Succession Planning for Small Business Owners: Everything You Need to Know to Retire Happy
Dylan Gans
May 5, 2025 ⋅ 10 min read
Imagine pouring your life into a business for 20 or 30 years—only to realize you’re unsure how to step away.
You’re not alone. Nearly 60% of small business owners don’t have a succession plan, even though many are within a decade of retirement.
The good news? A little planning goes a long way. Whether you're looking to sell, hand off the reins, or just buy yourself some peace of mind, succession planning gives you control over your next chapter—and ensures your business continues to thrive.
This guide explains succession planning, what it really means, your options, and how Baton makes the process simpler, faster, and more rewarding.
Why Succession Planning Deserves Your Attention
Most business owners put off succession planning because it feels too far away or too complex.
But waiting too long can cause real problems, like:
Unexpected disruptions: A sudden illness or emergency could leave your business without clear leadership.
Missed opportunities: Without a plan, you might have to exit in a rush—leading to a lower sale price or unprepared successors.
Family conflict: If business ownership or leadership roles aren’t clearly defined, disagreements among family members can escalate quickly.
Business failure: In worst-case scenarios, the company simply can’t keep going—leaving employees, customers, and your retirement in jeopardy.
Here’s a common scenario we see all the time: A business hits the market with solid revenue and a loyal customer base—but the owner is still at the center of everything. No general manager, no clear second-in-command, no plan for what happens after they step away.
At first, buyers show interest. But as they dig in, the red flags start to pop up.
The business feels risky without the owner in place. The financials are murky because of years of personal expenses running through the books. Lenders get nervous. SBA financing falls off the table. Suddenly, the deal requires more seller financing than expected—if it moves forward at all.
In cases like this, the sale often drags on longer, involves more stress, and ends with a lower payout than it could have with a stronger transition plan.
The takeaway? A successful business succession plan isn’t just a back-burner thought—it’s a smart business move that preserves business continuity and protects your value and peace of mind.
Buyers aren’t just purchasing your past success—they’re investing in what the business looks like without you. Building leadership depth and cleaning up your financials before going to market can make a huge difference in the quality of offers you receive.
What Succession Planning Involves
Think of succession planning as a roadmap for future leadership positions or business ownership.
A solid plan covers:
Timeline and retirement goals: When and how you want to step away.
Business valuation: What your company is actually worth on the market.
Succession path selection: Choosing the right person—or buyer—to take over.
Legal documents and financial prep: Ensuring everything is above board and ready for a smooth transfer.
Transition planning: Putting systems in place helps keep your business running smoothly, even after you step back.
If your succession plan includes handing things off directly, here's a closer look at how to transfer a business to another person legally and strategically.
Now, let’s talk options.
Your Succession Options: Which Path Fits Your Goals?
Succession isn’t one-size-fits-all. It depends on your goals: Do you want to cash out? Keep the business in the owner’s family? Reward a loyal employee?
Here are the four most common paths.
Option 1: Sell the Business
For many owners, selling offers the clearest path to a clean financial exit. It’s especially appealing if you’ve built a profitable, well-run company and are ready to move on completely. But of course, you need to know how to sell your business.
One of the most financially effective ways to sell is through a full sale to a well-qualified individual buyer backed by SBA financing.
Here’s why this approach works so well:
Higher multiples: Individual buyers often pay higher multiples, especially when they plan to operate the business themselves. The purchase represents more than just cash flow for these buyers—it’s a lifestyle and a long-term income stream. That emotional connection can translate into stronger pricing and smoother negotiations.
SBA financing boosts purchasing power: With an SBA loan, buyers can finance up to 90% of the purchase price, leaving only a small down payment required. This increases liquidity for the seller and makes deals easier to close.
Simple, clean deal structures: These sales are typically structured as asset sales with straightforward terms and limited post-sale obligations, allowing sellers to exit cleanly and quickly.
This path has proven successful across many industries, especially for businesses with stable cash flow, clean books, and easy-to-transition owner involvement.
One great example is Ed Dedicke, who ran Paradise Ponds for 22 years and successfully sold it with Baton’s help—achieving a clean valuation, strategic marketing, and a buyer who shared his vision.
Option 2: Pass the Business to a Family Member
Keeping the business in the family can be deeply meaningful but requires structure. Without transparent communication and documentation, transitions can get messy.
Here’s what to consider:
Are they ready? Make sure your successor wants the role—and is capable.
Is it fair? Other family members might expect a stake. Address financial fairness up front.
How will roles shift? Clearly define responsibilities to prevent friction.
Put everything in writing: Future roles, compensation, ownership structure, and a training plan. That makes it a successful succession plan, not just a hopeful handoff.
Option 3: Sell or Transition to Employees
Your employees already know the ropes. Transitioning ownership to key team members through a direct sale, profit-sharing plan, or Employee Stock Ownership Plan (ESOP) can be a powerful way to preserve your company culture and reward loyalty.
Why this works:
They understand your operations
It keeps things stable for your customers
You’re rewarding the people who helped build the business
But there are challenges: They’ll likely need help financing the purchase, and not every employee is ready to lead. Curious about how this really works?
