How to lay the groundwork for a successful transition
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Succession planning stage 1: Discovery
Key aspects of discovery:
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Succession planning doesn’t start with contracts — it starts with discovery. For financial professionals, helping business-owner clients navigate succession planning starts long before the paperwork. It begins with a deeper understanding of the owner’s goals, expectations and vision for the future. That’s what the first stage — discovery — is all about.
This foundational stage is where key conversations take place, risks are uncovered and the path forward begins to take shape. It’s also where you can add significant value as a trusted guide, helping your client understand the big picture and make informed decisions that reflect both personal and business priorities. The discovery stage begins with clarifying goals, which are the foundation for every decision that follows.
Define goals for business succession
The first stage is helping the owner articulate what they want to achieve from the transition. Each business owner’s goals are unique. Some may want the business to stay in the family. Others may want to transition to a partner, sell to employees or position the business for acquisition.
The business owner may also want to consider the company’s mission after their departure — not only who will run it, but what kind of business they want it to be.
Encourage clients to think through questions such as:
What legacy do I want to leave behind?
Whom do I want to benefit from this (e.g., my family members, employees, community and/or future owners)?
What kind of involvement, if any, do I want after the transition?
With these goals in mind, the next stage is identifying person or people best positioned to carry that vision forward.
Identify potential business successors
One of the most consequential decisions in succession planning is determining who will take over the business.
The successor could be:
A family member
A co-owner or business partner
A key employee
An outside buyer or competitor
Each option carries unique operational, financial and emotional considerations. For example, transitioning to a family member may involve navigating complex family dynamics and establishing clear roles. Selling to a third party may offer financial advantages but could raise concerns about maintaining company culture or employee job security.
It’s also important to give special consideration to existing co-owners or business partners. In many businesses, especially those with multiple owners, the most likely successor in an abrupt transition — such as death, disability or withdrawal — is a current co-owner. Most buy/sell agreements funded by life insurance are structured with this in mind, ensuring liquidity and continuity for both the remaining owners and the departing owner’s family.
Starting the conversation early allows time to evaluate potential successors, prepare them for leadership and structure the transition in a way that benefits everyone involved. It also enables the owner to communicate decisions transparently, particularly with individuals who may have expected to play a future role but in fact will not be part of the transition.
In cases where no clear successor has been identified, the discovery phase is a chance to begin that search. In this situation, be sure to allow for ample time to find the successor and prepare them (and the business) for a smooth transfer. Having a clear sense of potential successors naturally leads to the question of timing; that is, when and how the transition should occur.
Establish a transition timeline
While some owners may have a firm retirement date in mind, others may be more flexible. Regardless, even a rough timeline provides structure and sets expectations for everyone involved.
Key questions to ask include:
- When would you ideally like to step back from the business?
- Will the transition be gradual or occur all at once?
- Are there any events, such as a significant milestone or the completion of a major contract, that could influence timing?
A defined timeline also supports decisions around business valuation, buyout funding strategies and leadership development. Plus, it helps avoid the common (and costly) mistake of waiting too long to start planning.
Look ahead to a business valuation
Business valuation is a core element of planning. Valuation is more than just a number. It shows how the business is perceived in the market and sets expectations for both owner and successor. A clearer picture of value helps inform transition strategies, buyout terms and owner expectations. If the transition is years away, you may not get a valuation now that will still be accurate later. But it’s helpful to have a starting place.
The risks of delay
Many owners delay succession planning simply because it feels overwhelming. Waiting to plan could result in a reduced sale price, because the owner hasn’t taken steps to make the business attractive to the market and make themself unnecessary to its operations. Other risks of waiting are significant as well: tax and legal complications, operational disruptions and potential conflict among stakeholders. A clear timeline gives the owner — and everyone around them — a shared roadmap for preparing effectively. Of course, even the best-laid timelines can be disrupted. That’s why contingency planning is critical.
What if things don't go according to plan?
Even the most thoughtfully planned timelines can change. Life events — such as death, disability or an involuntary departure — can force a sudden shift in leadership. That’s why every succession plan needs a backup.
Key questions to raise with your clients:
- If an owner exits unexpectedly, who takes over?
- How will the business be valued and funded?
- What agreements are in place to ensure continuity?
Encouraging owners to think through these "what if" scenarios provides peace of mind and helps protect both the business and the owner’s family if the unexpected happens.
Assess business and owner readiness
Another important part of discovery is assessing how well positioned the business is for a transition. Even if a sale or transfer is years away, it’s worth identifying and addressing potential roadblocks now.
Common pitfalls can stand in the way of a smooth transition, including:
Overreliance on the owner for day-to-day operations
Disorganized or outdated financial records
Lack of documented processes or clear employee roles
Gaps in the leadership pipeline
Failure to evaluate and address business risks
Encourage clients to think of the business from a buyer or successor’s perspective: Is this company ready for someone else to step in and succeed? Are there improvements that could enhance value or facilitate transition?
These assessments don’t need to be exhaustive at this stage. But they help uncover priorities and give the owner time to implement changes that will ultimately support a smoother, more successful transition. Assessing readiness sets the stage, but it’s only the start of the broader succession journey.
Discovery is just the beginning
As a financial professional, you bring objectivity, structure and insight to a process that many business owners find deeply personal and complex. By facilitating discovery, you help clients move beyond vague intentions and into strategic action.
This stage also opens doors for deeper planning discussions around valuation, continuity planning, employee retention and more. It positions you as a long-term partner in preserving the business’s value and legacy.
Ultimately, discovery is about starting the right conversations — early and often — so the business owner can take control of their future, rather than leaving it to chance. By initiating a discovery conversation, you can help your business-owner clients take the first step toward a succession strategy that protects their legacy and livelihood.
Up next is Stage 2: Planning
Read our next article for guidance on how to access and strengthen the value of the business.
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