A great succession plan makes your business stronger. A bad one makes your exit harder—and more expensive.
Succession planning is often seen as a simple, linear process: Identify a replacement, train them, step away, and celebrate.
But in reality, the process is far messier—riddled with blind spots, emotional decisions, and flawed timing. These missteps don’t just complicate your exit; they can erode business value, disrupt operations, and damage the culture you have worked so hard to build.
At FocusCFO, our mission is to help entrepreneurs like you build sustainable, transferable business value. Darren Cherry, Area President and Exit Planning Lead for FocusCFO, has worked with hundreds of business owners preparing for succession or sale. He has seen what actually trips business owners up—and shares his insights into how to avoid it.
Below are seven common succession planning mistakes and the strategic shifts you can make to avoid them.
1. The Hero Complex: “Nobody Can Replace Me”
Many founders build companies where every critical decision flows through them. They handle the key client relationships, approve every major expense, and drive the strategy.
This feels like control. In reality, it’s a critical risk called owner dependence, and it's a major red flag for potential buyers. A business that cannot function without its owner has limited transferable value. Even for an internal or family transition, this dynamic creates a shaky foundation. If the business falters when you step away, its value disappears.
What to Do Instead: Systematically de-risk the business by delegating decisions and distributing knowledge. Shift key relationships from individuals to teams. Your goal is to build structural capital—systems and processes that allow the business to run smoothly and grow, independent of any single person.
2. The Reluctant Heir
One of the most common traps is choosing a successor based on loyalty or convenience rather than proven leadership capacity. Anointing a long-term #2 or a family member without a rigorous assessment is a recipe for failure.
When the chosen successor isn’t truly ready—or worse, doesn’t actually want the role—the transition is destined for chaos.
What to Do Instead: Treat succession as a strategic executive search. Conduct a leadership gap analysis to define the skills your future CEO truly needs. Then, invest in structured development, coaching, and—most importantly—have frank conversations to gauge their interest and commitment early and often.
3. The “It’s All in My Head” Plan
If your succession plan exists only in your mind, it doesn’t exist at all. An informal plan, no matter how brilliant, cannot guide your team, reassure stakeholders, or hold anyone accountable. A documented plan is a critical piece of intangible capital.
A formal succession plan should include:
- A strategic timeline
- Identified and vetted successor(s)
- A clear development and transition roadmap
- Contingency plans for unexpected events
4. The Silent Strategy
Many owners keep their succession plans secret, fearing they will trigger panic or lose leverage. But silence breeds uncertainty and fear. When employees, clients, and partners sense change is coming without any context, they assume the worst. This erodes trust and puts your human and customer capital at risk.
What to Do Instead: Communicate with intention. You don’t need to share every detail, but you must control the narrative. Reassure stakeholders that you are planning for the future to make the business stronger, not because it's in trouble.
5. Avoiding the Hard Conversations
"What if my successor fails?" "What if my kids fight over the business?" "What if a market shift forces me to delay my exit?"
Owners often avoid these tough questions, kicking the can down the road until a crisis forces their hand. This avoidance is where value is destroyed through family conflict, legal battles, and failed transitions.
What to Do Instead: Address risk head-on by building contingency scenarios into your written plan. Having open, honest discussions about potential challenges—even when uncomfortable—is a hallmark of a mature, well-managed business.
6. Waiting Too Long to Start
Effective succession planning is not an event; it's a long-term strategy. Ideally, the process should begin 3-5 years before your target exit date. Many owners wait until burnout, a health scare, or an unsolicited offer forces them to rush.
Late planning means limited options, and limited options mean reduced value. You can’t groom a successor overnight, and you can't fix deep-seated operational risks in a few months.
What to Do Instead: Start now. Think of succession planning as a core part of your business strategy, not just an item on your retirement checklist. The journey begins with the Identify and Protect stages of value maturity, ensuring your foundation is solid long before you plan to Harvest.
7. Confusing Ownership Transfer with Leadership Transfer
Handing over equity and handing over leadership are two different things. You can gift shares to a child, but that doesn’t make them a CEO. You can sell 100% of the business but remain a key advisor. Assuming ownership automatically confers leadership ability is a frequent and costly mistake.
What to Do Instead: Decouple the ownership track from the leadership track. A successor must be trained in management, strategy, and decision-making long before any equity changes hands.
What These Mistakes Can Cost You
Succession mistakes aren’t just annoying—they’re expensive. Here’s what you risk when your plan fails:
- A 25–50% drop in valuation if the business is overly dependent on the owner.
- Employee turnover if trust erodes or leadership is unclear.
- Legal costs from inheritance disputes or partnership dissolutions.
- Delayed retirement as you’re pulled back into operations.
- Lost legacy, as the business you built erodes under poor leadership or no plan at all.
From Planning an Exit to Building Value
These mistakes aren’t inevitable - they are the result of a plan that focuses on the destination, without taking a strategic approach to the journey.
Avoiding these slip ups requires more than a checklist; it requires a fundamental shift in mindset. You’re not just preparing for an exit; you’re creating options for your future. Whether you plan to sell, transition to family, or step back in five years or fifteen, the work you do today to build sustainable, transferable, business value is what will secure your legacy.
Take Action: Where Are You Today?
Here are 5 quick questions to assess your current succession readiness:
- Do you have a written succession plan?
- Can your business run without you for 30+ days?
- Have you identified and developed your successor?
- Do employees know what’s coming?
- Is your personal wealth tied up in your business exit?
If you answered “no” to 2 or more, it’s time to make succession planning a strategic priority.
If you’re ready to move beyond a simple checklist and start building real, transferable value, let's have a confidential conversation.
