Choosing Your Successor

If toying with this idea feels a little too much like making a date with fate, think of it as passing the baton so you can get on to other worthwhile pursuits.

Succession planning itself can be an exciting process, once you get used to the idea.

No matter where you are in your career, it’s important to have a successor in mind and to communicate that information in writing to the appropriate people.

Tragedies rarely happen, but they can happen at any time. So if you haven’t already done so, think of one person who could fill your shoes in an emergency.

If there is no one person, is there a group of people who could fulfill your role on a temporary basis? If so, who are these people, and how would you divide the responsibilities of your position?

Now, share this information with the appropriate parties: the individuals themselves, your board, your attorney, your C.P.A. and whomever else you deem appropriate. With this emergency outline in place, it’s time to get down to the business of long-term succession planning.

Fear of Planning for Succession

Vistage Speaker Donald Shelly points out that there are many reasons this is an often-postponed activity:

CEOs, particularly owner-operators, are often better “doers” than they are delegators. So it’s difficult to imagine delegating the whole business to someone else.

It’s difficult to give up the control, especially if you are an entrepreneur.

CEOs fear being fired if they turn control over to family and/or employees.

Identity crisis issues arise. They boil down to: “Who am I, anyway, without my business?”

Let’s “keep the peace” in the business. Everything’s running smoothly. A succession plan could rock the boat with employees and family members, especially those who aren’t good candidates to be involved in the company’s future – but who want to be.

If You Don’t Plan

Shelly describes the “downside” of failing to plan as follows:

The business could become a liability, rather than an asset to your family, if no one is interested in or able to run it.

The value of the business could be diminished drastically.

Estate tax liabilities could overwhelm the family if they don’t have the cash flow they need.

You may not be able to meet retirement objectives.

Key customers, banks and suppliers may abandon your company if they see it going off-course. Key employees may seek other opportunities in the uncertainty of a vacuum.

Developing a Business Succession Plan

If we’ve convinced you that you should go on, begin by educating yourself. Talk to people who have been there.

Find Vistage members in your group, or outside it, who have gone through this process, or are in it. Searching the online member directory on the “community” tab is a great place to start.

Go to seminars. Read books. Seek additional outside advice from consultants who specialize in this field.

The plan must be in writing, and must answer the following questions or address the following issues as outlined by Shelly:

  1. What are the options for your business?
    1. Liquidation (the worst-case scenario)
    2. Go public
    3. Sell to a third party
    4. Gifting the business in $10,000 annual parcels to family members, or using the one-time $600,000 exemption
    5. Sell to employees or family members
  2. Who should be the next stockholders?
  3. Who will run the company? Ultimately, this is the most important decision.
  4. What is the business worth?
  5. How will family and employees pay for the stock?
  6. How much income do you (the owner) need?
  7. When should you transfer voting control?
  8. Are there any personal guarantees that must be honored by successor management?
  9. Contingency plans (see above). Other than the names of people who can run your business, who will own it? How will it be run? Where will the money come from to fund the transfer?
  10. Do you have more than one stockholder? (A buy-sell agreement is necessary.)
  11. How does the succession plan tie in with your estate plan?
  12. What is the timing for the plan?

With the plan in hand, the training can begin for your successor. And you can begin to make plans for how richly you will spend the next part of your life. Once you have fielded all these matters, and committed them to paper, you need to communicate the information to key people. Shelly says you should solicit their input before finalizing the plan in case they do not want to accept the roles you envision for them.

Action Plan for Succession Decision Making

You have determined that you need to begin working on your succession plan. Now it’s time to set out your plan of action. Simply fill out this form, print it out, sign and date it. Make a commitment to yourself.

My plan will be in place by: Date


Name one person who could fill your shoes in an emergency:


If there is no one person, select a group who could assume a portion of your duties:
Individuals’ Names Area(s) of Responsibility


The first three steps I must take to prepare for making these decisions, and the date by which I will have them completed:
Step To be completed by:


Signature Date

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