Succession planning: What professionals want you to know

Many people don’t realize the amount of preparation succession planning entails

Succession planning is a crucial phase in the life of any successful business owner – and the lifespan of any enduring business – just as creating a business plan is vital at the outset of any serious enterprise.

In this three-part series on succession planning, experts in the field will demystify the process and provide expert guidance on issues ranging from financial advisement to legalities to taxation.   

Succession planning isn’t a process to take lightly, but it need not be a source of anxiety and uncertainty, either. By familiarizing yourself with these professional services and learning what they do, you’ll realize you have allies in this often-overlooked phase of business.


Retirement can be a bittersweet topic for business owners, though it’s inevitable. Many people don’t realize the amount of preparation succession planning entails. For any business owner or CEO, a trusted advisor is a crucial asset in devising an exit strategy and helping you consider all alternatives to a sale. 

Janet Lowe, senior vice president and manager of Vectra Wealth Management, likens succession planning to staging your house for sale. Think about all the work that’s involved in staging a home – cleaning, removing clutter and making sure appliances are working properly. Just like you want buyers to be attracted to your home, you want potential buyers to see how your business is poised for continued success. 

Getting the house in order

When evaluating how likely a business is to sell, Lowe wants to know: “Is there so much institutional knowledge that’s hung up in the owner that when you take the owner out it collapses?” 

Similar to a fixer-upper home needing a great deal of work, a business that relies too heavily on one person’s expertise can scare off buyers. Only 58% of family businesses have a succession plan – and most are informal according to PwC – but having a formal plan that includes these crucial steps allows for a smooth progression of events.

A business owner should be continuously asking themselves how their business is staged. Making improvements to attract potential buyers puts your business in the best position to sell when the time arrives. This can be as simple as transcribing knowledge or procedures that are exclusive to the owner so the information can be easily shared during a transition. 

It can also mean asking tough questions, such as:

  • How imminent is the transition?
  • Who should be involved?
  • Do major upgrades need to be made in the meantime?
  • What will you (the owner) do once the transition is complete?

Consider every option

Business owners and CEOs alike should be aware of all the options, of which there are multitudes, as Todd Munson, executive vice president and director of commercial banking at Vectra Bank, puts it. Munson encourages business owners seriously considering a transition to ask themselves, “Are you prepared to take seller financing? Are you willing to finance your management team buying you out? Have you thought about an ESOP? Is it a company that a private equity [group] might think has the ability to roll up into other acquisitions?” Evaluate these options for what best aligns with your primary goal, whether it be to continue a family business or hand responsibilities over to employees through an ESOP like the nearly 7,000 companies in the U.S. that the NCEO reports have this plan.

Have a financial advisor

Succession can be a difficult topic for business owners and CEOs to bring up on their own accord. Experienced succession planners understand the possibilities can be overwhelming for a business owner to evaluate on top of the emotions that retirement planning naturally conjures. That’s where experience and a firm foundational relationship become important. 

“First you (the financial advisor) have to have a deep and mutually beneficial relationship on both sides, and the client trusts you,” Munson says. “Then I think you can begin to open up that dialogue.”  

Your banking team can be your first resource for these advisor relationships. They have watched you grow and lead your company, and will want to see the legacy you’ve built in your business continue to succeed. 

Lowe has experienced firsthand how a transparent and understanding relationship can benefit the client in the long run. When one couple came to her to discuss their exit strategy, their top concern was what would happen to their son, who was employed by their business. Lowe, being well-versed in the intricacies of family business, helped the couple navigate a difficult conversation with their son and brought in the correct attorneys and CPA to assist. In the end, the family completed a sale while setting their son up for the future. SCORE found that there are nearly 5.5 million family-owned businesses in the U.S., and Vectra Bank specializes in family owned and operated businesses, and has built resources to assist in this very unique segment.

Start planning early

Like with other financial milestones, it’s best to begin planning your retirement early – five to seven years in advance is suggested by Lowe and Munson. It may be difficult for a business owner to pin down a retirement date so early, but still, SCORE found that 47% of family business owners expecting to retire did not have a succession plan in place. During this time, begin getting financials in order for the future. Munson suggests every business begin receiving annual financial audits for at least five years before selling. Potential buyers will want to see good financial information, just like a homeowner wants to make sure a house has a solid foundation. Planning your exit strategy is made easier with a solid foundation built on trust with a financial advisor who understands the tough questions the situation raises.

(This sponsored content is provided by Vectra Bank.)

Todd Munson, director of commercial banking, and Janet Lowe, director of wealth management and private banking at Vectra Bank, work with small to medium sized businesses in the Denver Metro area and throughout the state. To learn how we can support your goals, visit us at
www.vectrabank.com

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