesses retain critical information that keeps operations running smoothly.
A well-documented plan ensures successors can confidently step in and maintain continuity.
“A smooth leadership transition requires more than just naming a successor. That new leader needs mentorship and thoughtfully prepared resources that capture essential knowledge and insights for maintaining company continuity. Without this, even the most talented leader will struggle to step in effectively.” - Lisa Reardon, Executive Chair, OwnersEdge
Succession planning also includes a clear view of the business's financial health before, during, and after the change.
Without a well-thought-out financial and tax strategy, business owners may encounter unexpected costs, valuation disputes or tax burdens that can affect the company’s stability. This is particularly true if a change in ownership is in the succession plan.
Financial planning is a key component of a successful business transition, ensuring both the company and the departing owner are set up for long-term stability. From valuation to tax implications, several financial factors must be carefully evaluated to create a smooth and sustainable succession plan.
“Financial readiness must be a part of succession planning. Many business owners underestimate the tax and valuation challenges that occur. Advanced knowledge can mitigate many of these challenges. Working with financial experts well in advance ensures a smoother, more profitable transition.” - Christine Adee, CEO, OwnersEdge
Most people view succession planning with a long-term lens, but unexpected transitions can happen earlier. Sudden leadership departures, illnesses, and even death of a key organizational leader can create immediate succession challenges. Without a contingency plan, businesses may face operational instability, decision-making bottlenecks, and uncertainty among employees and stakeholders.
Having a well-defined backup strategy ensures long-term continuity for the company.
“The strongest businesses don’t just grow – they stand the test of time. Preparing for the unexpected isn’t a sign of doubt, but rather a mark of wisdom. A well-crafted succession plan isn’t a safety net – it protects the value you’ve built, the people you’ve empowered, and the future you’ve envisioned.” - Rob Dillon, CEO, OwnersEdge
Though succession planning primarily focuses on the transition to a new leader, it’s important to remember the employees who contribute to the company’s success. Employees are the backbone of any organization, and overlooking their role in the transition can lead to disengagement, uncertainty, and even turnover.
A strong succession plan considers company culture and employee well-being to ensure business continuity and preserve the legacy of the outgoing leader.
Company culture and employee welfare are critical in succession planning because they ensure business continuity, maintain morale, and support a smooth leadership transition. A well-aligned successor preserves company values, fosters employee engagement, and minimizes disruption, ultimately driving long-term success.
“A leadership change impacts the entire organization. The most successful transitions honor employees, reinforce company culture and ensure the team feels secure in the business's future.” -Christine Adee, CEO, OwnersEdge
Many business owners nearing retirement or stepping away from day-to-day leadership often find themselves asking, “Who should I sell my business to?” Without a clear succession plan, this decision can become overwhelming and rushed, potentially compromising the business's value, culture, or continuity.
Succession planning creates a framework that allows business owners to thoughtfully evaluate all available ownership transition options while aligning with both personal and organizational goals.
“Succession planning doesn’t just help owners decide when to step away—it also helps them decide who should carry the business forward. The earlier that vision is defined, the easier it becomes to find a buyer who aligns with it.” – Christine Adee, CEO, OwnersEdge
Succession planning should not be a one-time event but an ongoing process. As businesses evolve, leadership structures, financial landscapes, and company goals can shift, making revisions and refinements necessary and ongoing. Guidance from professionals, including financial advisors, tax specialists, and business transition experts, will help you make informed decisions.
For more guidance on creating a strong succession plan, download OwnersEdge’s Selling Your Business: Exit Planning Guide for Business Owners. This guide offers detailed insights on succession planning and can help you determine what type of transition might work best for your business.
To learn more about how an ESOP holding company works and how selling to a ready-made ESOP holding company could be the right fit for your specific exit plan, confidentially contact OwnersEdge today or review our related resources: