I met with a business owner last month. He’d been running his company for 28 years. Doing well, profitable, good reputation. “Jim,” he said, “I think I want to retire in about five years. What do I need to do?”
I pulled out a piece of paper and started writing. By the time I finished explaining everything he needed to do, he was staring at me like I’d just told him he had to climb Mount Everest.
“That’s a lot,” he said.
Yeah. It is. But here’s the thing about succession planning. It’s not complicated, but it takes time. Real time. Not “I’ll get to it eventually” time. Most of the succession planning failures I’ve seen over 30 years happen because owners start too late and try to rush through steps that can’t be rushed.
So let me walk you through the ten essential steps. Do them in order. Give each step the attention it needs. And for God’s sake, start now even if you’re years away from exit.
Step one: Start planning way earlier than you think you need to
This is the step most owners skip entirely until it’s too late. They figure “I’ve got time” or “I’ll deal with that when I’m ready.” Then something happens. Health scare. Spouse wants to move. Key partner wants out. Suddenly they need to exit in six months and everything that could have been planned and optimized gets rushed and compromised.
Minimum timeline for quality succession planning is three years. Ideally five. I know that sounds crazy to owners who are still 10 years from retirement. But think about what has to happen. You need to train successors, and that takes 12 to 24 months minimum. You need to transfer customer relationships, which takes 18 to 30 months. You need to document everything you know, which is 6 to 12 months of work. You need to build management depth, which is 24 to 36 months. You want to improve business value before exit, which really needs 36 to 60 months to do properly.
You can’t compress this timeline without breaking something.
I worked with a Michigan manufacturer who wanted to retire “in the next year.” He’d built a good business over 20 years, but everything ran through him. His customers only dealt with him. His team made no decisions without checking with him first. He had no documentation of critical processes.
We got him through it, but he had to compromise on price and work full-time for 18 months after the theoretical “sale” just to keep the business from collapsing. He ended up selling for about 60% of what he could have gotten if he’d started planning three years earlier.
Don’t be that guy.
Step two: Figure out what you actually want from succession
Before you can plan how to exit, you need to know what successful exit looks like for you personally. And I mean really think about it, not just “I want enough money to retire.”
What’s the minimum amount you need to walk away feeling secure? What payment structure works for your situation? Do you need everything upfront, or can you take payments over time? How much ongoing income will you need if you’re not drawing a paycheck anymore?
What about your legacy? Do you care whether your employees keep their jobs after you leave? Does customer relationship continuity matter to you? If this is a family business, do you care about keeping it in the family?
And what about your next chapter? Are you going to retire completely or do something else? Will you stay in the area or move? Do you want to stay involved in the business in some advisory capacity, or do you want a clean break?
I’ve watched succession plans fall apart because the owner never answered these questions honestly. They thought they wanted one thing, then realized halfway through the process they actually wanted something completely different.
Write this stuff down. One page. “In 2029, I will transition my business to [whoever]. The sale will provide [dollar amount]. I will [your plans]. My employees will [what happens to them]. My customers will [what happens to them].”
That document guides every decision you make from here forward.
Step three: Face reality about whether your business is ready
Most businesses aren’t ready for succession when owners first think about exit. That’s normal. The question is identifying the gaps so you can fix them.
Rate yourself honestly on these areas. Use a scale of 1 to 10, where 10 means perfect and 1 means complete disaster.
How clean and accurate are your financial statements? Could an accountant review your books today and understand them? Are your last three years of financials consistent and profitable? Do you have real working capital, or are you constantly cash-strapped?
How documented are your operations? Could someone new walk in and figure out how to run things? Does your management team actually manage, or do they just execute your decisions? Could the business operate for a month without you making any decisions?
How stable is your market position? Do you have a solid, diversified customer base, or are you dependent on a few big customers? Is your competitive position documented and defendable? Have you been growing, or have you been flat or declining?
Any area where you score below 7 needs work before succession. That’s not criticism. It’s reality. Better to know now when you have time to fix things than to discover it during buyer due diligence when you have zero time and zero leverage.
