Key highlights

  • Most business owners want to pass their business to family members, but few have a plan in place
  • A poorly executed transition can impact income, legacy and business continuity
  • Financial professionals can play a critical role by helping business owners identify risks and start planning early
A satisfied business owner shakes hands with her financial professional as her husband looks on.

More than 70% of family-owned businesses would like to pass their business on to the next generation, but only about 30% actually succeed in doing so.1

Family-owned businesses are part of the backbone of the U.S. economy. According to the U.S. Chamber of Commerce, small businesses employ almost half of American workers, and about 44% of the United States’ gross domestic product comes from family business revenues.2

However, many family businesses do not have a succession plan, and this could lead to significant challenges when a family business owner passes away. Often, the family business is the business owner’s largest asset, and the family may be dependent on its income. The business owner’s death affects not only the family, but also business partners, employees and creditors.

The risks of not having a transition plan

Family disputes
When a business owner passes away, the family is likely to be left in both
emotional and economic turmoil. The family’s income stream may be drastically
reduced. There could be confusion about who will take over the business. In the
fortunate situation when a family member can step into the owner’s shoes, does
that successor have the training, knowledge and experience to effectively run
the company? There is likely to be a short-term revenue loss while the successor
gets up to speed as well as long-term revenue impairment from the loss of the
business owner’s relationships.

Many clients aren’t thinking about succession until their financial professional helps them start the conversation.

Forced liquidation
All family members will be affected. The surviving spouse may need support. There may not be enough non-business assets to distribute to children not active in the business so that all children are treated equally. The family may not have the liquidity to satisfy debts and expenses. The family could even be forced to sell or liquidate the business for pennies on the dollar to meet liquidity demands.

Job losses
Without a plan, business partners may disagree with the family on the business transition. A partner may try to take over the business or leave the business, expecting the family to finance a buyout. Employees could be left in a precarious position, concerned about the future of their jobs. Creditors could seek immediate repayment of debt.

The solution: A thoughtfully crafted succession plan

A business succession plan is a strategy to maximize the value of the business and pass it on to the successor with minimal disruption. A complete succession plan includes:

An exit strategy

This is a planned series of steps to leave the business at a specific point in time.

A business continuity plan

This creates a strategy to address unforeseen events such as disability, death or natural disaster.

A buy/sell agreement

This is an important written document that identifies the buyer and seller, outlines the mechanics of the sale and lays out funding requirements.

A source of funds

Proper funding ensures that the plan can be executed smoothly, whether through insurance, savings or outside capital.

Family business owners can implement a complete succession plan to streamline the transition process and optimize the business’s value to the family. To get started, the business owner should put together a team that includes their financial professional, an attorney, an accountant and an insurance professional. 

With the team’s help, the business owner can review and organize the current scenario and identify future objectives. With established goals, the plan can be formulated and implemented. Any business succession plan should be periodically reviewed and updated to ensure that it still functions as intended. Use this article and the accompanying checklist to start meaningful conversations with your family business clients.
Refer to our helpful checklist, “Succession planning made easier.”

Conclusion

Succession planning is about building a stronger business that can flourish under any circumstances. With a detailed, well-crafted, properly funded plan in place, the business owner can preserve and protect the company’s value and successfully transition it to the next generation. Share a client-facing version with your business-owner clients.


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[1] “Family Business Facts,” Conway Center for Family Business, familybusinesscenter.com/resources/family-business-facts (accessed June 2, 2025).
[2] “Small Business Data Center,” U.S. Chamber of Commerce, uschamber.com/small-business/small-business-data-center (May 20, 2024; updated June 6, 2025).