Business succession is the process wherein a plan is made to transfer a business from one generation to the next or from one owner to the next.

Many business owners forget this important step and are in danger of working all of their lives creating, building and running a successful business, only to have it dissolved at their retirement or death.

The Family Business Institute reveals some startling statistics:

• More than half of family businesses expect a leadership change by 2013;
• About one-third of family businesses have a chief executive older than 60;
• 88 percent of family business owners believe the same family or families will control their businesses in five years;
• 30 percent of family businesses survive into the second generation, 12 percent into the third, and only about 3 percent into the fourth and beyond;
• Family business failures can be traced to one factor: A lack of succession planning.

It's very likely that a valuable asset will be lost if the leader of the business passes away suddenly without a business succession plan. Thousands or millions of dollars that could have been reinvested, saved or otherwise enjoyed are lost in an instant. In addition, failure to implement a business succession plan can result in unnecessary estate taxes.

It takes time to implement a succession plan. A number of steps must be completed in order to receive the maximum value for your business and make the transition as smooth as possible. Also, there are many factors to consider when creating a succession plan, such as your age, health, the industry, the economy and your children's interests and their ages.

As a first step, hire an experienced professional to guide you through the planning process. This person will do several things to plan and implement your business succession program:

• Examine the potential heirs or buyers;
• Value the company;
• Create the ideal scenario in which to sell your business or pass it on;
• Develop a strategy to deal with estate taxes;
• Establish a retirement program.

To implement the plan, the professional will start by looking at qualified successors. It's a good idea to have the successor work in the business prior to the transfer. The business can then be valued using a variety of methods.

The professional will also look at estate taxes and set up a plan to deal with them. Trusts and gifting can be implemented to achieve lower estate taxes. Finally, retirement planning will be addressed by reviewing your retirement accounts, your business situation and so on. The professional will then make recommendations for your retirement plan.

The right time to start thinking about a succession plan is now. No one knows what tomorrow holds. Someday somebody else will be in charge of your business if a proper succession plan is in place.