Business succession planning: How to secure your legacy

Plan for the future with business succession planning

Business owners put a tremendous amount of time, energy and passion into building their companies. So, it’s not surprising that stepping away from the business tends to be a highly emotional decision.

In a survey of small business owners conducted by U.S. Bank, three-quarters said they are stressed about deciding what to do with their business when they retire. While most said they plan to retire by age 65 and are confident they’ll reach this goal, just half have a formal business succession plan in place.

Business succession planning roadmap

According to Min Yoo, a senior wealth strategist with U.S. Bank, a succession plan establishes a roadmap that you can follow throughout the business transition.

“This roadmap will help guide you during both best-case and worst-case scenarios,” he says.

These are just a few benefits of succession planning:

• Succession planning helps ensure a smooth business transition.
• It enables you to articulate the reason for the business transition. “Once we understand why owners want to transition, it’s easier to create the roadmap,” says Yoo.
• If you’re selling your business, succession planning can help you maximize the business’ value.
• If you’re transferring the business to family members, a succession plan can provide for both children who want to continue working in the business and those who don’t.
• A succession plan can help frame discussions around estate considerations as part of long‑term planning.

Given succession planning’s importance, why do so many business owners fail to put a plan in place? Yoo lists a number of different reasons:

• They’re too busy running the company to deal with it.
• They’re concerned about whether the business will continue to succeed after they leave.
• They’re unclear about the business’ value.
• They’re unsure about the timing of the transition process.

“Many owners simply don’t realize how valuable their company is,” says Yoo.

Five steps to create a business succession plan

Yoo identifies five key steps in starting a successful business succession plan:

1. Prepare an owner’s statement that articulates why they want to transition the business – and the ultimate goal of succession.
2. Obtain a professional business valuation from a valuation specialist, business broker or investment banker.
3. Review important legal documents such as entity ownership and governance, bylaws and buy-sell agreements.
4. Assess and document the business’ financial condition by obtaining formal, audited financial statements.
5. Create a management organizational chart that identifies key employees and their responsibilities.

One of the biggest questions many owners have about succession planning is when to start the process. Yoo recommends starting at least three to five years before your planned exit date.

“This is the minimum timeframe required for effective tax planning,” he says. “Strategies such as qualified small business stock, using a charitable remainder trust and selling the business to employees via an Employee Stock Ownership Plan [ESOP] require at least this much time.”

How to finance a business succession or ownership transition

According to Erik Daniels, head of SBA lending for U.S. Bank, Small Business Administration loans can be a strategic tool for business buyers and sellers. He notes that SBA lending programs facilitated $8.8 billion in change of ownership transactions in 2025, a 31% increase from 2024.

“SBA loans offer three main benefits: lower down payments, longer repayment terms, up to 25 years if commercial real estate is part of the acquisition, and more competitive interest rates,” says Daniels. “The government guarantee helps offset the collateral risk to the bank.”

He notes that there are several different types of ownership changes.

“We’ve seen a lot of partner buy-ins, which allows a buyer to buy in at a smaller percentage and grow their ownership over the course of time,” he says. “SBA loans can also be used to finance the transfer of ownership to family members or outside buyers.”

When financing a business transition, it’s critical to understand the factors a business lender will evaluate. These include:

• EBITDA, which stands for earnings before interest, taxes, depreciation and amortization. Small businesses are generally valued as a multiple of EBITDA.
• Seller’s discretionary earnings, which is the total financial benefit an owner derives from the business. This figure is typically used to estimate business value.

“My advice to business owners,” Daniels says, “is to get out in front of this so you have a more informed understanding of what an exit value might look like.”

U.S. Bank is here to help you create a business succession plan that helps secure your legacy. Connect with a business banker about U.S. Bank’s succession planning services.