Succession plan

A succession plan sets out how leadership and ownership of a business will pass from the current generation to the next. In a family business it usually covers who will lead, when the transition will happen, how shares will move, how the founder will be provided for, and what governance will be in place afterwards.

Building one typically involves several advisors: lawyers for the ownership and estate structure, accountants for tax and valuation, and sometimes a family business consultant for governance. The details depend on the family’s jurisdiction and circumstances, so the family should work with its own lawyer and accountant.

A succession plan often covers:

• Leadership: who will hold which role, and the timeline for the change.
• Ownership: how shares transfer, often through gifts, sales, a trust or a buy-sell agreement.
• Governance: the board, the family council and the rules that will apply after the handover.
• Contingencies: what happens if the founder cannot continue suddenly, often in a separate emergency succession plan.

Succession plan or successor preparation?

The two are often treated as the same thing. They are not. A succession plan decides the structure. Preparing the successor decides whether the person named in it can lead the board, the senior team and the family when the day comes. Succession planning vs successor preparation sets out the difference in detail.

Why it matters

Families often finish the legal and financial work and assume the leadership side will follow. A plan that names a successor without a successor development plan alongside it leaves the hardest part to chance. Common family business succession mistakes covers where plans most often fall short.