Start Here: The 5 Questions That Define Your Succession Plan

Most families know they need a succession plan. Almost none know where to start building one. They hire an estate attorney and get a legal document. They hire a financial advisor and get a tax strategy. They may even hire a family business consultant and get a process framework. But nobody hands them a map that shows them what they actually need to decide — before anyone else gets involved.

This is that map. Frank Fallon has guided hundreds of family businesses through succession planning over 30 years. These are the five decision points that every succession planning process must resolve — and that determine what kind of help you need and in what order.

Decision 1: Who Will Own the Business After the Transition?

Ownership and management are separate questions. Answer ownership first. The options are not as simple as “give it to my kids.” Consider:

• Equal ownership among all children — active and inactive in the business — creates structural conflicts between those who depend on the business for income and those who depend on it for asset value
• Ownership only among active family members — requires a documented buyout mechanism for those who receive no business equity, funded by life insurance, cash reserves, or installment payments
• Hybrid structures — active family members receive operational equity; inactive members receive other assets of equivalent value — require accurate business valuation and willing agreement on what “equivalent” means

None of these options is inherently correct. What is correct depends on the specific family, business, and relationships involved. What is dangerous is assuming everyone agrees without making the agreement explicit.

Decision 2: Who Will Lead the Business?

Leadership succession is the decision families avoid longest and need most. It requires answering:

• Is there a family member genuinely ready, willing, and qualified to lead?
• If there are multiple candidates, who decides — and on what criteria?
• What role does the founder play after the leadership transition, and for how long?
• What happens if the chosen successor does not perform — who makes that determination, and what is the process?

The Conway Center for Family Business found that businesses with a documented leadership selection process and performance criteria are 3.2 times more likely to complete a successful generational transition than those without one. The document does not have to be elaborate. It has to be explicit.

Decision 3: What Is the Business Worth — and Who Decides?

Every succession plan that involves ownership transfer requires a business valuation — for estate planning, buyout calculations, or equitable distribution among heirs. The problem is that different valuation methodologies produce significantly different numbers, and family members who stand to receive more or less depending on the method chosen have an obvious interest in which method gets used.

This decision must be made — and agreed upon by all relevant parties — before an estate event forces it under adversarial conditions. Alternative Law mediates valuation methodology agreements as a standard part of succession planning, establishing a shared framework that prevents the most expensive category of succession dispute.

Decision 4: What Are the Rules for Family Employment?

One of the most corrosive forces in family business succession is the absence of a documented family employment policy. Without one, every hiring, compensation, and promotion decision involving a family member becomes a potential conflict — between family members, between family and non-family employees, and between the business’s professional standards and its family relationships.

A family employment policy answers:

• What qualifications are required for a family member to join the business?
• Are family members subject to the same performance standards as non-family employees?
• What compensation structure applies to family members, and who approves it?
• What is the process for a family member’s departure — voluntary or otherwise?

Alternative Law facilitates family employment policy agreements as part of succession planning. These agreements prevent the interpersonal conflicts that disrupt operations and make future succession even harder.

Decision 5: What Happens When Family Members Disagree After the Transition?

Every succession plan needs a built-in dispute resolution mechanism — because disagreements after the transition are not exceptional events. They are inevitable features of a business operating under shared family ownership with different individual interests.

The mechanism does not have to be complex. It needs to specify: who facilitates the resolution process, what triggers formal mediation versus informal discussion, and what happens if mediation does not produce resolution. Alternative Law recommends naming a designated mediation firm in the succession document itself, so that the first dispute does not require a search for help at the moment it is least convenient to conduct one.

The Right Order of Operations

Most families approach succession planning in the wrong sequence — they engage legal and financial professionals first, then discover that the human agreements required to complete the legal work do not exist. The attorneys wait. The tax planning stalls. The clock runs.

The right sequence:

1. Answer the five decisions above through facilitated family discussion — with a mediator, not a lawyer
2. Engage estate and tax counsel to structure the agreed decisions into legal and financial instruments
3. Document the agreed family policies — employment, dispute resolution, family council governance
4. Build the contingency protocols — what triggers review, what triggers succession of the successor
5. Review and update the plan on a regular schedule — minimum every three years or after any significant business or family event

Alternative Law facilitates Step 1 — the human agreements that make everything else possible. Call Frank Fallon at 1.800.529.1516 or schedule a free consultation at alternativelaw.com. Every engagement is backed by a 100% money-back guarantee.