The typical Michigan business owner I work with scores about a 5 or 6 overall when we first do this assessment. That’s fixable. It just takes time and focused effort.
Step four: Figure out who could actually take over
This is where succession planning gets real. Who could successfully run your business after you’re gone?
Maybe it’s your kids. But be honest about this. Are they interested? Are they capable? Too many family business successions fail because parents assume interest equals capability. Your kids might love the idea of owning the family business but have no idea how to actually run it. Or they might be perfectly capable but have zero interest in this industry.
Maybe it’s your key employees. Do you have someone who could step up? Could you structure a management buyout? Is an ESOP feasible? These options keep the business with people who understand it, but they require careful structuring and often creative financing.
Maybe it’s an external buyer. Strategic buyer from your industry? Financial buyer like private equity? Individual buyer looking for a business to run? Each type has different priorities and different pricing models.
I tell owners to consider all options before deciding. Don’t just assume it has to be one way because that’s what you’re comfortable with.
I worked with a service business owner who spent two years training his son to take over. About 18 months in, his son finally admitted he hated the work and was only doing it to please his father. They wasted almost two years on a succession path that was never going to work. Could have been pursuing other options that whole time.
Step five: Train your successor systematically
Identifying a potential successor is step one. Training them to actually succeed is the hard part that takes real time.
First year should be exposure and learning. They shadow you in key activities. They sit in important meetings. They learn how the finances work. They understand all the functions of the business, not just their current area.
Second year is managed responsibility. They start taking over specific functions with your oversight. They make decisions but you review them. They build relationships with key stakeholders. They handle increasingly complex situations while you’re there to back them up if needed.
Third year is independent leadership. They run operations with minimal oversight from you. They make major decisions on their own. They own the results. They demonstrate they can actually do this without you holding their hand.
This progression is how you build confidence and capability safely. Rush it and you’re setting them up to fail. Skip steps and you’ll end up taking back control when things get difficult.
And you need to actually let them fail sometimes. That’s how learning happens. I’ve seen owners sabotage their own succession plans by jumping in to fix every problem before the successor has a chance to work through it themselves.
Step six: Get everything out of your head and onto paper
This step is tedious. Most owners hate it. But it’s absolutely essential.
Everything you know about running your business needs to be documented before you leave. Customer quirks and preferences. Supplier relationships and ordering procedures. How to troubleshoot that one machine that breaks every six months. Quality standards and inspection procedures. Pricing strategies. Cash management. Strategic thinking frameworks. All of it.
Start with the most critical process. Write it down step by step. What’s the purpose? When does this happen? What are the exact steps? What problems commonly come up? How do you solve those problems? Who do you call if you need help?
Then move to the next critical process. After you’ve documented maybe 50 to 75 key processes, you’ve captured most of the essential knowledge that makes your business run.
For Michigan manufacturers, this documentation is especially valuable. You’ve got technical knowledge about automotive quality requirements or industrial processes that buyers can’t find anywhere else. That knowledge has real value, but only if it’s transferable.
I tell owners to budget three to six months of focused effort on documentation. It feels like it’s taking time away from running the business. But it’s actually protecting the value you’ve built over decades.
Step seven: Build a management team that can actually manage
Your successor can’t do everything alone. They need capable people around them who can handle their areas without constant oversight.
You need operations leadership. Someone who can run production or service delivery. Quality control. Inventory or project management. Not just someone who follows orders, but someone who solves problems and makes decisions.
You need financial leadership. Controller or finance manager who really understands the numbers. Someone who can produce accurate financial reports and provide insight, not just record transactions.
You need sales leadership. Someone driving revenue growth and managing customer relationships. Not just a salesperson, but someone who thinks strategically about business development.
You need administrative leadership. HR and employee management. IT and systems. Facilities and general operations.
Sometimes you can promote from within. Sometimes you need to hire external talent. It depends on whether you have people with the capability and whether they have the desire to step up.
