Succession planning template to transition a business in 8 months

Succession plans are crucial for the survival of family businesses. Without one, businesses that have been integral to their communities for decades may vanish. The vast majority of U.S. small businesses are facing a critical juncture: two-thirds of their owners plan to retire in the next two years, many without a succession plan in place. A succession planning template is designed to help small business owners strategically map out what happens next to ensure they continue to serve their communities.

There are an estimated 33.2 million small businesses in the U.S., employing 61.7 million people—nearly half of America’s workforce. However, our country faces a small business succession problem.

More than 200,000 small businesses are listed for sale each year, but only about 30% of those businesses ever find a buyer. Without a buyer or a clear exit plan in place, even long-standing, successful small businesses often must close their doors.

A succession planning template is helpful for small businesses because it helps owners and employees strategically prepare for inevitable employee churn and what happens when a business owner retires or moves on from the company. Knowing which kind of succession plan to implement and the key differences among them can help owners create an effective succession template:

• Employee succession planning focuses on identifying and nurturing talent to fill critical positions with capable successors when key employees leave the company or change positions.
• Small business succession planning focuses on a plan for the entire business when an owner sells the company, sometimes as a result of retirement.
• Long-term succession planning typically takes place over three to five years and results in a thoughtful road map for a small business when the owner is preparing to sell or retire.
• Emergency succession planning focuses on a short-term plan for the interim CEO and/or other small business leaders in the event the owner suddenly passes away, becomes extremely ill or disabled, or experiences an event that leaves them unable to lead.

At Teamshares, we recognize the importance of small businesses to their communities, and we work to help our network companies establish successful succession templates and transitions. Our vision is to help a network of 10,000 small businesses become employee-owned while supporting a generation of business owners through confident retirement.

In this post, we’ll cover the different kinds of exit plans and share succession planning templates to best suit each situation.

How to write a succession plan

A successful small business exit plan starts with understanding the type of succession and where the transition is happening within the business. Succession plans typically focus on either replacing key employees or selling the business.

1. Replacing key employees: Often referred to as career succession planning, this means creating a proactive plan to identify and nurture top talent to fill critical positions when employees leave the company or change positions.
2. Selling the business: This means developing a long-term plan for when a small business owner wants to exit the company, sometimes in the event of their retirement.

Employee succession planning process

When proactively planning for employee promotions, transitions, and churn, a successful succession planning template encompasses:

• Identifying key roles, the operational risk associated with losing that employee, and the expected timeline of departure if known.
• Evaluating a comprehensive list of role responsibilities.
• Building a talent pipeline and considering internal employees who can fill the role based on their career goals, past performance, and abilities, then considering external recruiting if needed.
• Creating an onboarding and training plan.
• Continually evaluating performance against company goals and creating a feedback loop with the employee’s successor.

Business succession planning process

When selling a business to a third party, owners should consider the following in a succession planning template:

• Creating an actionable timeline.
• Connecting with others who have gone through similar small business sales.
• Building out your team of advisors, such as your M&A attorney, financial advisor, business broker, and CPA.
• Evaluating the business. This includes analyzing expected external factors in or around your business that could necessitate a sale in one to five years and compiling financial statements to determine the value of the business.
• Getting a list of due diligence items from your broker and compiling the documents.
• Assessing processes, operations, and roles that are critical to business success.
• Documenting the business’s unique institutional knowledge and core competencies, and the strengths of the current team.
• Choosing a successor. At Teamshares, we place qualified small business leaders who will bring strong business acumen and management skills to grow the business.

Example succession plans

All succession templates look different depending on the type of succession: career vs. small business vs. long-term and emergency. Consider the different scenarios and examples below to figure out which succession planning template is right for your small business.

