What are the 5 D's of succession planning?

The 5 Ds of succession planning are Death, Disability, Divorce, Disagreement, and Distress, representing common life-altering events that can disrupt a business, necessitating proactive planning for continuity, leadership transition, and asset protection to ensure the company's survival and smooth operation despite unexpected challenges.  

What is the most common mistake in succession planning?

The most common estate and succession planning mistake is failing to plan at all. It's an easy topic to avoid, after all, who wants to think about death or disability? But failing to plan limits your options and leaves your family without guidance.

Other common mistakes include:

Planning only for succession emergencies.Failing to secure buy-in on your succession plan from senior stakeholders and the board.Neglecting your High-Potential (HiPo) pool.Deploying one-size-fits-all development programs for successors.Not having a set timeline or clear criteria for success.

Where do I start with succession planning?

Key aspects to have in a business succession plan:

Identify priority roles.

Define what is needed for each role.

Find possible succession candidates for each role.

Discuss career aspirations with your candidates.

Set an action plan for developing future candidates.

Estimate when transitions may occur.

How long does it take to create a succession plan?

Every company's timeline is individual. But it often takes 12 months or more to build out a leadership succession plan and depending on business needs it could take more than two or even three years. That's why often, by the time the business owner feels ready, he or she may already have fallen behind.

Do you assist with putting a business succession and emergency plan in place?

Yes we do. 

Do you assist with Buy/Sell Agreements and Funding?

Yes.  Us and our strategic partners can provide you with buy/sell agreement specimens for your review and assist with effective and economical funding options. 

I’m not ready to sell my business, so I don’t need a valuation.

You do not need to be ready to sell to benefit from knowing what your business may be worth. A business valuation can help you understand where you stand today, what drives your company’s value, and what areas may need improvement before a future sale, succession plan, buyout, loan application, or unexpected life event. A valuation is about seeing the scoreboard before the game is over.

My accountant/CPA already knows what my business is worth.

Your accountant/CPA may be extremely knowledgeable, especially for tax planning and financial reporting. However, tax records and business valuation are not always the same conversation. Financial statements often show what happened in the past. A valuation looks at how the business may be viewed in a transaction, succession event, funding conversation, estate plan, or buy-sell agreement. The two should work together, but one does not automatically replace the other.

My business is too small for a valuation.

Small businesses often need valuation insight the most because the owner’s personal income, retirement plan, family wealth, and exit strategy may all be tied to the company.

Even if your business is not ready for a major sale, knowing its estimated value can help with retirement planning, life insurance planning, key person protection, buy-sell planning, business funding, succession planning, and partnership discussions.

I only need a valuation when someone makes me an offer.

Waiting until someone makes an offer can put the owner at a disadvantage. By that point, the buyer may already control the conversation. When you understand your business value before negotiations begin, you are better prepared to evaluate offers, defend your price, identify weak points, and avoid accepting less than the business may be worth.

My business is profitable, so I’m already fine.

Profitability is a strong start, but it is not the whole story. A profitable business can still have risks that reduce value, including poor documentation, inconsistent cash flow, customer concentration, lack of leadership depth, outdated systems, tax inefficiencies, or no written succession plan.

I already know what I need to retire, so I don’t need a valuation.

Knowing what you need to retire is only one side of the equation. You also need to know whether your business can realistically help produce that outcome. If your retirement plan depends on selling the business one day, then the business value becomes one of the most important numbers in your financial life. A valuation helps connect your exit plan to your retirement plan.

My business is my retirement plan.

For many owners, that may be true. But if the business is the retirement plan, then what is the plan for the business? A valuation helps determine whether the company is likely to support your retirement goals, whether the business needs improvement before an exit, and what strategies may help protect the value you have built.

I don’t need a valuation because I plan to pass the business to my children.

Family succession still requires planning. If one child takes over the business and another does not, how will the family divide value fairly? If the business needs to fund retirement income for the current owner, how will that be handled? If estate taxes, debt, insurance, or family disputes come into play, what happens then? A valuation can help turn a family assumption into a real succession strategy.

A valuation is only useful for big companies.

Large companies may use valuations more often, but smaller and mid-sized businesses may have even more at stake. For many owners, the business represents years of labor, a major portion of net worth, and the foundation of family wealth. A valuation helps the owner see whether the business is functioning as an income source, an asset, or both.

My business has no value without me.

That may feel true, but it is also one of the most important reasons to start planning. If the business depends heavily on you, that does not necessarily mean it has no value. It means the value may be limited until systems, leadership, recurring revenue, documentation, and transferability are improved. A valuation can help identify where the business is too owner-dependent and what can be done to strengthen it.

I’ll deal with valuation later.

Later is not a strategy. Later usually arrives when something forces the conversation: illness, burnout, divorce, death, partner conflict, a surprise offer, a lending need, or a sudden market change.

The best time to understand your business value is before pressure enters the room.