This story is part of our February 2026 issue. To read the print version, click here.
A Midtown construction firm assumed the founder’s eldest son would simply “take over someday.” When the founder fell ill, the family discovered they had no formal valuation, no buy-sell agreement and no financing plan in place. The son couldn’t secure the capital to buy out his siblings, and a strategic buyer swooped in at a discount. The founder got far less than he expected, and the family still isn’t speaking.
In 2025, succession planning for business owners has never been more important. A powerful demographic shift is underway: Over 4.2 million Americans will turn 65 this year, and more than half of small business owners are already 55 or older. Many are thinking about retirement goals, personal wealth planning or pursuing a new business strategy. This reality makes it essential to have a formal business succession plan in place that will ensure continuity of leadership and protect your business’s operations.
With such a large portion of owners entering retirement at once, more businesses will be on the market, which can potentially drive up supply, drive down market value and reduce future appreciation. Strategic buyer interest may increase for certain industries, but competition among sellers could lower prices for others. Small-business succession strategies will need to account for this changing environment.
Delaying succession planning can also create risks that affect both the business and the people who rely on it. Waiting too long to plan may result in reduced business assets, lower employee retention rates and unnecessary estate taxes. Without a formal succession plan, co-owners, other stakeholders and key employees may face uncertainty that affects day-to-day operations. Financial decisions made under pressure often fail to align with long-term business continuity and personal wealth-planning goals, and a rushed transition may mean missing out on tax advantages or not having buy-sell agreements that protect ownership interests.
It’s also important to understand what succession planning actually involves. Succession planning is a key part of business planning that prepares for leadership transition while protecting the company’s value, relationships and operations. It is more than an exit strategy. A comprehensive plan includes leadership development for future leaders, preparing key employees and aligning the transition with the owner’s best interests and retirement goals. Exit planning focuses on the financial, legal and operational details of selling the business or transferring ownership interest. Both succession and exit planning are critical for a successful transition, but they address different pieces of the process.
Despite its importance, succession planning presents common challenges. Statistics show that while many business owners hope to pass on a legacy, only about half have a formal business succession plan. Without one, they risk undervaluing the business or losing control of the transition process. Family-owned companies face emotional and relationship-driven complexities. Decisions about ownership interest, management roles and leadership of daily operations must be handled with sensitivity and clear communication. This helps prevent conflicts between family members and other stakeholders.
Market timing can add another layer of difficulty. Market conditions, interest rates and buyer demand dramatically affect business sale outcomes. Selling the business during a downturn may reduce market value. Small-business owners need to monitor industry trends and be ready to act when conditions are favorable.
Another cautionary tale: A local precision-parts manufacturer waited for “one more good year” before taking his company to market. Then rates spiked, buyers pulled back, and valuations in his niche dropped almost 20 percent. By the time he engaged a banker, the offers were nowhere near what he’d built toward.
Leadership pipeline challenges also appear frequently. Without identifying and preparing future leaders early, succession planning becomes more difficult. This is why many succession-planning tips emphasize developing potential successors well in advance.
To help business owners move forward, here are the core steps of a strong succession plan.
Step 1: Define goals and timeline
The process begins by identifying specific circumstances, retirement goals and business-strategy priorities. Knowing whether the aim is to transfer to family members, sell to a strategic buyer or establish an employee ownership program helps guide the plan.
Step 2: Choose a transition path
Options include selling the business to a private equity firm, transferring to a business partner, transitioning to key employees or creating an employee stock ownership plan. Each has different tax advantages, market-value implications and impacts on the business’s operations.
Step 3: Develop future leaders
Small-business succession strategies work best when owners start early to mentor future leaders. Training current employees and building leadership capacity support employee retention and ensure continuity of operations.
Step 4: Prepare financially
Working with a financial advisor, tax advisor and business broker helps owners obtain accurate valuations, understand accounting guidance and position the company for a potential sale. Reviewing business assets, securing buy-sell agreements and considering an irrevocable trust can help minimize estate taxes and protect ownership interest.
Step 5: Formalize the plan
Documenting the process in a formal succession plan ensures all parties understand timelines, responsibilities and contingency plans. This protects the business, employees and family members from uncertainty.
Looking ahead, new tools and trends are reshaping succession planning in 2025. AI and advanced analytics can help identify potential buyers, match skills to leadership roles and forecast future appreciation. These tools support better financial decision-making and improve long-term wealth planning. Many business owners now prioritize skills and performance over tenure when selecting successors, which improves the odds of a successful transition and strengthens daily operations.
Succession planning may feel complex, but the changing market — and the growing number of owners nearing retirement — makes early preparation more important than ever. Even if you think it’s too early to start planning, it’s not. Emergency succession protocols are essential in our rapidly evolving world. These measures ensure continuity for employees, customers and business partners if leadership changes happen overnight, which will help you sleep better tonight.
Joseph Eschleman, CIMA, is the president and founder of Towerpoint Wealth, a leading Sacramento-based independent wealth-management firm overseeing nearly $600 million in client assets. With more than 24 years of wealth management and consulting experience, he guides business owners, retirees and executives on investment strategy, retirement planning and tax-efficient wealth preservation.
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