Did you know that the Northeast has over 200,000 small businesses with employees where the owner is nearing retirement, but only 17% of business owners have a documented succession plan? The Northeast Transition Initiative is working to combat this problem. Have you ever thought about what will happen to your business when you step away? This video from the Northeast Transition Initiative will get your wheels turning about what you’re looking for in a business transition.
Many business owners avoid this conversation until it’s too late—but planning ahead can mean the difference between a smooth transition and a stressful scramble.
Common Business Transition Paths
Don’t be afraid to consider different business transition models. Whether you’re looking to sell to a third party, pass the business down to a family member, or transfer ownership to your employees, there are resources to support you!
Selling to a Third Party
Selling to a third party might seem like the obvious way to exit your business as an open market sale can result in the most money up front, though not always. We know that your small business has value, but it’s worth connecting with a valuation expert to get a realistic idea of what your business might sell for. Consider meeting with our pro-bono coach Chris Wheeler for a conversation about business valuation.
Family Succession
Passing on the family business has become less common over the years. However, family succession can still be a great option if someone is genuinely interested in carrying on your legacy. Family succession maintains more continuity for employees and customers and allows you to stay connected with your business. Training up the next generation can take time, so this is not always the quickest or cleanest break. You should also be sure to consider emotions and relationships as you decide which family members will take over the business and in what capacity.
Employee Ownership
Transitioning your business to employee ownership through a worker cooperative allows employees to take over while keeping the business rooted in its values and culture. In a worker co-op, employees become both owners and decision-makers, ensuring long-term stability for the team and the community.
This model fosters loyalty and engagement, as employees have a direct stake in the company’s success. The transition can happen gradually or all at once, depending on financial and operational needs. While setting up a worker cooperative requires legal and financial planning, it’s a powerful way to preserve your business’s legacy while ensuring the people who helped build it benefit the most.
Another form of employee ownership is an Employee Stock Ownership Plan (ESOP), where employees gradually take ownership through shares in the company. While ESOPs can build long-term wealth for employees, they differ from worker cooperatives in governance and decision-making power. ESOPs are often more complex to set up and are not suited for all types of businesses.
Key Questions to Consider Before Starting
This Business Transition Readiness Checklist will help you assess where you’re at and find a starting point for your business transition journey.
- Assess Your Business’s Readiness
- Have you evaluated whether your business is financially, operationally, and structurally ready for a transition?
- Are your financial records accurate, organized, and up to date?
- Does your financial health align with your expected business value?
- Have you set a realistic transition timeline?
- Identify Potential Buyers
- Have you considered different types of buyers (e.g., competitor, supplier, customer, family member, key employee or employees, third party)?
- If unsure about a buyer, have you explored options like business brokers or industry connections?
- Evaluate and Enhance Business Value
- Have you completed a formal business valuation? How does it compare to your expectations?
- Are there opportunities to improve profitability, efficiency, or market positioning in the next few years?
- Have you identified key areas to strengthen (e.g., recurring revenue, customer base, operational processes)?
- Prepare for a Smooth Transition
- Are key employees aware of and prepared for the transition?
- Have you documented key processes, client relationships, and operational knowledge to ensure business continuity?
- Have you started preparing the buyer by sharing essential business information early?
- Next Steps
- Do you have a transition team in place (e.g., accountant, lawyer, business advisor)?
- Have you considered the tax implications and legal requirements of your transition?
- Have you mapped out post-transition plans for yourself and the business?
For more information on planning your business transition, check out the helpful resources provided by Business.com and the Northeast Transition Initiative. Consider attending the 2025 Vermont Employee Ownership Conference.
If you’d like to help service providers better meet your business transition needs, please fill out this survey by the Northeast Transition Initiative.