In succession planning, you're ultimately handing over the keys to your business, both figuratively and physically
Understanding the crucial components to getting it right

Eric Seidman, CPA, MBA Eric Seidman, CPA, MBA Partner Wouch, Maloney & Co. LLP

Partner, Wouch, Maloney & Co. LLP

The most crucial aspect of implementing a succession plan is establishing the overarching goals.
We begin by asking:

  • How does the owner want to structure the transition?
  • How long will it take?
  • How long will the owner work?
  • To whom will the business be transitioned?

Once answered, we help the owner determine the mechanism by which the plan is implemented. Typically, succession plans involve a sale or a gift. In either scenario, the length of time is a major factor. A sale may result in an extended buyout with a promissory note, and a gifting structure may feature a longer transition time due to annual gifting limits.

In a sale, there are different tax consequences for selling assets or company stock. The sale of assets may result in more ordinary income tax, whereas the sale of stock, broadly speaking, is taxed at capital gain rates.

In the case of a gift, there are annual gifting limits and lifetime estate and gift exemptions to consider. A structure in which the business is gifted may decrease the owner's lifetime exemption and conflict with an estate plan. As we learned in 2020, plans change without notice. To transition properly, planning is paramount.


Shane BrownShane Brown

Partner & Construction Practice Leader, Rocky Mountain Region, Plante Moran

Invest in developing your company's emerging and future leaders. Construction companies that wait to recognize and coach new leaders until the moment the owner says, "I've had enough and want out," or leave too many decision-making duties to rest on one individual, have a much harder time executing effective succession plans.

Most business owners are concerned with the company's continued success long after they have retired, and consistently focusing on leadership development will provide peace of mind and allow time for course correction, if needed.

Leadership transition is hard. The organizations that prioritize continual identification and development of their leaders throughout their careers are most successful in transitioning roles.

Asking each leader to identify their successor after they have held the role for 2 to 3 years allows for training, development, assessment and empowerment of all employees. Continual discussion about succession also shows less experienced employees that there is a path for their futures' and an organization that supports their growth and progression.

Clear succession plans also give external parties' lenders, the surety and others' comfort that the company will continue to perform strongly for years to come.