Every business, small or large, should have a transition plan for its key leaders. Whether it is due to individual retirements, talent attrition, or other factors, having discussions and plans for succession and potential transfer of ownership are vital to all businesses. Small businesses play an integral role in the economy—especially in rural communities—so it is all the more important for business owners and leaders to be aware, educated, and ready with a transition plan when the time comes.
Why Business-Transition Planning?
Small businesses are the lifeblood of the U.S. economy. Retaining and even expanding businesses is key to community vitality. And yet, as important as key stores or services are, they often operate without a succession plan. Only an estimated 33% of U.S. small businesses have a transition plan, and up to 30% of small business closures are the result of a failed succession (Templin et al., 2017).
While business owners cite retirement as their number one reason for succession planning, more than one-third of owners say they do not plan to ever retire and another 29% see retirement as more than 11 years away (Tran, 2023). For larger scale businesses, an estimated 10%–15% of companies hire a new CEO each year (Gjerstad et al., 2019).
Who Should Plan?
Whether large or small, all businesses should consider business-succession and ownership-transfer planning. Consideration should be given to key positions that would need to be filled or transitioned due to retirement or attrition over time. While many keep an eye on continuous quality improvement in other aspects of the business, these critical key-personnel and ownership issues are often neglected.
Both topics of ownership succession and leadership or management capacity should
be considered during planning. A plan should include discussion of positions to fill and timeliness for potential transition as well as the training or upskilling that may be necessary for the individuals to assume leadership positions. Consideration should also be given to whether applicants will be found through an internal (knowledge retention) or external (transfer to new ownership) search.
The psychological, emotional, and relational aspects of these types of plans are also important. Whether owners are really prepared to plan a transition is often an issue. “The biggest obstacle to succession planning centers on the mindset of the business owner,” (Rothwell & Prescott, Ed., 2023). Planning in advance of an owner’s untimely demise is always best for the family, the business, the employees, and the customers.
Business owners are often not yet ready to share with others that they are at a point-of-sale consideration as they do not want to lose customers or employees (Templin et al., 2017). Letting go of the reins is another concern for retiring owners.
Transitioning social capital, the networks of relationships among businesspeople, customers, partners, or suppliers should be planned carefully. Transfer is more than just the keys to the facility, it includes careful consideration of sharing strategic priorities and knowledge, technical competence, business relationships, supplier connections, employees’ technical expertise or talents, and other challenges that are unique to the business.
When Should You Plan?
Transition planning is an ongoing consideration. Ensuring that skilled leaders are ready to take the helm when tapped requires mentoring, upskilling, and other training. Good leaders will know the key competencies and criteria for their critical positions. This knowledge helps identify qualified leadership candidates.
Many business leaders have learned the hard way that business-transition planning takes longer than they thought. Outside or third-party business sales may take one to three years to plan, while internal transitions often take as many as five to seven years. “Leaders working ‘in’ business forget to work ‘on’ it” (University of Minnesota Extension, 2023).
Those ready to sell a business often underestimate the time it may take to plan for the transition. Ensuring financial records are ready, obtaining an accurate business valuation, finding a commercial real estate broker, and securing a buyer who has secured financial assistance for the purchase are all critical considerations.
What Should Be in the Plan?
If an owner plans to sell the business, a variety of areas should be included.
- timeline for transition
- positions to fill
- candidate availability, skills, and experience or talent
- standard operating procedures
- three or more years of business financials
- a business valuation
- existing debt
- identified funding for potential buyers
- if the business plan is for a sale or for a closure
Who Can Help?
Part of the reason for planning so far in advance is the ability to access the wide variety of professional guidance needed. Whether leaders need to gain expertise in financial planning, tax accounting, legal matters, business valuation, or the intricacies of real estate, these things take time and funding. Finding professionals with expertise in business valuation or certified exit planning can be challenging, especially in rural markets.
