4 Steps to Prep for Succession Before the Chips Are Down

Starting a small business is no easy task. It requires more time, money, decision-making and responsibility when compared to what an average worker faces.

By Frank Davis, New Era Financial On Mar 13, 2026

While it’s important for the business to be successful, it’s equally important that the small business has a succession plan in place not only for retirement planning, but for risk management. Due to New Jersey’s complex legal and tax requirements, without legal documents in place, someone else cannot make business decisions on an owner’s behalf in the event of illness, disability, or death.

The premature death of a small business owner is one of the most common instances where a lack of planning severely hurts the future of the business. This happens because, oftentimes, the owner is the only one with access to business accounts and the power to sign off on things when needed. Once they’re gone, employees stop getting paid, top clients and customers leave, and the family is stuck in probate – sometimes for years – with no income. Loved ones may also face elevated estate taxes, high legal fees, lengthy probate court proceedings, or may be forced to close for good. These complications can force families to sell the business quickly and likely for a fraction of its value.

While it may feel easy to put off succession planning, owners should start thinking about the company’s future as soon as the income being generated is enough to support themselves and their families. Below is a step-by-step guide small business owners can follow to kickstart their succession planning.

Determine long-term goals. Before the planning can begin, small business owners should envision what will happen to the business should they become ill, disabled, or die prematurely.

Identify potential successor(s). Once future goals are in place, small business owners can start listing potential successors. Depending on the structure, this could be a family member, multiple heirs, an outside buyer, or a current business partner.

Find out the company’s worth and implement a buy-sell agreement. For small businesses co-owned and operated, a buy-sell agreement is necessary. It should address what circumstances would lead to the business being sold, who can buy the departing owner’s share, how the price is determined and how the buyout will be funded.

Review the plan regularly and make necessary updates. A succession plan isn’t “a set it and forget it” situation and should be reviewed annually – even if it’s just making sure the plan you set up still makes sense. Any changes in revenue, ownership structure, and even family dynamics can make an existing plan ineffective.

In a state as complex as New Jersey, lacking a succession plan often leads to family conflict, losing valuable clients, a disruption in operations, expensive probate proceedings, and potential closure. A well-designed plan will give owners peace of mind knowing their company will continue on regardless of their level of involvement.

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