As a small business owner, you probably recognize yourself in this picture: working long hours; pouring your passion into every decisions, taking calculated risks when the potential payoff makes sense and constantly looking for ways to make your business easier to run.

Sound familiar? But here's a question that might make you pause: what's your plan for when you're ready to step back from the business you've built?

If you're like many entrepreneurs, succession planning might be that important task that keeps getting pushed to "someday." But here's the thing – the business owners who plan ahead tend to be in much stronger positions when transition time comes. Let's walk through what succession planning actually means and why starting now makes sense.

What’s a succession plan?
Think of a succession plan as your business's "what happens next" roadmap. It spells out what happens to your company when you're no longer running the show – whether you sell, retire, or face unexpected circumstances. It's your blueprint for ensuring the business you've worked so hard to build continues to thrive when you’re ready for your next chapter.

A good succession plan isn't just about the business itself. It's also a crucial piece of your personal financial picture, retirement planning, and estate planning.

Here's something most business owners don't want to hear: succession planning gets more complicated the longer you wait. The rushed, last-minute transition rarely goes smoothly. You've invested years of your life growing this business – why risk a bumpy handoff?


Planning for a smooth transition
Nobody knows exactly what the future holds, but you can still think about when you'd ideally like to step back. Is it in two years? Ten? Maybe you're planning to stay involved until retirement age?

Many business owners count on selling their company to help fund their retirement dreams. Others want to use the proceeds to start something new – maybe that passion project they've been thinking about for years. If you're running a family business, you might be hoping the next generation is ready and willing to take the reins.

Once you have a rough timeline in mind, you can start building your plan. If you're thinking about transitioning leadership while keeping some ownership, you'll need to invest serious time in training your successor. This could be someone already on your team or someone you bring in from outside. Either way, create a comprehensive training plan with clear goals and checkpoints to make sure they're ready when you step back.

This is also a perfect time to get fresh eyes on your business. Your future successor might have ideas about how to improve operations, company culture, or growth strategies that you haven't considered.



If you're planning to sell
Selling brings its own set of considerations, starting with the big question: what's your business actually worth?

Business valuation can be tricky because there are so many factors to consider: what industry you're in, how your business is positioned compared to competitors, your company's financial health, future growth prospects, and more. You don't have to figure this out alone – a business valuation expert can help you arrive at a realistic selling price.


The tax piece of the puzzle
Nobody wants to pay more taxes than necessary, especially when you're trying to get the most value from years of hard work. Whether you're selling outright or gradually reducing your ownership stake, tax efficiency should be part of your planning.

There are strategies worth exploring, like the capital gains exemption for qualified small businesses, or ways to reduce probate fees if you plan to maintain ownership. Income splitting through spousal or family trusts might make sense in your situation.

Since every business situation is unique, this is definitely an area where professional advice pays off. Your financial advisor and tax specialist can help you navigate the best approach for your circumstances.


Planning for the unexpected

Let's talk about the scenarios nobody wants to think about but everyone should plan for: what happens if you face a serious injury, illness, or unexpected death?

This is where the right insurance coverage becomes crucial. Disability insurance, critical illness coverage, and life insurance all play important roles. There's also overhead expense insurance that can cover your business costs if you need to take extended time away.

Key person life insurance is another consideration – it pays proceeds to your company if you or a vital employee dies, helping operations continue smoothly while you execute your succession plan.



Bringing it all together
A well-thought-out succession plan does more than protect your business during a transition. It can give you peace of mind and help you approach the future with confidence.

The best succession plans are team efforts. Along with your financial advisor, you'll likely want input from your lawyer, accountant, tax and estate professionals, and possibly a business exit specialist. Together, you can create a plan that fits your specific situation and goals.


Ready to start thinking about your business's next chapter? Connect with an Alterna Advisor who understands the unique challenges small business owners face. We're here to help you plan for a future that protects both your business legacy and your personal financial goals.