A local economic development team or small business development center can also be used as exit planning resources. Local economic development teams are often located within a county port authority, community improvement corporation, or the Ohio State University Extension office. In Ohio, the county’s local economic development organization (LEDO), is typically the one affiliate partnered with the regional JobsOhio organizations. The chamber of commerce or office of county commissioners can often identify the lead person. They often have awareness about available local or regional professional services such as accountants, attorneys, certified business appraisers, and commercial real estate brokers, as well as potential buyers or funding options. A third party’s opinion can help mitigate challenges and enhance the sense of fairness (Rodeck, 2025).
According to the Exit Planning Institute, business owners should take the time needed to be educated on transition topics and how to create a formal exit plan. Also important are the creation of a strategic business analysis, a business valuation, and a readiness assessment. “The value of a business is established from the buyer’s perspective, not its current owner” (Exit Planning Institute, 2023). In fact, retiring business owners often overestimate the value of their business at the time of sale (Ip & Jacobs, 2006).
Types of Transition
The University of Nebraska, Lincoln’s Business Transition Models resource (Schlake, 2023) shares a variety of transition options, a few of which are noted below. Other types exist, providing a wide variety of transition types to review. Consideration should be given to the business owner’s financial and community needs to determine the best individualized deal structure.
- Transition through Private Sale
A business owner wishing to sell will need to obtain a valuation and explore purchasing options with partners, family, or employees before listing the business for sale to internal or external buyers. The process requires taking the time to gain a valuation, list the business for sale, secure a buyer, and complete the sale and operational transition. The result is a community that retains a viable business that provides jobs, services, and/or products. - Transition to Family/Employee
Some owners wish to leave their business to a family member or key employee. These might include “ownership gifting, transferring shares, or selling outright” (Schlake, 2023). An Employee Ownership Trust (EOT), an Employee Stock Option Plan (ESOP), or worker cooperatives are other options to consider.
Family-owned and -operated business transitions to the second generation have declined to as low as 19% in recent years. When someone in the family is not prepared to take the helm, it can lead to great owner stress (Kislik, 2022). - Transition to Worker Cooperative
A worker cooperative involves a transfer from the owner to a team of community representatives. This allows the community to benefit as a stakeholder but requires a great deal of planning and can prove to be a complicated process. - Transition through Liquidation
It is common to see a business open one day and close the next. The owner may determine this is the best option for them; however, it is not always best for the employees, customers, and the community they serve. In this model, owners may sell inventory, equipment, and the site (if owned), or cancel any existing leases. This does not maximize value for the owner or the community that the business is exiting.
Leadership Transition
Selection and management of the right leadership for a business transition is critical to the future success of the business. Depending on the type of transition selected, this may mean leadership choices come from family members, partners, internal staff, or the external buyer.
Be sure to consider key job incumbents, leaders, and those doing important jobs within the organization. There may be others whose “loss would be devastating to the business” (Rothwell & Prescott, 2023). Careful consideration of key existing employees and other stakeholders is also critical to success. Development of people with more or different skills should be an ongoing business focus.
Careful planning and communication will be needed as well as consultation with selected new leaders to ensure they honor “loyal employees and customers who have been a part of the business” (Rothwell & Prescott, 2023).
Consideration of skilled leaders ready to take the helm when needed is an ongoing concern. While mentoring, upskilling, and other training may be necessary, the investment in personnel is prudent.
Farm-Based Business Transitions
Planning the transfer of farm ownership and management is a difficult task and is often neglected due to lack of time or knowledge of family-appropriate options or legal means (Marrison, 2021). However, a variety of resources are available on legal, tax, estate planning, profit analysis, transfer of assets, and other key topics.
If planning for the future of a farming business, whether it is transitioning to the next generation or another ownership type, a variety of farm-specific transition resources are available through the Ohio State University Extension Farm Office (farmoffice.osu.edu/law-library/estate-transition-planning). This resource offers a wide variety of topics explained with fact sheets, articles, and videos (Ohio State University Extension Farm Office, 2025).
The “Planning for the Future of Your Farm” law bulletin series “explains the legal tools used for planning and presents strategies that can address a family’s goals” (Moore & Hall, n.d.). In addition, the office offers webinars and in-person workshops on a wide variety of farm-related topics.
