The Operational Side of Succession Planning


As an owner of a private business, you know that nothing lasts forever.  And that includes you, your management team, and other key players in your business eco system.

I’d like to start the conversation as if the majority, if not all, of this privately owned business is owned by a single family.  Many times, that single family may be multi-generational or aspire to be so. The concepts and remedies to ensure a good succession for a company that is owned by one person, a family, or with many owners, are the same.  But as you may imagine, the more owners that are active in the business should make the succession for the leader and other key players a bit easier.

There are two sides to the succession plan.  One is for the operation of the company and the other is for the ownership of the deceased owner’s share. The business owners that we work with have a high percentage of their net worth tied up in the business and sometimes the real estate within which the business operates. The most common surprise is how little attention is given to the details of a succession plan that these business owners were given by their team of advisors.  They all had CPA firms, attorneys, insurance agents, money managers, and a bunch of other suits around them giving advice within their silo of expertise, without making sure the plan was buttoned down from both a financial and an operational side.

Starting on the operational side, who is going to do the work of the deceased?  In companies where you have a very strong founder who is still in the trenches for many things, this is a huge issue.  These owners need to have conversations with their key employees immediately to talk through this possibility.  I’m talking the real nitty gritty in terms of who does what.

Multi-generational family ownership is not necessarily the cure for an operational succession plan.  The roles to be assumed by a Generation 2, 3, or whatever, must be planned so that the vacancies are properly filled.  We all know that blood line succession may work for ownership, but not always for operating the business.

Even businesses with a relatively strong management team need to iron these issues out.  Owners may be surprised to learn that their team wondered what would happen if the key person didn’t wake up for breakfast. Owners need to run the scenario in their heads and pretend that this all happened yesterday.  The ideal outcome is to set up the operational succession plan now what would make you feel best about how the business will be run when you can’t.

The owner/leader needs to make the initial assessment and decide who they think is ideal to step up to what roles and begin having conversations with them.  When you’ve got talent that is capable, interested, and maybe even eager for the opportunity, then it is time to communicate these decisions to others on your leadership team and eventually with everyone.

These conversations will eventually need to be very detailed regarding the roles, compensation and equity incentives. Not many employee/leaders are benevolent enough to pour their hearts and souls into a privately held business for the benefit of heirs without a reasonable incentive for them. In smaller businesses, it becomes likely that your next generation of leaders will become the majority owners.  When the business is larger, there is probably enough value, cash flow, and profits to present a very good financial package to the next gen leader(s), even if the family still maintains significant ownership.

This process can take a long time.  Sometimes it is the owner who procrastinates. Oddly enough, the very busy business owners whose businesses are thriving are the exact ones who need it the most.  The fact that they don’t have the time for this is a leading indicator that they really need help.

Most of the operational issues in succession planning could be handled by the owner(s) without professional guidance.  But in my experience, an outside influence from a good advisor can guide the process so that it has desirable outcomes in a reasonable amount of time.  In my opinion, this can be done withing 3 – 6 months with just a little focus and professional guidance.

Next week we’ll dive into the financial side of succession planning.

Napier Financial is an independent full-service wealth manager and a fiduciary.  We act as a financial “head coach”, overseeing and managing all facets of our clients’ financial lives, including succession planning and business owner retirement planning.  Interested in learning more?  Reach out to Alex Weiss at or 781.884-2356.

John P. Napolitano CFP®, CPA, PFS, MST is Founder and Chairman of Napier Financial in Braintree, MA.  Visit for more information. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Investment and financial planning advice offered through US Financial Advisors and Great Valley Advisor Group,  Registered Investment Advisors.


By John P. Napolitano CFP®, CPA, PFS, MST Founder & Chairman Read More