Michigan manufacturing businesses often need specialized technical knowledge. External hires might need six months to a year just to understand your specific operations. That’s why starting early matters so much.
Step eight: Structure the deal so everyone wins
How you structure succession makes a massive difference in taxes, risk, and outcomes. This is where you absolutely need professional help.
An outright sale means the buyer pays everything at closing. Clean break. You’re done. Capital gains taxes apply. This is lowest risk for the buyer but requires them to have all the capital upfront.
An installment sale spreads payments over three to ten years. This spreads your tax burden across multiple years. You stay involved enough to ensure you get paid. Lower capital requirement for the buyer, but more risk for you if things go badly.
An earnout structure means a base payment plus performance bonuses. This can bridge valuation gaps and align interests during transition. But if the business underperforms, you don’t get those earnout payments.
An ESOP allows employees to buy the business gradually. Tax advantages for the seller. Employees stay motivated. But it’s complex and expensive to set up properly.
And then there’s tax planning. This is absolutely critical. Work with specialized tax advisors on whether to structure as an asset sale versus stock sale. Whether installment sales make sense for deferring taxes. Whether charitable remainder trusts could help. How family gifting strategies might work.
Michigan doesn’t have state inheritance tax, but federal capital gains still apply. On a $2 million sale, you’re potentially looking at $400,000-plus to the IRS unless you plan properly. Good tax planning can save you hundreds of thousands of dollars.
Step nine: Execute the transition in stages
Successful transitions don’t happen all at once. They happen gradually over 12 to 24 months typically.
First three months are announcement and preparation. You tell key stakeholders what’s happening. You communicate the timeline. You address people’s concerns about what this means for them. You begin formal transition activities.
Next six months are intensive knowledge transfer. Training and shadowing for your successor. Transferring customer and supplier relationships. Completing documentation of remaining processes. Systematically reducing your involvement.
Next nine months are the transition period. Your successor takes operational control while you’re available for consultation and support. You monitor performance. You adjust things that aren’t working. You maintain stability during the changeover.
Final six months are full transition. You completely exit active involvement. Final payments get made according to your agreement. You celebrate successful transition. You move to your next chapter.
The timeline adjusts based on your specific situation, but the principle stays the same. Gradual transition gives everyone time to adjust. Rushed transition creates chaos and destroys value.
Step ten: Actually let go when it’s time
This is emotionally the hardest step for most owners. You’ve poured 20 or 30 years into this business. Walking away feels wrong even when you planned it.
But your successor needs space to lead. Your hovering undermines their authority. It creates confusion about who’s really in charge. Employees start coming to you instead of the new owner because that’s what they’re used to.
Set very clear boundaries. Define exactly when you’ll be available for questions. Resist the urge to second-guess decisions. Trust the systems you spent years building. Focus on whatever comes next for you.
If you structured an installment sale or earnout, you’ll need to monitor business performance without interfering. Quarterly financial reports usually work. Maybe annual meetings. Stay informed without micromanaging.
And celebrate what you’ve accomplished. Successfully transitioning a business is a huge achievement that most owners never pull off. Host events for employees. Thank key customers. Acknowledge everyone who helped you build something valuable.
Leave on a high note. Your reputation matters even after you’re gone.
Let me help you get this right
I’ve guided dozens of Michigan business owners through successful successions over 30 years. The process is completely manageable with proper guidance and systematic execution.
I offer free succession planning assessments. We’ll sit down and go through where you are on this 10-step checklist. What gaps need attention? What’s a realistic timeline for your situation? What should you focus on first?
Call me at (248) 957-0300. I answer my own phone. Everything is confidential.
Most clients work with me for two to three years through the succession process. Monthly check-ins keep you on track. Quarterly reviews measure progress. I also connect you with specialists you’ll need along the way – attorneys, CPAs, valuation experts.
The best time to start succession planning was five years ago. Second best time is today. This checklist gives you the roadmap. Now you just need to commit to actually walking the path.
Your business represents decades of hard work. Don’t risk that legacy by skipping proper succession planning.