Advisors Offering Succession Planning to Business Clients

Nearly two-thirds of family businesses do not have a documented and communicated succession plan per PwC’s 2023 US Family Business Survey. Combine this fact with the Exit Planning Institute’s estimate that only 30% of small businesses successfully sell - leaving 70% of small businesses without a buyer or successful plan for what happens next - is a serious wealth preservation problem that needs to be addressed. The facts that succession planning is usually the last thing business owners want to deal with, that there are no one-size-fits-all succession templates, and that it is a complex, multi-variant, decision process may be to blame and only keeps kicking the can down the proverbial road.

To explore how some advisory firms are trying to address this need by offering succession planning for their business clients, we reached out to Institute Founding Members Jennifer Specter, Shareholder/Chief Operations and Compliance Officer, and Alyssa Dalbey, CPWA®, CFP®, Shareholder/Wealth Manager at Schultz Financial Group (SFG). We asked them a few questions to understand how and why they offer succession planning as a standard offering to their business clients.

Hortz: Why do you feel your firm should offer succession planning as part of your overall advisory services?

Alyssa: Entrepreneurs and business owners are one of our primary client segments to whom we provide wealth management and business consulting services. Typically, their business is the highest value asset on their balance sheet so this naturally leads us to conversations about business succession.

Hortz: How do you broach the subject of succession planning with your business clients?

Jennifer: Our approach is to have a candid conversation. They know what it takes to run their business and they know how much of that relies solely on them. We address them very directly and ask them what happens if they unexpectedly die or become incapacitated? Who is going to run the business in their absence?

We let them know that even though these preliminary conversations about succession planning may be challenging and uncomfortable for them, our goal is to help provide them with peace of mind by putting a long-term plan in place.

Hortz: How do you proactively work with your business clients on succession planning? What process do you follow and what resources do you provide them?

Alyssa: Our process involves the following steps:

  1. Assess their current business situation – We evaluate the current state of their business (profitability, key roles, potential successors, etc.) and determine the potential profitability (or lack of profitability) if our client were no longer able to run their business.

  2. Understand their goals and priorities – We have discussions with our client and their family members to understand their goals and preferences. Do they want a family member to continue to own and manage the business in their absence or do they want to sell to key employees or a third party? How does their business integrate with their family’s personal mission and values?

  3. Identify Action Plans – Based on their goals, we provide them with different action plan options and help them understand the implications of each plan and how it will impact their business, their clients/customers, and their successors.

  4. Develop a Formal Succession Plan – We coordinate with third-party resources (legal, tax, valuation, etc.) to create a detailed plan for our client that includes specific steps, timelines, and responsibilities.

  5. Invest in Professional Development – We encourage our business clients to provide training and development opportunities for their potential successors so they will have the necessary skills and knowledge to step into their future leadership roles and be able to seamlessly run the business.

​Hortz: Any advice you can share on how best to convince business owners why they need to set up a succession plan?

Jennifer: I think what can help is emphasizing the key elements of what a succession plan can provide, such as:

Business Continuity and Stability – It is critical to have a plan for leadership transition to avoid business disruptions. A good succession plan helps ensure that critical business functions continue seamlessly when you are no longer there.

Talent Development and Retention – Succession planning demonstrates to your employees that there are clear pathways for career advancement which encourages them to stay engaged and contribute to the overall success of the company.

Business Value and Profitability – A solid plan evaluates the company’s current and projected resale value and can help boost the company’s stability and profitability.

Alyssa: I would say to look at succession planning like buying an insurance policy, only there is a 100% chance that you are going to need it. There will be a period when you can no longer work in your business for various reasons (retirement, illness, death, etc.).

So, do you want to spend the time now while you are healthy and engaged in the business to be proactive and create a plan that is in your best interest, that will serve you, your family, and your legacy for generations to come? Or do you want to just run the business full speed ahead and see what happens at the end (and that is not likely to be a good or most profitable outcome)? A well-thought-out succession plan can safeguard your family’s wealth, your company’s future, and solidify operational stability so the prudent thing to do is to have a succession plan in place.

Related: The AI Advantage in Wealth Management