Here’s what to know if you’re asking, “how to sell my business to a key employee?” If this option appeals to you, start developing their leadership skills now.
Option 4: Merger or Closure
If you don’t have a clear successor, merging with another business can help strengthen your market position and give your company a new life. Just make sure there’s alignment on values, systems, and strategy.
Closure is rarely ideal—but in cases where the business can’t operate without you and no transition is viable, it’s worth planning in advance to minimize disruption.
Step-by-Step: How to Build a Succession Plan
Now that you know your options, here’s how to actually build a successful succession plan—step by step.
Step 1: Set Your Timeline and Retirement Goals
Are you aiming to exit in 1 year? 5? 10? Do you want to stay involved as a consultant—or walk away completely?
Defining these goals upfront guides the rest of your decisions and gives you a realistic window for planning and execution.
Step 2: Get a Business Valuation
You can’t plan your future changes without knowing what your business is worth. A proper business valuation helps set expectations, price correctly, and identify what needs improving.
Baton offers free, data-backed valuations to take the guesswork out of the process. Not sure where to start? This guide explains exactly how to value a small business—and what factors impact your number.
Step 3: Prepare the Business for Transition
Make your business easy to take over.
That means:
Tidy financials: Clean up your books and organize reports. Begin winding down any personal expenses that run through the business—these can hurt your valuation and make financing harder when it’s time to sell.
Clear systems: Document your SOPs and workflows.
Less dependency on you: Shift key responsibilities to others and work toward making yourself replaceable. Whether hiring key leadership, stepping back from day-to-day decisions, or both, the goal is to build a thriving business without you.
Legal cleanup: Resolve contract issues, outstanding obligations, and compliance.
Succession planning isn’t just about leadership—it’s about creating a business that looks strong on paper to buyers and lenders. The earlier you start, the more options you’ll have—and the more leverage you’ll keep.
Step 4: Choose a Succession Path
Go back to your goals. Do you want family continuity, employee ownership, or a full sale? Be decisive and start working toward that path with intent.
Step 5: Build Your Support Team
Selling or transitioning a business isn’t a solo project. You’ll need a small group of trusted experts:
Lawyer: To draft and review legal documents like your buy-sell agreement.
CPA: To advise on taxes, financial structure, and potential sale terms.
Baton: To guide you through valuation, buyer outreach, and closing.
Strong support ensures your plan doesn’t fall apart at the finish line.
Step 6: Document the Plan
Every succession plan should be written, shared, and referenced often. Be sure to include:
A timeline for transition and training
Roles for your leadership team and any future leaders
Ownership transfer details—including how life insurance proceeds or contingencies will be handled
Clear plans for business continuity under new leadership
When it’s all down on paper, there’s no guesswork—just a clear, confident path forward. A documented plan turns good intentions into real outcomes and keeps everyone aligned through every transition stage.
Step 7: Execute the Plan (When Ready)
Start putting the plan into action:
Begin training the new owner or team
Let employees, partners, and key customers know what’s coming
If selling, kick off the outreach process
Pro tip: Don’t wait until a crisis forces your hand. A proactive plan gives you options—and peace of mind.
How Baton Makes Selling Smarter
Traditional brokers can drag things out, charge huge commissions, and leave you in the dark. Baton does things differently—with a simplified, transparent platform built for small business owners.
Here’s what you get:
Free, accurate valuation (no strings attached)
Access to a pre-qualified buyer network—no tire-kickers
Straightforward pricing—no hidden commissions
Tech-enabled tools to organize documents, manage offers, and streamline handoff
50% faster close times than traditional methods
Baton helps you go from “Where do I start?” to “What’s next?”—with clarity and confidence.
Best Practices for a Smooth Transition
Want to make your business succession planning process even smoother? Stick to these proven strategies:
Keep your business healthy: Don’t check out early—your valuation depends on it.
Communicate early and often: Keep your team, family, and advisors in the loop.
Stay flexible: Things can change—plan accordingly.
Think beyond the handoff: What’s your next move after the transition?
Use trusted partners: Lean on your CPA, lawyer, and Baton’s expert support.
Smooth transitions don’t happen by accident—they happen by design. The more intentional you are now, the easier it will be to exit on your terms and set up the next generation’s chapter for success.
Business Succession Planning Checklist
A solid succession plan isn’t just a to-do list—it’s your blueprint for a smoother, more successful exit.
Use this checklist as your guide through each key milestone:
Define your retirement goals
Get a business valuation
Select your succession path
Prepare your financials and operations
Assemble your support team
Create legal agreements and contingency plans
Document and execute the plan
Your business has been your life’s work. This plan protects that work and ensures it continues to thrive without you. Whether you’re stepping away next year or five years from now, starting today gives you more control, more options, and a better outcome.
Start Your Succession Journey With Confidence
You’ve worked hard to build your business. Now it’s time to protect it—and your future. Whether you’re ready to sell or just exploring your options, a strong succession plan puts you in control.
Ready to get started?
Get your free valuation today and take the first step with Baton.