Why Most Business Successions Fail – and How Yours Can Succeed

Insights from Gerry Lynch, Director at Govn365

Why Most Business Successions Fail – and How Yours Can Succeed
What 70% failure rates, “sale-ready every day,” and protecting value have in common.

That was the provocation from our Govn365 webinar with Carole Pedder (Partner, PKF Withers Tsang): most owners leave succession too late, communicate too little, and never define what “ready” looks like – then watch value leak at exit.

Owners build great businesses, but buyers fear the IP walks out with them. If risks aren’t captured and capabilities aren’t embedded, buyers discount- often 25%+. The fix isn’t heroic- it’s earlier, clearer, and more disciplined.

Rethinking Succession: What Should “Sale-Ready Every Day” Look Like?

If your plan lives only in your head, you’re flying with one eye shut. Carole recommends:

• Define your intention: maximize price, preserve legacy, or step down gradually
• Map your buyer: family, internal successor, or third-party- each has different requirements
• Clean, consistent financials: tidy balance sheet, dividend policy, shareholder accounts
• Lock in the assets: key contracts, leases, IP, trademarks, supplier & client agreements
• Document the know-how: get the IP out of the founder’s head and into the business
• Self-due-diligence: find your own red flags before a buyer does

The Big Pitfalls (and How to Avoid Them)

• Late planning → missed value-building windows
• Secret succession → resentment in families/teams (“you can’t sell a secret”)
• Messy financials → skepticism in due diligence
• No exit framework in partnerships → forced discounts when life happens
• Founder-centric goodwill → price cuts if the business = the owner

Choosing Your Path: Family, Internal, or Third-Party?

Family succession 

• Set expectations early; avoid endless “runways” that breed resentment
• Test capability gaps; add advisors to plug what the successor lacks

Internal promotion/MBO 

• Look for track record, not potential alone. Rainmakers don’t appear overnight
• Stage ownership; align incentives to retention and performance

Third-party sale

• Prepare for different value lenses (location, IP, market share)
• Ensure what’s pitched survives diligence – no surprises

Due Diligence: Make the Easy Things Easy

• Align narrative and numbers (no last-minute R&M/marketing cuts to “pretty up” EBIT)
• Remove non-core assets from the balance sheet
• Pre-clear tax & distribution mechanics for getting proceeds to owners
• Update shareholders’ agreements: exits, valuations, and buy-sell triggers

One Practical Step This Quarter

Write your exit on a page: objective (price/legacy/lifestyle), timeframe, likely buyer, owner role post-deal, and top 5 gaps to close. Then schedule monthly accountability with an external advisor or board to chip away at the list.

Key Takeaways

• Start early; be sale-ready every day

• Embed value in the business, not the founder

• Clean up governance, finances, and contracts before buyers arrive

• Talk early and honestly – you can’t sell a secret

• Use independent advisors to remove blind spots and keep momentum

🎥 Watch the webinar replay
If this surfaced a challenge or blind spot, let’s talk. Govn365 helps owners and boards surface risks, tidy governance, and execute succession without bleeding value.

Book a 15-minute chat with Gerry Lynch

https://calendly.com/gerry-lynch-govn365/15-minute-phone-call