Family Business Transition Guide

Family business transition with attractive couple signing contract

A guide for small business owners that can help you formulate the actions needed to effect a successful family business transition.

Presented by Kris Maksimovich, AIF®, CRPC®, CPFA®, CRC®:

As you prepare for the family business succession/transition process, it’s important to address the underlying issues at play before you calculate your business’s value or the amount of life insurance the business might buy. Your vision for your business, the objectives you hope to achieve from the transition, and whom you choose as a successor—a family member or someone else—are ultimately what will drive the plan and its execution.

This guide looks at business transitions and steps you can take to help you create a smooth transition.


The biggest mistakes business owners can make with their business transfer include:

  • Making assumptions
  • Relying on handshakes or verbal agreements
  • Infrequently reviewing the plan
  • Believing that, without planning, you can still meet your objectives

Conversely, the most valuable actions you can take are:

  • Openly listening and communicating with the parties involved
  • Documenting the plan in detail
  • Regularly reviewing the plan


Out of the Trenches. Most small business owners spend so much time working on the business that they don’t have time to take a step back from the day-to-day challenges. But to successfully accomplish any type of planning, particularly succession planning, you need to find time free from interruption when you can think about what you would like to see happen to your business in the future. During this time, put aside questions of “how” the transition will happen and simply ask yourself the “what” and “why” questions.

For example, if you could see the business 5, 10, or even 20 years from now, what would you like to see?

Use adjectives to describe the leadership, client base, size, quality of service, organization’s values, and so forth. Does this vision seem fulfilling to you? Why or why not? And what might you do now to change that outcome?

Determining Your Goals. Before we get into specific planning recommendations, it’s important that you define your personal and professional goals and priorities, so we can better understand what you’d like to accomplish.

At a high level, there are five objectives to prioritize with the transition of your business:

  1. Retirement income (and funding other goals)
    Do you feel that you have plenty set aside for retirement income and other goals, or would you like to explore ways that this transition can help fund (or add to) your retirement?
  2. Tax optimization
    Most people like to minimize the amount of taxes they pay, but, for many, it isn’t their top priority—optimizing for business longevity or for responsible heirs is more important. Do you have preferences when it comes to tax optimization?
  3. Family integrity
    If you could see your grandchildren as parents, what values would you hope they were passing along to their kids? How would you like to use your financial capital to invest in family capital?
  4. Business health and longevity
    Is it important to you that your business outlives you? If so, do you want it to stay in the family, or would you be just as satisfied if there were other capable folks running it?
  5. Personal legacy
    Do you have charitable desires or other marks you’d like to make on the world that this transition could empower?

Take some time to prioritize these objectives so that we can optimize our planning techniques based on what’s most important to you. As you’ve learned by running your business, it doesn’t matter if you get somewhere efficiently if it’s not where you wanted to be heading!

Equitable Doesn’t Mean Equal: Conversations with Your Family

When it comes to transitioning a family business, it’s easy to think about giving each family member the exact same treatment, but that may not make sense for your business. Family members either may not be qualified to take a role in the business or they may not want to be involved.

Unfortunately, as you can imagine (and may have experienced), arguments and resentfulness can arise regardless of the situation. Often, the best way to minimize future family strife—and optimize the outcome—is to communicate with each family member well ahead of time. Find out what they’re interested in and what they’re hoping for. Be aware that avoiding these discussions can take a toll, both in terms of family conflict and even in legal struggles.

If you don’t feel comfortable having these talks on your own, find a professional who is trained in successfully mediating family meetings. Questions to consider include:

  • Which of your possessions hold special meaning to each family member?
  • What roles in the business would family members be interested in pursuing?
  • What does the business itself mean to your family? What would they like to see change about it, and, more important, what would they like to see stay the same?


Identifying and Preparing Your Successor

Talk with your family first. Before making any irreversible decisions about the future of your company, your children will likely appreciate being part of the conversation. It can be difficult to avoid alienating children who want to be part of the business or, vice versa, to avoid feeling disappointed with those who don’t want to be a part of this legacy.

Rather than relying on what has been said in the past, it can be helpful to start from scratch in gauging their interest in participation or in leadership.

