The Do’s and Don’ts of Succession planning for family-owned distribution companies

Succession planning is one of the most important—and sensitive—processes for any family-owned distribution business. Whether you’re passing the torch to the next generation or transitioning to outside leadership, how you plan the handoff can determine the future success of both your company and your family.

Too often, succession is delayed, rushed, or approached emotionally rather than strategically. To ensure a smooth, profitable, and sustainable transition, it’s essential to know what works—and what to avoid.

Here are the do’s and don’ts of effective succession planning for family-owned distribution companies.

✅ DO: Start Planning Early—Much Earlier Than You Think

Why it matters:

Succession isn’t a single event—it’s a multi-year process. Starting early gives you time to develop leaders, set expectations, and avoid last-minute decisions.

How Early?

Ideally, 5–7 years before the anticipated transition

Minimum of 2–3 years for proper training and financial planning

🧠 The earlier you start, the more options you have.

❌ DON’T: Assume the Next Generation Automatically Wants to Lead

Why it matters:

Not every family member wants—or is prepared—to run the business.

What to Avoid:

Guilt-driven successions

Handing over control without assessing capability and desire

Overlooking non-family or outside talent that may be better suited

🧭 Succession should be based on merit, not bloodline alone.

✅ DO: Create a Formal Development Plan for Successors

Why it matters:

Leadership isn’t inherited—it’s developed.

What to Include:

Rotational experience in key departments (ops, sales, finance)

Leadership coaching or mentorship from senior executives

Clear milestones and performance reviews

👷 Preparing a successor is a full-time commitment, not a hand-off.

❌ DON’T: Leave Financial and Legal Structures Until the Last Minute

Why it matters:

Without proper tax, ownership, and estate planning, transitions can lead to major financial pain—for both the family and the business.

What to Avoid:

Outdated or unclear shareholder agreements

Unplanned gift or estate tax implications

Unfunded buy-sell agreements

💸 Smart financial planning protects both the company and the family legacy.

✅ DO: Get Input From Key Stakeholders—Inside and Outside the Family

Why it matters:

Succession affects your leadership team, employees, suppliers, and customers—not just the family.

What to Do:

Involve senior non-family leaders in planning and knowledge transfer

Be transparent about timelines and future roles

Engage your board or trusted advisors early in the process

🗣️ Succession is smoother when people feel included, not blindsided.

❌ DON’T: Tie Leadership to Ownership Without a Plan

Why it matters:

You can own a company without running it—and vice versa. Mixing the two without structure leads to confusion and conflict.

What to Avoid:

Giving equity to inactive family members without governance rules

Leaving decision-making authority unclear

Allowing ownership disputes to stall business operations

🔑 Separate ownership from management—clearly and early.

✅ DO: Document the Plan—and Revisit It Often

Why it matters:

Plans change. Family dynamics shift. Market realities evolve.

What to Include:

Timeline for transition

Defined roles and responsibilities

Exit/retirement plans for current owners

Communication strategy to employees and partners

📄 A written, flexible plan provides clarity when things get complex.

❌ DON’T: Let Emotions Drive the Process

Why it matters:

Succession touches identity, family relationships, and legacy—it’s emotional by nature. But decisions must be grounded in what’s best for the business.

What to Watch For:

Resistance to letting go

Rivalries between family members

Avoidance of tough conversations

🧘 Bring in third-party advisors to help navigate sensitive discussions objectively.

✅ Conclusion: Smart Succession Protects Both Legacy and Longevity

For family-owned distribution companies, succession planning isn’t just about who comes next—it’s about building a future where the company thrives, the family stays aligned, and the transition strengthens—not disrupts—the business.

By following these do’s and don’ts, you’ll create a plan that respects your past while securing your future.