Contact Us Today! (949) 305-8642


Securing Your Legacy: A Step-by-Step Guide to Creating a Business Succession Plan

Posted by James Burns | Jul 20, 2023 | 0 Comments


As an entrepreneur, you've invested time, effort, and passion into building your business. It's not just a livelihood; it's a part of your identity. However, one aspect many business owners overlook is planning for the future of their company when they're no longer at the helm. A business succession plan is a crucial strategy that ensures a smooth transition of ownership and management, safeguarding your legacy and protecting the interests of your loved ones. In this blog, we'll outline the essential steps to create a comprehensive business succession plan, with a special focus on the role of life insurance in the process.

Step 1: Define Your Objectives and Vision

Before embarking on any succession planning, it's vital to clearly define your objectives and vision for the business. Consider questions such as:

  • Do you want to keep the business within the family or sell it to a third party?
  • Who do you see as your ideal successor(s) to maintain the company's values and ethos?
  • What legacy do you want to leave behind through the business?

Understanding your long-term goals will guide you in crafting a tailored succession plan.

Step 2: Identify and Develop Successors

Identifying potential successors within your organization is crucial for a successful transition. Look for individuals with leadership skills, an understanding of your business, and a commitment to its success. Invest in their development through training, mentorship, and exposure to various aspects of the company's operations. Preparing capable successors will increase the chances of a seamless handover when the time comes.

Step 3: Conduct a Thorough Business Valuation

Knowing the true value of your business is essential for determining a fair financial arrangement during the succession process. Engage professional valuators or financial advisors to assess your company's worth based on its assets, revenue, cash flow, market position, and growth potential. An accurate valuation will help avoid disputes and ensure a fair distribution of assets.

Step 4: Choose the Right Life Insurance Policy

Life insurance plays a significant role in funding a business succession plan. There are several options to consider, such as:

  • Key Person Insurance: If you are an integral part of your business, this policy compensates for the financial loss the company may suffer if something happens to you. The payout can be used for recruitment, training, or covering temporary revenue gaps.
  • Buy-Sell Agreement: This agreement involves co-owners purchasing life insurance policies on each other. If one owner passes away, the surviving owner(s) can use the insurance proceeds to buy the deceased owner's share of the business. This ensures a smooth transfer of ownership without causing financial strain on the remaining partners.
  • Trust-Owned Life Insurance: Placing life insurance policies into a trust can provide liquidity to pay estate taxes, equalize inheritances among family members, and facilitate a smooth transition of business ownership.

Step 5: Develop a Comprehensive Succession Plan

Now that you have a valuation of your business and the appropriate life insurance policies, it's time to draft a comprehensive succession plan. This plan should include the following elements:

  • Clear timetable for the transition: Specify the date or triggering events that will initiate the succession process.
  • Roles and responsibilities: Outline the roles of successors, key employees, and advisors during and after the transition.
  • Decision-making framework: Define how major decisions will be made during the transition period to ensure a stable business operation.
  • Contingency plans: Anticipate potential roadblocks and have contingency measures in place to handle unforeseen circumstances.
  • Communication strategy: Inform stakeholders, employees, and clients about the succession plan in a transparent and timely manner to mitigate uncertainty.

Step 6: Review and Update Regularly

Business dynamics and personal circumstances change over time. Therefore, it's essential to review and update your succession plan periodically. This ensures that it remains relevant and effective in reflecting your evolving vision and the needs of your business.


Establishing a business succession plan is an investment in your company's future and the well-being of your loved ones. Life insurance serves as a powerful financial tool to fund the transition and protect the interests of all parties involved. By taking the steps outlined in this blog, you can secure your legacy and ensure the continuity of your business for generations to come. Remember to seek guidance from legal and financial professionals to tailor the plan to your specific needs and circumstances. These are only some ideas but each person's journey and exit of their business and the unique value it offers in the marketplace usually differs so you need experienced help. We have worked with many business owners through the process of fundamental estate planning to exiting, selling or having children take over the business while the business owner sips pina coladas…ok well may just a green drink for some.

About the Author

James Burns

Estate Planning, Asset Protection, Business and Real Estate Transactions, nutraceutical Law and franchising:


There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment