Future-Proofing Your Goals: The Value of Proactive Succession Planning

How do you retire when you’re running a company and there isn’t clarity around what you and your business need to be successful in the future? You build a plan.

A succession plan is one of the most important documents for a business owner, as it details your vision for leadership of the company when you are ready to move on to the next chapter and increases the likelihood that this transition will go smoothly. Yet, the 2023 Connecticut Family Business Report* found that close to 75% of survey respondents do not have a succession plan in place.

“Business owners don’t have a lot of free time to dedicate to something that is not an immediate need,” says Jessica Dodge of Connecticut Wealth Management. Oftentimes business owners are accustomed to feeling like big decisions fall to them alone to make, especially when looking out for employees and customers. Effective succession planning is about more than just your business, and taking the time to make those critical decisions in isolation can waste time and resources. “Building a plan for your financial future is a clear-cut example of an area where you need to leverage the expertise of a professional.”

Out of those surveyed in the report, only 28% of business owners said they have a written plan, with 35% stating their succession plan is “well-defined but undocumented.” This begs the question, what makes a “well-defined” succession plan?

It is Never Too Early to Start

“From our viewpoint, what makes a successful succession is having clarity around your whole financial picture, inclusive of both business and personal finances,” says Dodge. “There is always some level of emotion, which is why it’s critical to start the planning process early, ideally as early as 5 to 10 years out from your planned exit.”

Events and circumstances might change, but having a documented plan ensures that you have a solid foundation to revise from, rather than starting fresh amid potentially challenging times. The goal for your succession plan is for it to be proactive, not reactive.

It’s also easy to assume that those close to you know about your plans and are on board. This is increasingly common inside closely held and family businesses. While your vision might be for your children to eventually take over, this might not be realistic due to their age, interest in the business itself, or countless other reasons. With an initial plan in place, you are better equipped to navigate the unexpected and pivot to alternative options.

The more time you take to craft your succession plan, the more control and exit options you will have over the journey to make your vision a reality.

Prioritizing What Matters

As with most things in life, succession planning starts with asking yourself what it is you want to happen when transitioning away from the business. What are your short and long-term business objectives? What are your aspirations on the personal side, including your family?

“Reviewing this side-by-side will enable you to see how connected your business and personal goals are,” says Dodge. “You are not CEO of the company in isolation – the business bleeds over to your personal life and vice versa.”

Communication and timing are key here. When the moment is right, discuss your plan with those affected by it, such as your spouse, partner(s) or other key stakeholders, and your customers. Clear and open communication at the start can help to ensure that everything goes smoothly when it comes time to exit.

Mind the Gap

Once you have defined what it is you want, it is important to identify what you need and the steps to get there. What is the structure of your team? Is your time spent doing the things you are most passionate about in your business?

“Uncovering the potential gaps and identifying areas that need to improve can help you to exit with confidence,” says Dodge. You need a team of trusted business advisors who can hold you accountable to make these improvements that often take time – some combination of attorneys, accountants, and wealth managers – all working together to hold you accountable to your goals.

Your succession plan should seamlessly align with your personal financial plan, providing a framework that guides the decisions you make on the business side to achieve your financial objectives on the personal side.

“You should walk away feeling confident in the state of the business you leave behind, and at the same time, feel confident in knowing that you will have the means to live your life how you want to,” says Dodge. “That is our primary goal – to ensure that you feel good about your succession.”

Move Forward with Confidence

Connecticut Wealth Management (CTWM) is helping business owners identify the steps and actions they need to take in order to enhance the value of their company and make measurable progress toward their financial goals.

Interested in learning more about how CTWM can help? Contact us at 860-470-0290 or contact us today.

*The 2023 Connecticut Family Business Report is a collaboration between CBIA, Hartford Business Journal, Hinkley Allen, Connecticut Small Business Development Center, Connecticut Wealth Management (CTWM), and the Family Business Program at UConn.