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The succession readiness gap: Why most business owners aren't as prepared as they think | Baker Tilly
Article
The succession readiness gap: Why most business owners aren't as prepared as they think
Five dimensions of succession readiness can determine owner preparedness
March 23, 2026 · Authored by Ryan Miron
Structured assessments consistently reveal blind spots in timing, valuation, leadership and tax positioning. Discover how we help business owners determine succession readiness and plan ahead to achieve better results.
The confidence problem
Ask a closely held business owner whether they have a succession plan, and most will say yes. They have a buy-sell agreement, an estate plan, maybe a conversation or two with their attorney. On the surface, it appears like the bases are covered.
But when we sit down with owners and walk through a structured readiness assessment, a different picture tends to emerge. The buy-sell agreement was drafted years ago and no longer reflects the current value of the business. The estate plan assumes a family dynamic that has since changed. And the "plan" for the business itself often amounts to a general intention to sell at some point without a timeline, a prepared buyer or a clear view of what the owner needs from the transaction to fund the next chapter.
We call this the succession readiness gap: the distance between thinking you are prepared and actually being prepared. It is not a failure of intent. Most owners care deeply about getting this right. It is a failure of structured assessment, and it is remarkably common.
Why now: a generational convergence
Two demographic forces are converging in ways that make this gap more consequential than it has been in decades.
Baby boomer business owners, who represent the largest concentration of closely held business wealth in the country, continue to age into transition windows. Many have delayed planning due to the uncertainty of the past several years, and the transition runway that once felt long is now compressed. Decisions that benefit from three to five years of preparation are being made in twelve months or less.
At the same time, Gen X owners are increasingly pushing toward exits earlier than prior generations. The reasons vary, but the pattern is consistent: a post-pandemic reassessment of personal risk, a desire to monetize while market conditions remain favorable and a stronger orientation toward lifestyle flexibility. These owners are not waiting until their late sixties to begin the conversation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
The result is more owners across age brackets approaching transition simultaneously, and fewer of them genuinely prepared for what the process demands.
Recent legislative and regulatory shifts add a layer of complexity. Even when exemption levels are favorable and market conditions appear stable, the bigger risk is false comfort: the assumption that favorable conditions mean there is no urgency. In our experience, that comfort often delays the very assessments that would reveal how much work remains.
A succession readiness assessment: five dimensions that matter
Succession readiness is not one thing. When we assess an owner's preparedness, we look across five dimensions that together determine whether a transition will go smoothly or stall.
Timing and runway. Is there enough runway to execute well, or is the owner reacting to a life event, a health scare, a partner dispute or market pressure? Owners who begin the process proactively have more options and better outcomes than those who start under duress. The diagnostic question is straightforward: if you assume a twelve-month delay from today, do you still have the runway to execute your preferred path?
Financial clarity. Most owners focus on what the business is worth. But, genuine readiness requires answering three distinct questions: Is the business performing to its potential relative to its peers? What is the realistic range of value a buyer or successor would pay? And, does the owner's total financial picture, business and personal combined, support the transition they want? When any one of these questions goes unexamined, owners make decisions based on incomplete information. A structured financial review that addresses all three is one of the most valuable early steps an owner can take.
Leadership and operational depth. Can the business operate and grow without the founder in the room? Buyers, whether internal successors, private equity sponsors, or strategic acquirers, are evaluating the management team as much as the financials. A business that depends entirely on its owner is harder to transfer and commands a lower price. The test is simple: if the owner stepped away for ninety days, what breaks?
Tax and structural positioning. Has the owner structured ownership, entity elections and estate documents to protect the after-tax outcome? The difference between a well-positioned transaction and a reactive one can represent significant unnecessary tax exposure. This is not about aggressive planning; it is about confirming the basic architecture is in place before the transaction timeline starts. The question: are your entity and estate choices aligned with the most likely exit path, or with a path you no longer intend to take?
Stakeholder alignment and personal readiness. The most technically sound plan will stall if the people involved are not aligned. Does the owner have clarity about what they want from the next chapter? Are family members, business partners and key managers aligned on the direction and pace of the transition? Has the owner's household planned for the personal financial reality after the business is no longer the primary source of income and identity? These are the questions that rarely appear in a legal document or a tax model, but they are often the ones that determine whether a transition actually moves forward. The question to ask honestly: if you called a meeting tomorrow with every person whose support you need, would they all say yes?
The positive impact of early assessment
Owners who assess readiness three to five years before a target transition consistently achieve better results. That is a consistent pattern, not an outlier. It is what we see in practice, across industries and transaction types.
Early assessment creates optionality. An owner who understands the gaps has time to consider a range of paths: an internal transfer to family or management, an employee stock ownership plan, a third-party sale or some combination. An owner who discovers those gaps twelve months before a hoped-for close has far fewer choices.
It also surfaces fixable problems while there is still time to fix them. A leadership gap can be addressed with a two-year development plan. A valuation disconnect can be narrowed with operational improvements, better financial reporting and targeted de-risking, whether that means reducing customer concentration, formalizing key contracts or bulletproofing critical processes. An outdated estate plan can be restructured. None of these corrections happen quickly, but all of them are achievable with adequate lead time.
Buyers and capital sources notice the difference. A prepared seller moves through diligence faster, negotiates from a position of strength and is less likely to encounter surprises that erode value or delay closing. The market rewards readiness with better terms and fewer post-closing disputes.
The output of a structured readiness review is not a binder that sits on a shelf. It is a clear picture of which transition pathways are viable, what must be true to pursue each one and the sequence of steps required to start closing gaps. Owners who go through this process walk away with a short list of priorities, defined decision gates and a practical action plan they can begin executing immediately.
Closing the gap
The succession readiness gap is not inevitable. It exists because most owners have never been through a structured assessment that looks at all five dimensions at once. They address pieces of the puzzle in isolation, with different advisors, at different times and assume the picture is complete.
The most productive step an owner can take is a straightforward one: sit down with an advisor who can look across timing, financial clarity, leadership, tax positioning and stakeholder alignment together and answer one question honestly. If I wanted to transition this business in the next three to five years, what would I need to be true that is not true today?
The answer almost always reveals more work than expected. But it also reveals that the work is manageable, provided there is time to complete it well.
If you are considering a transition in the next three to five years, a structured readiness review can clarify which pathways are realistically available, what stands in the way of your preferred path and where to start. Connect with our business owner succession services team to learn how a readiness assessment can bring focus to your next chapter.
