Key takeaways

  • 30% of small-business transitions fail, often because there is no formal succession plan
  • Succession planning requires thoughtful decisions that address everything from financial readiness to understanding the emotional impact on the owner
  • For successful transitions, business owners and their families should focus on these key factors: financial, personal and emotional readiness

Business succession is one of the most critical aspects of business ownership, but it’s also one of the most overlooked. For many business owners and their families, a privately held business is a vital part of their financial, personal and emotional life. When the time comes to transition the business — whether by the business owner’s choice or through unexpected circumstances — these aspects may be at risk.
A graphic with a lightbulb icon and the following stat: Only 30% of small-business owners have a formal succession plan,¹ and only 15% have received advice about exit options.
A pottery maker inspects a mug while managing their small business online.

The lack of a structured succession plan after the business transition occurs can lead to increased emotional stress and financial risk and potentially cause the business to fail. In fact, 30% of small-business transitions fail, often because there is no plan.2

Preparing for business succession with these key factors in mind can help make the transition more successful for business owners and their families.

Financial readiness for succession

The income that many privately held businesses generate provides financial support to the business owners and their families. In addition, many times the business is the largest asset for the business owner and the family. Owners may also look to the proceeds from the sale of the business to fund retirement. If the sale doesn’t close at the price the owner anticipates, their standard of living in retirement could be substantially altered.

These factors make financial readiness a high priority when developing a business succession plan. It’s important to ask questions about current income and cash flow needs, with a focus on the potential need to replace business income in the short and long term.


Key risks for business owners to consider include:

Income replacement

How will the owner replace the income the business currently provides?

Cash flow needs

What other sources (e.g., savings) are available during the transition?

Retirement security

Do the sale proceeds align with the owner’s long-term goals?

Retirement lifestyle

How will the owner fund the lifestyle they want if proceeds fall short?

Business continuity

If the unexpected happens, who runs or transitions the business?

Personal considerations in succession planning

The purpose and success of a business are often integral parts of the business owner’s identity. This may be especially true when a business owner puts his or her name on the business itself. The idea of turning over the reins of management to someone else — even family members — can cause stress and cloud the decision-making process.

In the case of a family business, the primary owner may look to succeeding family members to build on its legacy and preserve the business owner’s reputation. The owner should ensure that family members’ goals are aligned before including them in succession plans.

Clarifying personal goals

Many owners underestimate how tied their identity is to the business. Will they be ready to give up control? Will retirement feel like a relief or a loss of purpose? Or both?

Thinking through life after the transition helps shape the plan. Whether it’s traveling, part-time work or mentoring a successor, clarity here builds confidence for the next phase.

Understanding financial needs

Most small-business owners rely heavily on the company for income. In fact, 90% have the majority of their wealth tied up in their business, yet 98% don’t know what their business is worth.3 That disconnect can lead to unrealistic expectations. Even a rough estimate of business value can help determine whether the owner’s financial goals are achievable or adjustments are needed.

Navigating the emotional impact of succession

Owning and running a privately held business is commonly a matter of pride. The business owner has invested time, effort and money to build a business that reflects their personal values.

The transition away from business ownership can take an emotional toll on a business owner. This may even be true when the business is passed on to family members or successive generations.

While a succession planning discussion may focus more on the financial and personal aspects, it’s important not to ignore the potential for emotional impacts to the business owner. Some owners may be happy to walk away from the business after the transition, but others may have a longer emotional attachment to ensuring the success of the business they built.

The best time to uncover any emotional ties is during the succession planning process. An honest discussion with the business owner and any planned successors can raise awareness of these emotions and give the owner the opportunity to address the emotional impact in advance.
A barber shop owner stands proudly outside their locally owned business.

Succession planning isn’t just about legal documents or business valuations. It’s about preparing the whole person. From financial readiness to emotional impact, business owners need thoughtful guidance to make confident decisions. As a financial professional, you play a critical role in helping them navigate what’s next with clarity and intention.

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[1] “PwC’s 2023 US Family Business Survey,” pwc.com (May 16, 2023).
[2] “2023 National State of Owner Readiness Report,” Exit Planning Institute, exit-planning-institute.org/state-of-owner-readiness (2023).
[3] “Whitepaper: Discover What Your Business is Worth,” BizEquity Team (June 6, 2024).