Richard Stone, CFP, is founder and chairman of Private Ocean Wealth Management.

The number of succession plans being implemented has increased substantially due to the large number of baby boomers preparing for retirement. As business owners plan for their eventual departure from their firms, a significant number of critical issues must be addressed. The succession-planning process can take years.

Starting early greatly improves the chances of creating your desired future for your company and loved ones. It is estimated that under 10 percent of companies make it to the third generation. This sobering news reflects the fact that the process of changing company ownership is fraught with potential problems.

As a co-founder of Private Ocean Wealth Management, I went through the experience of succession-planning and learned a good deal in the process. As I sought to plan the next phase for the firm and myself, I found surprises and challenges along the way. My hope is to leverage my experience in going through the succession process, and share this for the benefit of those who are starting to consider an exit from their business.

What are your goals?

Knowing your goals may sound simple, but the reality is that getting your desired outcome requires knowing what you really want. What are your life goals? What are you looking for? Legacy? Philanthropy? Family education? What does the future look like? Do you downsize your home or upsize?

Methodically modeling the financial aspects is also important. Consider assets, debts, liabilities and financial-planning. You may have unrealistic expectations. Can I pull the trigger now, or do I need to wait? Business-planning and strategic-planning can help you get a better sense of the potential scenarios.

Who should you sell to?

There are three main scenarios in succession-planning and transitioning ownership: selling to family, selling to members of your business or selling to an outside third party. If you wish to pass your business on to future generations, you will need to make an honest assessment of the prospective needs of your family and business, the qualifications of any interested family members, and whether the family and your business would be best served by a continued relationship.

If you wish to transition to a member or members of your current firm, focus on the terms as well as the price. After considering a number of factors, I chose to sell my interest in the firm to key employees. The terms that were arranged provided a higher degree of employee ownership and helped ensure a smooth transition, with no impact to current clients or the community.

Selling to an outside third party is another potential option. In this case you will need to get your house in order and consider the things that a third party would want to see. You may find it beneficial to consult with outside help regarding the value of your business. A good adviser in the business valuation space may also know of potential buyers.


It is important to communicate with all the interested parties throughout the process. For service companies, such as law firms and accountants, much of the value of the business lies in the employees. It is in your best interest and the interest of your firm to keep open communications with your employees, family members and any other key contingents. This can help provide transparency and mitigate disruption for the interested parties.

Richard Stone, CFP, is founder and chairman of Private Ocean Wealth Management.

Build your team

The skills that make a successful business person are not necessarily the skills that you need to successfully transition your firm to the next phase. This, paired with the fact that most people only go through the process once in their lives, highlights the need for surrounding yourself with a team of experts.

As succession planning involves a number of different areas, you will want to obtain assistance from your key business and estate planning advisers, including your wealth manager, attorney, accountant, tax adviser, and insurance professional. Meet with them, preferably together, review your succession plan requirements, and direct them to work together as a team to achieve your objectives.

Hoping for the best won’t ensure the future of your company

Some business owners avoid succession-planning and vow to “die in their boots,” working until the end. This is not a wise decision. The reality is that you owe it to your business, your loved ones and your community to create a succession plan. This will benefit the continuity of your business, and benefit your employees and key customers.

Additionally, starting the process early will allow you a greater array of potential scenarios for your succession plan, increasing your odds of achieving the future you desire.