Conclusion
Loss of businesses, often due to the lack of a succession plan, can be detrimental—especially in rural or small communities. With the looming retirement of the baby boomer generation who owns an estimated “51% of privately held businesses (more than three million valued at nearly $10T), these are pivotal times in the privately-held-company market as 75% of owners would like to exit their businesses in the next 10 years” (Exit Planning Institute, 2023).
Often the most important issue related to business succession planning is the mindset of the owner. Are they psychologically ready to begin a plan, trust a new owner or leader, engage the right advisors, and let go of the reins?
Beginning conversations early and often can assist leaders over time with the transition planning process. Learning more about the types of transition and what fits best—as well as securing an accurate business valuation—are also key.
An unexpected health occurrence, retirement, or other catastrophic event related to a founding entrepreneur or company leader may force a sudden management change or business sale. But a variety of succession planning processes are available for those interested in learning more and positioning their business with a well-thought-out plan.
References
Exit Planning Institute. (2023). National state of owner readiness report.
exit-planning-institute.org/hubfs/Member%20Center%20Resources/2023%20National%20State%20of%20Owner%20Readiness%20Report.pdf
Gjerstad, K., Eilertsen, P., Nordahl, T., Rasin, J., Seppä, T., Kivilaakso, H., Poulsen, M.-B., Fischer, C. & Jenssen, J. R. (2019). Bringing science to the art of CEO succession planning. Boston Consulting Group.
bcg.com/publications/2019/science-ceo-succession-planning
Ip, B. & Jacobs, G. (2006). Business succession planning: A review of the evidence. Journal of Small Business and Enterprise Development, 13(3), 326–350.
doi.org/10.1108/14626000610680235
Kislik, L. (2022). How to prepare the next generation to run the family business. Harvard Business Review.
hbr.org/2022/09/how-to-prepare-the-next-generation-to-run-the-family-business
Marrison, D. (2021). Planning for the successful transition of your agricultural business [Fact sheet]. Ohioline. Ohio State University Extension.
ohioline.osu.edu/factsheet/anr-47
Moore, R. & Hall, P. K. (n.d.). Planning for the future of your farm [Law bulletin]. Ohio State University Extension Agricultural & Resource Law Program.
farmoffice.osu.edu/sites/aglaw/files/site-library/PlanforFuture/2022%20Legal_Worksheets_combined.pdf
Ohio State University Extension Farm Office. (2025). Estate & transition planning. Ohio State University Extension.
farmoffice.osu.edu /law-library/estate-transition-planning
Rodeck, D. (2025). A beginner's guide to business succession planning for small- and mid-size business owners [Blog]. ADP.
adp.com/spark/articles/2024/03/a-beginners-guide-to-business-succession-planning-for-small-and-midsize-business-owners.aspx
University of Minnesota Extension. (2023). Why do so few owners have their ownership transition plan down in writing? [YouTube video]. UMN Extension Community Development.
youtube.com/watch?v=TfyHii2sPzM&list=PLvuB0WMxdvs19Dq_-8UYRYj9-0E2OuD5O&index=4
Rothwell, W. & Prescott, R., Ed. (2023). Succession planning for small and family businesses, Navigating successful transitions. Routledge Press.
routledge.com/Succession-Planning-for-Small-and-Family-Businesses-Navigating-Successful-Transitions/Rothwell-Prescott/p/book/9781032249872?srsltid=AfmBOoqMpv_7hpOlnBSWI1ho5243YVdsF4eNRwL2XUu3guyqQWEsPXsr
Schlake, M. (2023). Business transition models. University of Nebraska Cooperative Development Center.
ncdc.unl.edu/sites/unl.edu.ianr.nebraska-cooperative-development-center/files/media/file/Business%20Transitions%20Models%202023.pdf
Templin, E., Chazdon, S., Muske, G., Barroso, F. D., Osborne, L. & Craig, W. (2017). The silver tsunami and rural small business retention: What can communities do? Community Development, 48(2), 282–298.
doi.org/10.1080/15575330.2017.1287110
Tran, T. (2023). Why are boomer business owners hanging on to their businesses long past retirement age? Federal Reserve Bank of Minneapolis.
minneapolisfed.org/article/2023/why-are-boomer-business-owners-hanging-on-to-their-businesses-long-past-retirement-age