Find a Family Successor for Your Business

By Carmen Bianchi
Published: December 15, 2015 | Last updated: March 21, 2024
Key Takeaways

A traditional estate or succession plan for a family or closely held business should encompass and be part of the estate plan, the financial plan and the strategic plan. Every closely held and family business company should have an exit strategy. What is yours?


Lately, many closely held and family businesses have come to us saying that they, that is, the CEO/Founder would like to work more “on” the business as opposed to “in” the business. They would like to extract themselves from the day-to-day operations and would rather concentrate on growing their business and perhaps looking to diversify or even merge and/or acquire some other enterprise. However, one of the biggest dilemmas facing these CEO’s/Presidents/Founders is letting go. How do you let go? It is all very well to name your successor, hire your successor, but then once your successor has been identified then it is your duty to have the employees, clients, customers and service providers buy-in and become comfortable with this person.


Establish a Defined Transition Plan

A timeline, or transitory period, is good with a set date, like perhaps three months, so that you can ease your successor into the position; however, BEWARE. Remove yourself from your usual office, move on down the hall and step away from the daily operations, allowing your successor to demonstrate his/her capabilities. Make sure that your successor has the same values and standards of excellence as you do and that the vision of the company remains your vision. At the outset of this transition, it is best if regular scheduled meetings occur between the successor and the person who is stepping down.It is important to determine whether your company is your legacy and what you would like it to perpetuate through the generations. But whose dream is it? Because if it is only your dream and not your next generation’s dream then your company may become just another company being part of the statistics that say between 87% and 92% of all companies in the USA are family owned or closely held, but by the second generation this percentage drops to 36% and by the third generation it drops to 16%. “Shirt sleeves to shirt sleeves in three generations,” as the saying goes, and this could be your legacy!

Do not set up your next generation for failure. Make sure that the successor desires this position and is capable of being a leader. Establish good mentorship and development programs as well as good leadership programs. Successors need to acquire the necessary skills and experience and be comfortable in their role as the leader. Employees and customers rely on the leadership of the company to create a smooth transition that will not be disruptive to their lives.


If succession is split between two or more siblings and/or family members, what agreements should exist between these shareholders that will allow for future changes in the company? Be careful of 50/50 splits with no majority shareholder. Establish sound Buy/Sell agreements whereby decisions are able to be made for issues such as: Do the shares remain in the bloodline in case of divorce? Are adopted children considered bloodline? Upon demise of one of the shareholders, do the shares go back to the company or to the other family shareholders? Who will manage the company? Will there be an outside Board of Managers? Will minority ownership be allowed outside the family amongst key employees or should there be phantom stock given to these employees? These are very important considerations.

Considerations for the Successors

If you are thinking of becoming the successor of a family or closely held business, here is some food for thought:

  • How do you plan on acquiring the skills necessary to become the leader of the company?;
  • Get meaningful, full-time outside work experience to create an aura of credibility;
  • Look for mentors both inside and outside of the business;
  • Seek the presidency of an organization outside of your work;
  • Develop or belong to a peer group;
  • Identify leadership models to emulate;
  • Remember that real authority comes from earning respect, not from power;
  • Eventually identify your own management team; and
  • Be a role model of listening skills, openness and change.

Passing on Ethical Values to the Next Generation

Finally, what we like to encourage is an ethical will in a good succession plan. Ethical wills are multifaceted tools that can be used to transmit not just your intentions, but, equally important, your thoughts and feelings on innumerable subjects, some of which may be too difficult or sensitive to express directly while you are alive. Mostly lessons learned as you experienced life through failures and triumphs, an ethical will is most importantly a tool that describes the principles and values with which you lived your life. This is a unique way of creating a lasting legacy of your wisdom and insight for having lived such a rich and rewarding life: a final lesson to be learned.


About the Exit Planning Institute

The Exit Planning Institute® (EPI) is the premiere international membership organization serving the educational and resource needs of exit planning professionals. Formed in 2005 to bring together business brokers, M&A advisors, CPAs, financial advisors, attorneys, management consultants and other business advisors, the Exit Planning Institutes members, including some of the most highly recognized leaders in the industry, draw upon their combined expertise to better serve the needs of small and mid-sized business owners worldwide. The common thread uniting these different professionals is their commitment to helping clients exit their companies successfully.


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Written by Carmen Bianchi

Carmen Bianchi
Carmen Bianchi has been a Family Business Consultant since 1991. She is the founder and director of the EMC Business Forum at San Diego State University, servicing the growth needs of family and closely held businesses. She was the founder of the University of Texas at El Paso Family Business Forum and was the executive director of the Forum. Ms. Bianchi has relocated to the San Diego area and is the founder and a principal of Carmen Bianchi Associates, a consulting firm in Family Business. She currently teaches in the College of Business at SDSU in the MBA program a class on Family Business Management.

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