To sell or to mentor? If you decide that your kids (or even key employees) should have an increasingly important role in the future of your business, look to leverage their strengths. As famous management consultant Peter Drucker suggested, “The task of leadership is to create an alignment of strengths, making our weaknesses irrelevant.”

Rather than focusing on each child’s weaknesses, look at what your children excel at and think about how to utilize their unique strengths to form a team that you can mentor into success.

Maximize your business’s value

If you are selling your business, the previous step is moot. That said, regardless of whether you’re training someone to take over or selling, there are some steps you can take to maximize enterprise value in the transition:

  1. Introduce your successor to your employees, clients, vendors, and strategic partners. Let those folks know that their opinion is important by asking them what your successor needs to know to be successful. What is special about your business that the successor should continue to foster? What changes (if any) would they like to see the successor lead the charge on?
  2. Let them prove their worth. Rather than giving kids a free pass to the corner office, it is valuable for them to do some of the grunt work with pride. This will enable your children to understand the value of hard work—and realize the ultimate payoff. It can also be helpful for all parties if your children work with a competitor to learn more about the industry outside of the business they may already know quite well.
  3. Have a plan for passing the reins. Most transitions happen either far too quickly or far too slowly; we’ll discuss the pace of the transition in the next section.

Finally, if you are bringing your children (or other family members) into the business, help them learn from the bumps and bruises you may have faced if you took over a family business (if, in fact, you have been working with family). Consider these questions:

  • What was helpful to you when you gained authority? What would you have liked to know earlier?
  • What decision-making strategies did you use to settle disputes between family members so that it strengthened family bonds rather than tearing them apart?

Passing the Reins at the Right Pace—Not Just the Right Time

Understandably, most business owners focus on when they want to move on to the next chapter of their lives, and this ends up driving the timing of the transition. Additionally, when thinking about turning over power (e.g., decision-making authority), the tendency is to be slow in letting go. This happens both because it feels good to be needed and to have authority and, at the same time, because the business owner doesn’t want to see his or her successor stumble through mistakes that could have been avoided.

Of course, a transition that moves too slowly frustrates and demotivates successors, while one that moves too quickly yields unnecessary mistakes and pain for employees and clients. Keeping these simple concepts in mind can help yield huge benefits for you, your successor, and the firm at large:

  • What is the next impactful thing that your successor can take ownership of?
  • For a particular task, is the cost of a mistake higher than the lesson learned and the autonomy experienced?
  • What could your successor do to prove to you that he or she is ready for a certain responsibility? Does the successor know that, and does he or she have the tools or training to accomplish the task?
  • What aspects of the business is your successor most passionate about learning and owning? Can you help mentor him or her in those areas sooner than you had planned to increase your successor’s passion/energy?

Engaging Key Employees

Be sure to bring key employees into discussions. If they aren’t your choice for successor, they will still be playing an integral role in ensuring that your business doesn’t skip a beat. If they feel like they have a voice in the decisions that are made around the transition, they will be much more willing to help. As you did with your successor, look at their strengths and interests and allow them to guide some of your decisions.

Beyond the management aspects, there are often some financial decisions to think through with key employees:

  • What ownership or management expectations do they have?
  • What, if anything, would you like to provide them to give them a reason to stay with the business after the transition?


Mechanics of a Family Transfer. Only after you’ve determined your personal goals and your business goals should you structure the actual transfer plan:

  • Who will have ownership after the transition?
  • How will you determine valuation (e.g., determined at sale versus annually for three years after transition)?
  • How will the financing be arranged (e.g., self-financed, life insurance, bonus plan, gifting, installment sale, retained property-leaseback)?

We can help you formulate the specific actions needed to effect a successful transition.


Use this section to outline questions/concerns and to articulate next steps:

Open Questions 



My Next Steps 



Advisor To-Dos



This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.


Kris Maksimovich is a financial advisor located at Global Wealth Advisors 4400 State Hwy 121, Ste. 200, Lewisville, TX 75056. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Financial planning services offered through Global Wealth Advisors are separate and unrelated to Commonwealth. He can be reached at (972) 930-1238 or at

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