Bud was proud of the successful business he started 40 years ago. From his initial small store, he had expanded to several locations around the state, with loyal employees, vendors and customers.

Everything changed when he died unexpectedly. Bud, a composite of several entrepreneurs whose next of kin declined to discuss the business publicly, always assumed one of his children would take over, but he never put a plan in place or even talked about it.

Chaos ensues when family members clash over the leadership and direction of the businesses. Daily life can disintegrate into battlefields of bruised feelings and bitter arguments.

Family feuds kill businesses

Often, as disagreements escalate into legal disputes, rudderless businesses have to be liquidated, leaving shattered families with tarnished reputations and meager assets.

Versions of this unfortunate scenario play out at small businesses every day. Owners who have the vision and perseverance to transform an idea into a successful enterprise are often so passionate about their creation that pragmatism becomes clouded. They can be unreceptive to a future for the business that does not include their steady hand.

But such lack of foresight goes far beyond the demise of a corner bakery or modest factory. The Small Business Association says businesses with fewer than 500 employees — its definition of small businesses — account for 99.9% of all firms in the U.S., 43.5% of the country's total economic output and just under two-thirds of new jobs created.

Well-defined succession plans thus contribute not only to the continued success of individual companies but also to a more robust economy for us all.

Safeguard the enterprise

"A common misconception among small business owners is that succession planning is only necessary for larger corporations," says Dana Ronald, president of Tax Crisis Institute. This is not the case, he says — smaller enterprises are actually more vulnerable to sudden changes in leadership.

"Having a succession plan in place safeguards the business against unforeseen circumstances and provides a clear roadmap for the future," Ronald adds.

Experts agree that it is never too early to begin putting a succession plan into place. "The best time to start is when everything's calm, leaders are well and no drama," says Brad Banias, an immigration lawyer in Charleston, S.C.

Alastair Hazell, founder of the Calculator Site, agrees, advising that even if it feels premature, "Don't wait for the storm to hit before fixing the roof."

Steps to creating a succession plan

1. Contemplate your legacy. It is natural to focus on the nuts and bolts of a business when considering a succession plan. Tracey Gillespie, business owner advisory managing director at Wells Fargo Wealth & Investment Management, suggests that owners focus first on people directly affected, usually family and employees.

"How should they benefit from the value you created?" she says. "Considering what you want for them will shape your succession objectives and priorities."

2. Seek professional guidance. Ronald recommends retaining a lawyer to make sure your plan complies with relevant laws and regulations and financial advisers to ensure your succession plan is financially feasible.

Establishing a power of attorney designates someone to make decisions if the owner is incapacitated. A buy-sell agreement helps establish a fair market value for the company. Life and disability insurance policies can provide financial security for the business and key personnel in case of an unexpected event.

3. Put it in writing. Discussing a succession plan is better than doing nothing, but executing a formal document ensures that everyone is, literally, on the same page. Outlining managerial responsibilities or the transfer of ownership eliminates future squabbling among employees and family members who claim to have different memories about what was said.