General Business

Succession Planning 101

A retiring business owner must start early when planning who should take over the reins of the business.

By George N. Saliba, Contributing Writer On Apr 3, 2025

With 51% of US business owners now over the age of 55, a tidal wave of retirements and successions is expected over the next decade or so, and many business owners remain uncertain about who will take over their operations. They are also confused about various succession planning strategies and may procrastinate engaging in planning because they loathe the notion of relinquishing control to new leaders.

A constant refrain among experts interviewed by New Jersey Business Magazine is the importance of beginning succession planning up to 5 to 10 years before retirement so that key tax and estate planning strategies can be properly leveraged, and family-member employees – as well as other workers – can be moved into place after being carefully selected for special roles.

Family Dynamics

Communication is crucial for success. “Sometimes [business owners] fail to sit down and actually talk openly about what the ideal outcome is for them,” explains William S. Barrett, CEO of the law firm Mandelbaum Barrett PC, in Roseland.

He also says, “[At times] problems within a family business [regarding succession planning] could have been avoided. The parties [may] not really [have been] misaligned at all, but as a result of failing to communicate and be transparent with each other, they ended up in situations where people were not trusting each other’s motivations, and all of a sudden what should have been a very straightforward process falls off the rails.”

James Duffy, president and partner at the accounting firm Wiss & Company, LLP, in Florham Park, reveals that he is sometimes a “punching bag” for businesses’ family members who telephone him to complain about their relatives. Overall, Duffy says of family business owners: “You’re most likely going to end up with [some of your] kids in the business and [some of your] kids out of the business. Very rarely – if you have multiple children – do they all want to be in the business. … Where we’ve been most successful in those sorts of situations [is through] upfront communication.”

Barrett summarizes that business owners, again, must understand the ideal outcome for all stakeholders, communicate openly with them, and start the planning process early.

Where to Start

Of the 38% of business owners who have not yet created a succession plan, Morning Consult and NEXT360 – in partnership with Edward Jones financial advisors – found that 32% of owners in this subset were unsure how to begin the succession planning process. Approaching one’s accountants and attorneys can help.

Jason Navarino, chair of the tax and corporate groups at the law firm of Riker Danzig LLP, explains overall, “It’s a matter of trying to convince people that we know what we’re talking about. It really is cheaper and easier to do this, now. You may not want to spend a few thousand [dollars] to do this right now, but it’s better than spending tens, if not hundreds of thousands of dollars down the road, when there’s a dispute or something else going on.”

Meanwhile, Barrett underscores highly practical reasons for commencing succession planning early, including: “If you don’t show people within your organization that there is a long-term plan for the future that is secure and comfortable, people will get nervous about the long-term viability of [your] business.”

Specific Strategies

Highly specific tactics play a role in successful planning. Besides helping to implement tax planning strategies that may take a long time to develop in order to pass muster with government authorities, attorneys can also draft operating agreements that include deadlock-breaking provisions, dispute resolution mechanisms, and buy-sell provisions. Meanwhile, for example, a qualified small business can avail itself of Section 1202 stock, whereby a business owner might be able to sell the stock of a company, free from federal taxes. Additionally, real estate holdings may be able to leverage 1031 exchanges to avoid paying taxes up until the time the person who owns the property is no longer alive. Generation-skipping legal trusts and other trusts can also be established for the benefit of family members and for additional reasons.

Teamwork

Teamwork among experts is key, especially if a business is being sold. Riker Danzig’s Navarino says, “Oftentimes, we’re the ones quarterbacking both within the [law] firm and outside the firm.” Other professionals can include, but are not limited to, environmental law attorneys, intellectual property attorneys, employment law attorneys, as well as accountants, middle-market investment bankers and business valuation experts.

The business owner’s financial position must also be considered. Stephen J. Pagano, a partner at Riker Danzig who practices in the tax and trusts and estates department, notes, “A lot of times with a business owner who is exiting, there’s a question of what they can afford. So, [it is important to] have a qualified CPA and financial advisor who does a financial analysis of the business say, ‘Okay, this is what you need to live the rest of your life – the way you want to live it – in retirement. …’ From my perspective as a trust and estates attorney, I’m being tasked with minimizing your estate gift tax. I could do that and leave you [without] money left over to live your life. It is really [key] to have the full team in place when you’re going through this process of succession planning: Early [on], [in the] middle, and [at the] end.”

Selling a Business

Not all succession planning involves family members or employees taking the reins. An infamous U.S. Small Business Administration statistic notes that only about 30% of family-owned businesses survive to the next generation, and many fewer to a third generation.

Sometimes selling the business is the best option, and, as Russell Miller, regional developer and broker of record at Murphy Business Sales, explains, “When we’re invited in advance – and if the whole business is just the [key] owner – the first thing we need to work on is building a team. That may take two to three years, or more … if they made bad hires. But that’s one of our common recommendations: You need to make your business independent of you. That lessens the risk for the buyer coming in and makes it a more desirable business to purchase. When we look at the valuation, we can give a higher multiple to a business like that.”

Conclusion

While a seamless transition within a family is ideal for many people, again, it doesn’t always occur. Overall, John Inzilla, business intermediary and franchise owner at Murphy Business Sales, concludes, “The key thing is: How can we help the transaction, whether it’s a family member, employee, or an outside buyer? It’s starting early, getting the financials [as well as] all aspects of the business in place, so that it’s more easily saleable. [It’s getting] in touch [with us] so that we can partner, and get [it] done for you.”

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