How the Three-Bucket framework secures your succession journey

Succession planning is rarely just a technical exercise. For most business owners, it is deeply psychological. Your business is not simply an asset on a balance sheet. It is identity, purpose, security, and often your life’s work.

When owners approach succession, whether that is a sale, a management buyout, a family transition, or a gradual step back, the biggest risk is not usually poor intent. It is poor capital allocation driven by emotion, habit, or overconfidence in a single outcome.

A useful way to structure this complexity is through the Three-Bucket Framework, which draws on principles popularised by the ‘Aspirational Investor’. This philosophy first coined the term Aspirational Bucket to describe capital allocated not purely for financial return, but for fulfilment, curiosity, and long-term legacy.

The Three Buckets

The bulletproof bucket

Purpose: Security, liquidity, and peace of mind

This bucket exists to make everything else possible. It is capital that is:

• Highly liquid
• Low or negligible risk
• Designed for known or near-term liabilities
• Typical uses include:

Personal living costs post-exit

• Tax liabilities
• Short-term commitments
• Contingency planning

Common assets in this bucket might include cash, high-quality money market instruments, and government bonds.

From a psychological standpoint, this bucket reduces anxiety. It allows business owners to step back from their company or negotiate succession decisions without the pressure of needing every outcome to go perfectly.

The common mistake: Being over-allocated. Holding too much capital here may feel safe, but over time, inflation quietly erodes purchasing power. Excess caution can become an invisible risk.

The compound and grow bucket

Purpose: Long-term wealth creation and inflation protection

This is the engine room of sustainable financial independence. The role of this bucket is to:

• Grow capital over the long term
• Beat inflation
• Provide future income optionality

This bucket is typically invested in diversified long-term assets such as equities and high-quality businesses, accessed through carefully selected investment strategies.

Unlike the Bullet Proof Bucket, this capital is not designed for short-term spending. Time is its greatest ally. Compounding works best when left undisturbed, supported by discipline and patience.

The common mistake: Under-allocation. Many business owners underestimate how much capital they need to work quietly in the background once their business income reduces or stops. Without this bucket being properly funded, future lifestyle flexibility can be compromised.

The aspirational bucket

Purpose: Upside, ambition, and personal conviction

For most business owners, this bucket already dominates their balance sheet. It includes:

• Their own business
• Private equity
• Venture capital
• Concentrated or illiquid special situation opportunities

This is where vision, expertise, and personal edge can create exceptional outcomes. It is also where risk is highest. Returns can be transformational, but capital loss is a genuine possibility.

There is nothing wrong with ambition. In fact, it is often what made the business successful in the first place. The key is ensuring that aspirational investments sit within a broader, balanced framework.

The common mistake: Overconfidence through familiarity. Owners often feel safer with what they know, even when the concentration risk is extreme. Emotional attachment can blur objective risk assessment.

The entrepreneur’s curse

A recurring behavioural bias we see among founders and owner-managers is what we often describe as the entrepreneur’s curse.

Having built a successful business through judgement, resilience, and personal risk-taking, it is entirely natural for owners to believe that investing additional capital back into what they know best will always deliver the strongest outcome.

The logic often sounds like this:

• “If I invest £100,000 into my own business, I have far more control.”
• “I understand this better than any external investment.”
• “This is where my best returns have always come from.”

And sometimes, that belief is correct.

But not always.

Even exceptional businesses are exposed to factors outside an owner’s control. Market cycles, regulatory change, competition, technological disruption, and timing can all materially alter outcomes. Concentrating incremental capital into a single enterprise increases exposure to these risks, even when confidence is high.

From a succession perspective, this bias can quietly undermine financial resilience. Capital that could have been diversified to protect lifestyle and long-term security instead becomes further tied to one outcome, one sector, or one set of assumptions.

This is not an argument against backing your own business. It is an argument for balance.

Aspirational investments, including further investment into your own company, should sit alongside, not instead of, properly funded Bullet Proof, Compound, and Grow buckets.

Why owners drift to extremes

In practice, we see two recurring profiles:

• Owners of their own businesses who keep too much wealth in the Bullet Proof Bucket, driven by fear of loss after years of hard work
• Private equity owners who reinvest almost everything into aspirational opportunities, driven by optimism and belief in their own judgement

Succession is not the end of the journey. Done well, it is the beginning of the next chapter.

* Pain is the business development at Credo.

PERSONAL FINANCE