• Employee succession planning: Creates a strategy for filling critical positions with highly skilled talent when employees leave the company or change positions. This type of plan helps employers find and nurture talent to fill any gaps left by high-level leadership or key employee departures.
• Small business succession planning: Focuses on what happens to the entire business when an owner is retiring and plans to sell the company. Typically implemented three to five years prior to retirement, although sometimes in as little as eight months, these plans set the small business and its current employees up for success after the transition. Small business succession planning considers strategies like selling to an outside party, passing the business off to the owner’s family heir, selling the business to an employee, or liquidating the small business.
• Long-term succession planning Typically takes place over three to five years, this results in a thoughtful road map for the small business when the owner decides to leave. Long-term succession planning is strategic and proactive, whereas emergency succession planning is often more reactive.
• Emergency succession planning delineates a set of responsibilities for the interim president, CEO, and/or other key leaders of the small business in the event the owner of the business suddenly passes away, becomes ill or disabled, or experiences an event that leaves them unable to lead. Emergency succession plans are never ideal and can be avoided by implementing a proper long-term succession strategy.

Based on your small business needs, select one of the long-term succession planning templates below:

• Succession planning template for small business owners and current presidents who are staying in their roles but want to build a proactive recruiting strategy for transitioning other key employees.
• Succession planning template for prospective presidents who are looking to leave a high-level position.
• Succession planning template geared towards small business owners looking to exit their business.

Employee succession planning template

This employee succession planning template helps small business owners and current presidents build a proactive recruiting strategy to temporarily or permanently fill critical openings without disrupting day-to-day functions. An employee succession plan also helps leaders build a talent pipeline and improve employee retention, morale, and overall organizational success.

Leadership succession planning template

A leadership succession plan is focused on filling the gap that is left when a president or CEO is leaving a high-level role. Our succession planning template is a road map that will help address the priority functions and essential responsibilities of a president or CEO that staff or a new leader will need to address.

Business succession planning template

If you’re an owner who’s considering retiring and selling your small business, it’s best to begin working on a long-term plan three to five years prior to your exit and expected sale. Small business succession planning is about creating an exit strategy that takes your community and employees into account and anticipates the complicated emotional and logistical process of selling a business. It’s also about establishing a legacy.

How to use a succession planning template

Our succession planning templates are made in Google Sheets and simple to use, even with no prior experience. Follow these step-by-step instructions to copy each succession planning template, fill out the information as instructed, and convert the final document to a PDF to use as needed.

1. Open the applicable template: Click ‘Make a copy’

2. Select the second tab in the Google Sheet: Choose the right-most tab in the bottom left of the spreadsheet

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3. To add rows or columns per category: Select row/column > right click > Insert one row above

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4. To convert to a PDF document: Select File > Download > PDF (.pdf)

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Best practices in succession planning

After working together on several small business acquisitions, we asked Lauren Altschuler, CEPA, CBI, M&A Advisor at Transitions in Business, to share some best practices in small business exits.

Lauren offered valuable advice for business owners and leaders preparing for a small business transition. Her key recommendations, including the questions business owners should consider, are:

• Stop using the business as a tax shelter. At least three years prior to a sale, stop running personal expenses through the business and stop buying expensive equipment for the depreciation write-off.
• Start using a professional bookkeeper, if you haven’t already.
• Ensure your financials are in order.
• Remove yourself as much as possible from the day-to-day operations of the business, to demonstrate that the business can run well without you.
• Try to make sure that no single customer makes up more than 25% of your revenue. Consider how dependent your business is on any one customer, employee, or vendor. Be sure you are diversifying your customers and your vendors.
• Ensure your key employees have employment contracts and non-competes that will stay in place after your departure.
• Examine your revenue streams. If your business doesn’t have recurring revenue, develop a plan to change that. For example, can you start selling year-long recurring contracts to your customers instead of one-off sales?
• Work to establish three years of positive trending revenue and profits.
• Ensure efficient use of cash in the business.
• Structure your business to continue to grow in the future.
• Create a significant differentiation between your business and the competition.
• Make sure you have satisfied customers.

A succession planning template helps ensure the future of small businesses. By understanding employee career goals and external economic factors, business owners can understand when to initiate succession, and which succession planning template is needed. Creating a succession planning timeline can help owners choose the correct succession process and connect with skilled brokers, like Lauren, to sell their business.

Whether you’re a small business president replacing a key employee or an owner preparing to exit your small business, Teamshares can help ensure your business remains financially durable and never has to be sold again.