If you own a business, you carry a lot on your shoulders. You make decisions every day that affect your family, your people and the future of the organisation you have worked hard to build. Yet when it comes to succession planning, many owners take risks they would never accept in any other part of their business.
Lucan Bartlett, a Principal at Moore Markhams Whanganui, spends a great deal of time helping business owners and families work through succession issues. His observations offer a clear warning: most problems start long before anyone calls a professional for help.
Succession planning isn’t just about choosing who will take on the leadership role, it is also identifying the best candidates and facilitating their development into the role, designing a comprehensive and dynamic transition and managing communications with key stakeholders.
We have compiled the most common mistakes business owners make when it comes to succession planning.
Acting before seeking advice
The most common and most damaging mistake is simple. People act first and look for advice later. As Lucan puts it, the most consistent pitfall he sees is people falling into is succession planning before seeking professional advice.
Owners often make decisions that feel convenient at the time. They restructure, sell assets or begin shifting ownership to the next generation. Only afterwards do they discover what those decisions mean for tax, legal responsibilities or family expectations. By that point, options are limited and the fix is usually more complicated than the original plan needed to be.
Lucan explains that for any large significant transaction it is important to get valuable advice first. It sounds obvious, yet many people still skip this step because they underestimate the complexity of what lies beneath the surface.
Delaying planning due to lack of awareness
Many owners do not fail to plan because they are careless. They fail because no one has ever talked to them about succession. Lucan sees this often. There is a significant lacking in general awareness of succession planning, whether the business owner has never been informed, or remain unaware.
If you have spent years focused on running your business, you might not realise how early succession conversations need to begin. This lack of awareness means many owners only start thinking about the future once retirement is near or a major life event forces the issue. By then, the pressure is high and the room to plan is small.
Starting far too late
Succession planning is not something you can rush. Lucan is clear about the timeline. When thinking about retirement it is important to give yourself a minimum of five years, this timing accommodates appropriate investigation into tax implications when coming to the end of a business.
Five years is a minimum. Yet many owners start much later. A late start reduces your options, limits the tax strategies available and often forces you into decisions shaped by urgency rather than what is best for you and your family.
Starting early gives you time to test options, communicate clearly with your successors and prepare the business for a smooth transition. Leaving it late means dealing with problems reactively, often at greater cost.
Missing the retained earnings tax trap
One technical issue catches many owners by surprise. Lucan explains that some businesses have a lot of retained earnings and if you sell the business or company, you can be left with a massive portion of money in a company where it isn’t practical for you to just remove it.
Retained earnings sitting inside a company cannot simply be withdrawn tax free. Owners who discover this only after a sale often face tax bills they did not expect. With the right advice, this can be planned for years in advance. Without that advice, it becomes a painful and avoidable shock.
Underestimating the role of professional advisers
A consistent theme in Lucan’s comments is the central role of advisers – accountants, lawyers and, where relevant, those supporting family members or beneficiaries. When children or multiple generations are involved, he notes that things can easily become complicated when nothing is planned.
Many business owners treat advisers as a last step. They come in to tidy things up once decisions have been made. Lucan argues the opposite. Your accountant and lawyer should be the first people you speak to. They help you see issues you may not have considered, give you options that reduce risk and ensure every step supports your long term goals.
Succession is not only about ownership. It is about clarity, communication and avoiding disputes that can damage both family relationships and the business itself.
Succession planning affects every business, not just family firms
Lucan is clear that succession is not limited to farms or family businesses. Anything where there is an asset of value needs a plan. Even in non family companies, someone still needs to take over. Someone still needs to understand the financial and tax position. Someone still needs the confidence to continue what you have built.
Ignoring these questions does not make them disappear. It only means you face them later, when choices are limited.
Take the first step now
Succession planning is not only about your exit. It is about protecting your legacy, reducing uncertainty and giving the next generation the best chance to succeed. The earlier you start, the more control you have.
If any of Lucan’s observations sound familiar, you are not alone. Many business owners recognise these mistakes only once they are in the middle of them. You do not need to wait for that moment.
Reach out to Moore Markhams today. Our team can help you understand your options, avoid the common pitfalls and put a practical, well supported plan in place. It is the first step that makes every step after it easier.
