When planning for the future of your business, one of the most significant decisions you face is defining what exactly you’re passing on. The “what” of succession planning sets the foundation for everything that follows—determining how the transition unfolds, who benefits from it, and what role you will have once the transition is complete. It’s not just about handing over control; it’s about ensuring the process reflects your values and goals while protecting your legacy for years to come.
So, what are you actually transitioning? Here are some key factors to consider when defining WHAT you’re passing on:
- Company Ownership vs. Specific Assets
First, decide if you’re transitioning ownership of the company as a whole or just certain assets owned by it. Are you transferring full ownership of the entire corporate entity for someone else to run and lead? Or do you want to pass along just specific assets such as property, key equipment, or even customer lists and intellectual property? For some owners, it makes sense to transfer ownership of the entire company to maintain continuity and provide a clean break. Other owners might prefer to separate certain assets from the overall business for the transition, which can offer more flexibility and allow you to determine the best path forward based on the circumstances of both your business and your potential successors. - Total Sale vs. Gradual Transition
Once you’ve determined what you’re passing on, the next question is whether you want to do it all at once or over time. A total sale all at one time offers a clean break—allowing you to walk away and fully focus on the next chapter of your life without any ongoing responsibilities. This might be ideal if you’re ready to retire or want to avoid being tied to the business. However, a gradual transition, such as selling ownership over time or handing over control piece by piece, can help provide stability and continuity. It allows successors time to adjust to their new responsibilities and helps ensure that the business remains stable during the transition. A hybrid option could be to sell/transfer the full business or all assets at the same time, but stay on in an advisory capacity to support your successor as they navigate the early stages of leadership. - Key Employee Buy-In? ESOP? Family Trust?
How you structure the transition also matters greatly. Would selling to a key employee or a group of key employees make the most sense? This option is often attractive because it keeps the business in the hands of those most invested in its success. Alternatively, establishing an Employee Stock Ownership Plan (ESOP) allows all employees to gradually take ownership of the business, building a sense of shared responsibility and loyalty. A family trust, on the other hand, can help preserve the business for future generations, ensuring that family members maintain control and benefit from the business’s success. Each option comes with unique benefits and challenges, and it’s important to think about which aligns best with your vision for the future. - Retaining an Advisory Role
For many business owners, stepping away completely all at once can feel overwhelming or “too soon.” You’ve poured your heart and soul into this business, and the thought of cutting all ties can be difficult to face. If this sounds like you, consider whether retaining an advisory role might be the right option. Remaining involved as an advisor can offer you the best of both worlds—you get to step back from the daily responsibilities while still contributing to the company’s success. This role can be invaluable during a gradual transition, as it provides stability for the new leadership and peace of mind for you. - The Importance of Business Valuation
No matter what path you choose, having an accurate valuation of your business is essential. A thorough valuation helps you understand the true worth of what you’re passing on, allowing you to make informed decisions and ensure fair value for yourself and any successors. This valuation process can also highlight areas where your business could be improved before the transition, helping you maximize its worth and set your successor up for success. The more clarity you have about the value of your business, the easier it will be to create a succession plan that aligns with your goals. - Aligning with Your Goals and Values
The decisions you make about what you’re passing on should align with your personal goals and values. Are you singularly focused on maximizing the financial return from your business? Or is preserving your family’s legacy the most important factor? Do you want to give back to your employees who have helped the business grow over the years? Or do you want to make sure your family members are provided for above all else? There’s no one-size-fits-all approach, and every decision should reflect what you value most. Defining what you’re passing on is about more than just finances; it’s about shaping the future in a way that is meaningful to you. - Creating a Customized Succession Plan
Ultimately, defining what you’re passing on is one of the key factors in crafting a succession plan that’s customized to fit your unique circumstances. Whether you’re selling the business outright, transitioning assets over time, establishing an ESOP, creating a family trust, or some combination of these options, the structure of your succession plan should reflect your vision for the future. A thoughtful, well-designed plan can help ensure that your business continues to thrive long after you’ve stepped away, benefiting your successors, employees, and community for years to come.
At MSB Law, we understand the complexity of these decisions. Our values-driven approach ensures that your succession plan is crafted with care, aligning with your priorities and goals. Whether you’re ready to step away completely or prefer to remain involved in some capacity, our team can provide the guidance and support you need to make the best choices for your future. Contact us today to learn more about how we can help you define what you’re passing on and create a succession plan that secures your legacy.