Some small business owners set themselves up for failure when they are trying to exit their companies.

Kevin Harris, the senior vice president and managing director of the family business group at Northern Trust Company in Chicago, had such a client.

This client envisioned his children taking over his small company when he stepped down. But when he finally got around to talking with the kids about it, he realized none of them wanted to run a company.

He tried to find an outside buyer, but none panned out. He was aging, and the business became rudderless. He ended up selling a multimillion-dollar business at a fire sale price, says Harris.

Sadly, a Wilmington Trust study of small business owners suggests such stories are more common than not.

Ask almost any advisor with small business owners as clients about their succession planning, or lack thereof, and the advisor will have at least one horror story.

Brad Dillon, a vice president and senior wealth planner at Brown Brothers Harriman, a private bank based in New York City with offices nationwide, has a client who owned a $100 million family business he’d inherited from his father.

The patriarch of the family had left the business to his three sons, one of whom, Dillon’s client, was appointed to manage the firm. But the business did not have enough insurance to pay estate taxes when the father died, and the situation created a huge rift in the family, Dillon says. The business was eventually sold to a private equity firm.

“I wish we had had the father as a client, because the whole family could have lived happily ever after, but the father did not plan well,” Dillon says.

Andrew Crowell, the vice chairman of D.A. Davidson’s individual investing group in Los Angeles, had a client, a single woman, who was adept at data analysis and made a career doing business modeling for entertainment companies. When she was ready to retire, she began thinking about replicating her business to sell it, but it was too late by that time.

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