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.

“She could have brought someone in a few years before and trained him or her, which would have given her business value and enabled it to continue,” Crowell says. “Instead, the business ended when she died suddenly, leaving no money from it for the estate.”

According to Wilmington Trust, 58% of the owners of small businesses do not have a business succession plan. Even many financial firms do not have a plan. “It’s the classic case of the cobbler’s children having no shoes,” Crowell says. Advisors say they have seen little improvement in the number of successful succession plans over the years.

Nearly half (47%) of small business owners over age 64 do not have a plan in place, Wilmington Trust says. Yet 67% of the 200 owners of privately held companies included in the firm’s study acknowledged it is important to have a plan if they are aging, while 55% said it is important in order to provide security for their families.

According to the Conway Center for Family Business, a nonprofit organization in Columbus, Ohio, that provides education and resources for family business owners, 70% of family businesses do not make it to the second generation. Only 12% make it to the third generation, and only 3% make it to a fourth.

Yet business owners have a lot of reasons to want their firms to continue after they leave.

Survey respondents said it is important to make sure their companies survive into the future to take care of employees (87%). Others said it is important to make sure the company retains value and that family harmony is maintained. Owners also want to reduce their tax burden and achieve valuation goals.

At the same time, nearly 40% want to keep the business within the family. But all of this may be impossible without pre-planning, advisors say.

“What business owners need to realize is the sooner they start planning, the better their odds of achieving their goals—both financial and personal,” says Matt Panarese, president of Wilmington Trust’s Mid-Atlantic region and leader of the firm’s National Business Owner Practice Group.

Owners have ambitious goals for their businesses and they know the importance of planning for the future, but there are a lot of excuses about why the majority do not do the planning, the survey shows.

“Business owners do not like to envision a day when they can no longer aggressively direct a company they have developed,” says Terry Duncan, president of Duncan Management Inc., a business development company in Forney, Texas. “To start admitting they are not going to be around forever is a big hurdle to get over. They have to be willing to turn over the reins and let the new person make some mistakes.

“It is very difficult not to micromanage a company you own, but there need to be other managers in place who can take control,” Duncan adds. “Once an owner starts to age, there are going to be multiple people vying for the job. Having a succession plan in place is a way to manage that competition.”

“Business owners tend to wear a lot of hats, and doing a succession plan gets pushed to the bottom of the to-do list,” says Crowell. “It always seems like there will be a more convenient time in the future to do it. As the advisor, you just have to make them schedule the time. They have to begin their businesses with the end in mind. Make them think of the reading of their wills and what kind of disarray they may leave their families in if they do not plan early and properly.”

One way advisors can push their clients to begin a succession plan is to start a discussion about what they want to get out of the business, says Barnum Financial Group, a financial services firm based in Shelton, Conn. Two of Barnum’s financial planners, Benjamin Soccodato and Chris Kampitsis, recently earned the Certified Exit Planner designation because the firm feels helping business owners prepare to exit their companies successfully is so important.

“Whether the goal is to keep the business within the family or sell to a third party, there are multiple issues to address for a successful transition, such as exit objectives, the owner’s own financial plan and continuity of the business,” says Kampitsis.

“An advisor,” Soccodato says, “should help the business owner identify what his or her objectives are for the business and how much money they will need from the business post-tax after they step down. That drives the question of valuation of the business and increasing the value as much as possible.

“Then determine if the owner wants to continue to employ half the town or wants to keep his name on the building. Start with fact-finding and then try to understand on a deeper level what the owner wants.”

“Many owners,” Kampitsis says, “may want to transfer the business to family members or to key employees. But have they explored whether those are real possibilities?”

Owners have to consider contracts to keep employees in place during a transition and non-competition contracts for those who leave. There are a lot of “what-ifs” to think about, Barnum says.

“If you are going to have a son or daughter take over, what does that do to your key managers?” Soccodato asks. “What if there are two owners and they disagree? What if one owner goes through a divorce?”

Kampitsis adds, “A lot of business owners think they have the expertise to do the exit planning by themselves, because no one on the outside is having this conversation with them. An advisor needs to have that conversation.”

It’s the nature of small businesses that the personal estate planning of the owner and the succession planning for his or her business are intertwined, says Karen Reynolds Sharkey, a national business owner strategy executive at U.S. Trust.

“Business owners are always focusing on the day-to-day activities,” she says. “A lot of the owners do not want to think of their own mortality. But if they plan early, they can have control over the outcome.

“Remind them to think about their employees and management team,” she says. “Those people are relying on the business owners to help protect their families, too.”

Each business owner should also be advised to rely on a team of professionals to help plan the destiny of the company, including financial advisors, attorneys, CPAs, business consultants and valuation experts, adds Barnum.