The Information You Need For Every Type of Business to Develop a Successful Succession Plan

Succession Planning | Business Strategy

 Larry Guess By: Larry Guess
The Information You Need For Every Type of Business to Develop a Successful Succession Plan

As a business owner, you may have spent years growing, cultivating and shaping your company to match your strategic vision. It’s your baby, your lifeblood. While moving on or selling it might not be on your mind currently, but considering an exit strategy and succession plan now will help you to be prepared whenever you are ready.

Building a comprehensive transition strategy will support the best outcome for you and your business. Here’s how to get started.

What is a Business Exit Strategy/ Succession Plan

An exit strategy is what an owner or founder of a company creates as a road map for transitioning the ownership of their business. Having an exit strategy gives business owners a way to reduce or liquidate their stake in a business and potentially realize a substantial profit.

It can also provide a contingency plan to be followed in the event of any unforeseen circumstance or emergency.

Types of Exit Strategy

Business exit planning is not one-size-fits-all. A small business exit strategy may not work for a larger business and vice versa. Your plan should focus on creating a comprehensive strategy that will address all the aspects surrounding an ownership transition and make sure you are prepared and able to lead the life you want after exiting your company.

Below, we’ll explain some of the different types of exit plans you may want to consider. It is important to establish your goals and objectives and then determine which plan will help you successfully achieve them.

Legacy/Family succession

This type of exit plan keeps the business all in the family. If you’re looking to pass down your company legacy to a family member, it’s important that the family member you choose is prepared and educated on what it takes to run a business.

A pro to this exit plan is that your family member can be trained over a number of years and even after you leave, you could be brought on in an advisory role. The cons are that there may be no one in your family capable of taking on the role/no one wants the role, or keeping the business in the family may blur professional and personal lines and cause stress.

Third-Party Sales

Another type of exit plan is selling to a third-party. This is when you sell your business to another company or a private equity firm that may be looking to increase their footprint in the market, eliminate competition and/or acquire your talent or product.

There are pros and cons to this method. A strong pro is that you get to maintain control over price negotiations and set your own terms. If there are multiple bidders, this also gives you a chance to drive bids higher.
Cons to a third-party sale transaction is that they can be very time-consuming, costly, difficult to keep confidential and have the potential to fail.


In this situation, a company is bought for the sole purpose of acquiring talent. With this exit strategy, you can leave the company knowing your skilled employees are well looked after. The downside to this tactic is that you may not be able to find a buyer and that this can be a long, costly process.

Management and employee buyouts

In management and employee buyouts, those already working for you are able to transition into more senior roles to fill any gaps in leadership. These employees already have an intimate knowledge of your company and will be well-equipped to manage the company. This can also occur when both management and select employees join together to take over an existing firm. The buyout is beneficial for all parties involved and allows the company to positively restructure internally.

Selling your stake to a partner or investor

If you aren’t the only business owner, you also have the option of selling your stake to a partner or investor. This type of sale is also known as “friendly buyer” because you’re likely selling your company to a trusted friend or someone who already has a vested interest in your business.

Initial public offering (IPO)

In this situation, you are taking your company to the public and selling shares as stock to shareholders. With this option, you have the potential to earn a substantial profit, but high regulatory costs and added pressure and scrutiny from shareholders are sometimes enough to make many business owners opt to stay private.


Liquidating your business is a common exit strategy for failing businesses or ones that are unable to attract suitable buyers due to the lack of proper planning. In this situation, your company is closed down and all of its assets are sold. Proceeds of the sale are used to pay transactional costs and liabilities. The owner receives the balance – if there are any funds remaining

Exit Strategy Example

All these exit strategy examples come with pros and cons, but you can find one that’s right for you. Still not sure which plan is best for your company? At Plancorp, we have a team of experts ready to help you create a plan that works for you, not against you. Contact us today to set up a meeting.

Succession Planning



This material has been prepared for informational purposes only and should not be used as investment, tax, legal or accounting advice. All investing involves risk. Past performance is no guarantee of future results. Diversification does not ensure a profit or guarantee against a loss. You should consult your own tax, legal and accounting advisors.

Plancorp is a registered investment advisor with the Securities and Exchange Commission ("SEC") and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. SEC registration does not imply a certain level of skill or training. Please refer to our Form ADV Part 2A disclosure brochure and our Form CRS for additional information regarding the qualifications and business practices of Plancorp.

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After successfully selling his share of a business, Larry joined Plancorp in 2016 to lead our Exit Strategy Advisors division. Thanks to his extensive experience buying and selling companies in both the private and public sectors, as well as his time consulting in this arena, he’s able to connect on a personal level with clients looking to chart their own transitions. More »