Questions to Consider when Creating a Succession Plan

Succession planning usually isn’t the first thing hardware store owners want to discuss. Most are focused on daily tasks like managing inventory, helping customers, keeping vendors satisfied, and opening the store on time. However, with baby boomers retiring faster than ever, succession planning has become a key topic in the hardware industry. Over half of U.S. small-business owners are older than 55, and one in four is already 65 or older. By 2035, about six million small and midsize businesses will change owners, and around one million are expected to be sold. That’s nearly $5 trillion in business value changing hands. For many family-run hardware stores, the upcoming changes in ownership are especially important. The real question isn’t when the change will happen, but whether the business will continue into the future.

Choosing Who Takes Over
Choosing who will take over isn’t easy. It’s one of the most personal and complex decisions an owner faces. Many stores look to the next generation, hoping to pass the business to a son, daughter, or grandchild and keep the legacy going. But wanting it isn’t enough. The next generation needs to take responsibility and understand what running a retail business really means. They also have to be ready to learn how the business works, both day-to-day and financially. Even though 85% of owners want to pass their business down, only about half have a plan to do so.

In many cases, the best person to take over isn’t a family member, but a long-time employee or manager who already understands the customers, the seasonal patterns, and how the store works. These transitions often go more smoothly because the new owner is already trusted. Some owners decide to sell to an outside buyer, a trend that is becoming more common as younger entrepreneurs look for established businesses rather than starting their own. About a third of Gen Z and Millennial owners say they want to buy a business from a retiring owner, and well-established hardware stores in the community are appealing choices.

When the Transition Should Begin
Most experts suggest starting succession planning five to ten years before retiring. That might seem like a long time, but there’s a lot more to the process than just handing over the keys. The new owner needs time to:

• Review financial information.
• Build relationships with vendors.
• Understand the store’s inventory cycles.
• Earn the confidence of employees and customers.

The owner also needs time to update financial records and legal documents, and to get things ready for a valuation. Since 62% of owners say they’re retiring sooner than planned, waiting too long can put the business in danger. If you plan to retire within the next ten years, you should already be working on a succession plan.

Building the Right Paper Trail
Creating a solid succession plan starts with good documentation. Think of it as a manual that someone else could use to operate your business. The primary part is a formal plan that explains who will take over, how duties will change, and when the plan takes effect. You’ll need accurate financial records. These include three to five years of verifiable statements, inventory records, vendor contracts, debt details, and lease agreements.

Getting a professional valuation helps set a fair price and prevent conflicts, especially in family handovers. Be prepared to formalize the transition by signing buy-sell agreements, operating agreements, and ownership transfer contracts to ensure the deal is clear and enforceable. Finally, a written timeline helps everyone stay on track as roles change.

Does Money Need to Change Hands?
In most situations, the answer is yes. Even if the business stays in the family, there’s usually a financial transaction involved. This could be a discounted sale, a gradual buy-in, a seller loan, or a mix of gift and purchase. The business needs money to keep running, and the retiring owner often relies on the sale for retirement. More than half of owners worry they won’t get a fair price, so having a solid financial plan is important. A clear and fair deal protects both the owner and the new leader.

The Boomer Retirement Wave and What It Means for Hardware Stores
By 2040, over 78 million Americans will be at or above retirement age, which is about 22% of the population. This shift is affecting hardware stores in particular, since many are owned by boomers who started their businesses in the 1970s, 80s, and 90s. These stores are often found in suburban or rural areas, serving as important community hubs. If they close, people lose access to tools, supplies, and know-how that big-box stores can’t always provide.

McKinsey estimates that smooth ownership transitions could save up to 12 million jobs and $250 billion in yearly regional spending. This isn’t just a business concern; it’s about keeping communities stable.

Sell or Pass It Down?
There isn’t a single right answer. Passing the business to family works when the next generation is ready and willing. Selling is a good choice if no one in the family wants to take over, if the owner needs retirement funds, or if the business needs new investment and updates that a new owner can bring. The main goal isn’t to force a legacy, but to keep the business going.

How Stores Survive into the Future
The stores that survive this generational change will be the ones that see succession planning as a smart investment, not something to do at the last minute. The best transitions have a few things in common.

First, they start planning early. Owners who begin the process years before retiring have more choices, greater bargaining power, and more time to prepare their successor. Second, they know it’s critical to keep good records. Someone taking over the business can’t run the operation based on memory or guesswork. Third, these owners pick successors based on their skills, not because of family ties. Whether it’s a relative, a manager, or an outside buyer, the business needs someone with strong leadership ability. Fourth, astute owners modernize the business before handing it over. Stores that invest in technology, inventory systems, digital marketing, and better operations are worth more and easier to sell. Finally, they clearly communicate with employees, customers, vendors, and family members to have a smooth transition with minimal disruptions.

Succession planning means more than moving on to your next chapter. It’s making sure your legacy of community service continues long after you’re gone. With the right preparation, the future can be just as successful as the past.