Don't Let a Lack of Succession Planning Ruin Your Future
No one lives forever. A day will come when it is time for you to retire, or to begin a new chapter in your life. When that time comes, if you have not planned for a successful transition of your practice and your clients, you will find that many options have been lost to you. Whether you are considering a merger or sale or planning for an internal succession, Succession Planning begins with your decision to take responsibility for your future.
For single owner firms without the professional staff to develop, selling your firm becomes the main option. Other firms might consider either and Internal or External Succession plan.
Several years ago we were engaged to consult with a firm where the senior partner (and founder) was negotiating with four (4) “junior’ partners. These other partners each owned 1% of the equity of the firm. One of the partners owned 2%. These partners were clearly competent and they had enjoyed long and successful relationships with the firm and the senior partner.
Our initial consultation consisted of a couple of days in meeting and discussions with each of the partners individually, and the senior partner and a representative of the other partners together. During these discussions it became clear that they had already been in negotiations for more than a year and that their previous long term relationship had soured and deep animosity had built up. The senior partner’s succession plan had failed.
In addition to the meetings and discussions, ProHorizons performed an analysis of the firm so we could understand the fair market value of the firm and the relationships of the partners. Over the course of several weeks of negotiations it became apparent we might be at a stand still. The senior partner would not budge on some of his financial demands and the other partners were adamant they had developed some goodwill they felt were not being given proper credit (probably true). Unfortunately ProHorizons had been called in too late.
The end result was that the “junior” partners “defected to a competing firm. They were able to retain approximately 1/3 of the clients. The senior partner, who had transferred many of his relationships, was able to associate with another firm and retain approximately 1/3 of the clients. The remaining 1/3 just dissipated and went away. Litigation ensued and no one came away happy.
Don’t let lack of planning ruin your retirement.