I've had some version of the same conversation dozens of times. I'm sitting with a business owner who is somewhere between 50 and 65, the business is doing well, and either I've raised the topic or they have — usually tentatively, almost like they're embarrassed to bring it up.
The conversation is about what happens to the business when they're done.
Almost every time, the owner has never fully thought it through. Not because they don't care about the answer, but because the question is uncomfortable in ways they haven't articulated yet. It's tied up in their identity, their family relationships, their finances, and their sense of what they've built. Thinking about it seriously requires confronting all of those things at once.
Your job as an advisor is to help them do that — clearly, without judgment, and without pushing them toward an outcome that fits your practice better than it fits their life.
The Four Paths
Every succession eventually follows one of four broad paths. Most business owners haven't thought carefully about which one fits, or they've assumed a path without examining whether it actually works.
Sell to a third party. This is the most straightforward version of an exit in financial terms. A strategic buyer — usually a competitor or a company looking to enter the market — or a private equity group buys the business. The owner gets cash. Sometimes they stay for a transition period; sometimes they're out quickly. The business continues under different ownership.
The financial result is often the most attractive of any option. But it usually means the business as the owner built it changes. Culture, employees, the owner's name on the door — all of that becomes uncertain. For some owners, that's fine. For others, it's disqualifying.
Pass to family. This is what many owners imagine when they think about succession, and it's frequently the most complicated path in practice.
The financial question and the family question almost never have the same answer. The child who is most involved in the business may not be the most capable leader. The owner who wants to treat children equally faces the problem of a business that can't pay out multiples of its value simultaneously. The parent who wants the business to stay in the family has to reckon with whether the family member who inherits it actually wants to run it — or is just agreeing because it's the expected thing to say.
None of these problems are insurmountable. But they require real conversations, not assumptions.
Sell to employees or management. A management buyout or an Employee Stock Ownership Plan (ESOP) allows the business to transfer to the people who already work in it. This path tends to appeal strongly to owners who care about what happens to their employees and want the business to stay independent.
The tradeoff is typically financial. Management buyouts often require seller financing, which means the owner doesn't get all their money at once and takes on the risk that the new leadership can actually run the business. ESOPs have favorable tax treatment but involve significant complexity and cost to establish. Neither is a shortcut.
Multiple owners transition. In businesses that started with partners, or where key employees have been brought in as equity holders over time, the transition may involve existing co-owners buying out the departing owner's share. This is often the clearest path when the structure already exists — and the messiest when the buyout price and terms haven't been thought through in advance.
The Questions That Reveal the Real Answer
Most owners haven't articulated what they want because nobody has asked the right questions in the right order.
What do they want the money to do? This is the financial question, but it's not just about the number. Some owners have more money than they'll ever need and care less about maximizing the price than they think they do. Others are counting on this transaction to fund retirement for themselves and their spouse. The answer shapes which paths are realistic.
How involved do they want to stay? Some owners want to be completely out — they're ready to close this chapter and do something else. Others want to stay connected to the business in some capacity, perhaps as a board member or advisor. Some haven't fully admitted to themselves that they don't actually know what they'll do when they're not running the business every day. The honest answer to this question eliminates some paths and opens others.
What do they owe the people who helped build it? This question surprises some owners when you ask it directly. But most of them have employees who showed up when things were hard, who turned down other opportunities to stay, who built something alongside the owner. Some owners feel a genuine obligation to those people. Others don't — and that's a legitimate answer too. But it's better to surface it explicitly than to discover it mid-process.
What happens to the name? For some owners, the business bearing their name is meaningful. For others, it's just a name. It sounds like a soft question, but the answer sometimes reveals something important about what the owner is actually trying to protect.
How much time do they have? This is the one most owners underestimate. A well-executed third-party sale of a $5 to $10 million business typically takes 12 to 24 months from the decision to close. A family transfer or management buyout, done properly, often takes longer. An owner who says they want to be out in 18 months and hasn't started yet is behind.
Your Role in the Process
You're not a therapist, and succession planning isn't grief counseling. But an owner who hasn't thought clearly about what they want from this process is going to make bad decisions — and then blame whoever was advising them.
The most useful thing you can do early is slow the conversation down. Don't let the owner jump straight to valuation or deal structure until the directional questions are answered. A business owner who hasn't decided whether they want to stay in the business for two years post-sale or walk out the day of closing is not ready to negotiate deal terms. Those two scenarios produce completely different structures.
Push them to get specific about what they're actually optimizing for. Price is usually the first answer. It's rarely the only real answer.
The owners who get what they want out of a succession process are usually the ones who spent time at the beginning understanding what they actually wanted. The ones who don't are usually the ones who let the process define the outcome rather than defining it themselves first.
Joshua R. Bohlke spent over a decade as a commercial banker before serving as CFO and financial advisor to businesses from $1M to $50M in revenue. He advises owners and their advisory teams through growth, transition, and succession.
jrbohlke.com • The Analysis