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Succession Planning: The Challenges, Solution, and Process


On Thursday, April 8, David Killion, Transaction Advisory Principal, and Jason Buhlinger, Litigation Support Partner, hosted the webinar, “Succession Planning: What Is Your Business Worth?” The webinar, which kickstarted our series of webinars and educational content on succession planning, discussed how to help business owners plan and prepare for a successful exit.

David and Jason discussed three main exit planning topics: the challenges facing business owners looking to transition, how exit planning can mitigate those challenges, and what the exit planning process entails. They also covered the importance of business valuations with exit planning, which will be summarized in a forthcoming article.

The Challenges

The first challenge for business owners is the inherent risk in small business ownership. A small business is considered a low liquidity asset. Therefore, it is difficult to diversify and can be hard to manage and plan from a wealth standpoint. Business owners looking for a successful exit often run into roadblocks regarding the personal investment they have put into their company. Many small business owners have their financial wealth tied up in their organization. The main challenge, then, is extracting and unlocking that business asset. One goal for a business owner should be to harvest that investment and make a plan to maximize value.

The other challenge is the transition itself. The statistics around business transitions are grim but are essential to keep in mind as you look toward the future of your business. Nearly 80 percent of companies put on the market do not sell. Approximately half of the companies that do sell do so with significant concessions by the owner. Additionally, just 30 percent of all family-owned businesses survive into the second generation, and only 12 percent survive into the third.

Owners face some daunting odds when looking to transition away from their businesses. However, business owners can significantly increase their success with good planning, good preparation, and open dialogue with stakeholders and those involved.

The Solution

A good exit plan can address and avoid all variables that challenge business owners looking to transition.

Exit planning combines the plan, concept, effort, and process into a clear, simple strategy to build a transferable business through strong human, structural, customer and social capital. The future of you, your family and your business are addressed through exit planning by creating value today.

Simply put, exit planning is strategy! It’s not something that should always be equated with retirement or succession – those are heavy, personal topics. Instead, it’s essential to boil exit planning down to a crucial component of your business’s strategy. Exit planning strategy, both long-term and short-term, is a critical method to look at the personal, financial and business components of your life and put them in harmony. It’s a matter of taking a holistic approach to getting you from where you are to where you want to go.

The Process

The exit planning process consists of three to four general phases: discovery, preparation, decision, and, potentially, what comes next.

In the discovery phase, your team of experts will work to learn everything about you. They will dig into your goals and priorities, your company, your family and the critical leadership and staffing involved with your organization. Once they grasp the basics, your team will put together a prioritized action plan tailored to your needs.

Next, you will move into the preparation phase, which involves putting together the different deliverables required as part of your exit plan. The first deliverable, which is the starting point of every exit plan, is a valuation. The valuation is used as a baseline for our process and creates a benchmark for future value creation. Your team will also look at business improvements that could be made and will focus on de-risking the business by combing through buy-sell agreements and third-party action plans in place. Using those components, your team will put together proof documents, explore ways to improve value, and then ultimately build a framework to assist you in the third phase of the process: deciding to either grow or exit your business.  

That decision and what comes afterward is ultimately up to you and your stakeholders. Regardless of your decision, though, give yourself and your team of experts enough time to move through the process thoroughly and make an informed decision. The exit planning process isn’t something that can be done in six months; it should be carefully considered over time, so be sure to give yourself and your team a long runway.

When Should I Start the Process?

If you’re pondering the best time to start the exit planning process, the answer, in short, is now. However, it’s important to note that beginning the exit planning process does not have to be a massive undertaking. Instead, starting the process begins with a conversation. Confer with your trusted financial advisor or other individuals that you trust when you face big decisions and slowly ease your way into the process.

If you’re ready to start talking about exit planning but are unsure where to begin, we recommend starting at the end. What is your desired exit date to start the exit process, or succession, or internal transfer? Start there and work backward.

The business valuation is also a critical starting point for every engagement. It gives your financial advisor a baseline for retirement planning. It gives your team of experts a baseline for examining your business and determining where they might be able to add value. It also gives you an indication of what your business is worth. 

Ultimately, there are two ways to exit a business: to plan for it or not. Planning for your business exit is the best way to ensure that you are appropriately equipped for and protected from all types of outcomes. Brown Smith Wallace can help you plan and prepare for a successful exit.

If you’re interested in hearing more about this topic and could not attend the live webinar, click here to access the recording.

We have many subject matter experts that can help you prepare for all phases of your exit. If you have questions or need assistance, please feel free to reach out to David Killion, Transaction Advisory Principal, at 314.983.1304 ( or Jason Buhlinger, Forensics and Business Valuation Partner, at 314.983.1310 (


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