PLAN THE PERFECT HANDOFF

Tips for retirement succession planning.

When A. Conrad Huffman was ready to retire from the Glendale, California, company that he co-founded with his wife, Helen, the succession seemed pretty straightforward. Their son, Eric W. Huffman, says he’d been groomed to succeed Conrad by working in every division of the company, Vege-Kurl, which specializes in making white-label cosmetics and other personal care products. By the late 1990s, Eric was ready and eager to take over.

Father and son worked out a deal that allowed Conrad to remain on the payroll as his son slowly bought the company stock, a process that lasted a decade. Vege-Kurl also brought in a partner who could handle inventory, accounting, and general management while Eric specialized in sales, marketing, and R&D. The transition worked, and the company thrived. Now, two decades later, Eric is 58 and mulling succession plans again, knowing that he and his partner want to retire in three to four years. “I have 110 employees, which means I have 110 families relying on me,” Huffman says. “We take succession very seriously.”

Planning how to hand off your business can be dizzyingly complex. You need to consider who can best run things—but also who can afford to buy you out. “The closer you get to the actual succession, the fewer opportunities you have to structure the right sale, to save on taxes, to prepare your employees and yourself,” says Joan Crain, global family wealth strategist at BNY Mellon Wealth Management, based in New York City.

So what should you be doing, and when should you do it?