How and Why to Begin Succession Planning for Your Firm
In five years you will arrive. The question is, where? You can put off succession planning, and you will, most assuredly, arrive somewhere. Or, you can Plan for Success and arrive at your desired future. The quality of choices (or lack thereof) you make today will set the trajectory of your firm’s future.
If you are like a lot of firms, you aren’t actively engaged in the implementation of a succession plan. Instead, you have taken a back-burner approach to succession planning, hoping/praying and assuming that the issue will resolve itself. In some form or fashion it will, but it may not be to your liking.
The reality is there is only a handful of ways this scenario can play out.
- You will merge with a larger firm who is happy to absorb your clients and staff into its leverage model, placing you in a limited power position for the duration of your career.
- You will sell your practice with some claw backs for client attrition; in many cases, your client list will be cherry-picked for the best and you will get a discounted value for the rest.
- You will groom your replacements and expedite the transition of management/ownership to those replacements and hope they don’t drop the ball on your buy out.
- You will work until you can’t (or can’t stand it) any longer.
- You can act like there is no tomorrow – NT – and build a practice you won’t want to sell.
Here’s what I mean.
A few years ago, one of those notorious California wildfires came within a couple of miles of our home. We were placed on Evacuation Alert. If you have ever been faced with one of these situations, you know the choices that go on in your head: irreplaceable vs. replaceable. The replaceable items go through another sort with important vs. vital and easy or difficult to replace. On the upside, the idea of purging (via the fire) a lot of “stuff – excess baggage” from our life that wasn’t adding any value was a very appealing proposition.
Now imagine you have only 24 hours to pack up and move your practice to a new location. You would go through the same wildfire-sorting criteria to identify the very best clients, team members and resources to take with you. This concept of building your dream team is often referred to as the “Mars team.” Applying the planet Mars concept across your entire practice, extracting the best of the best and leaving the rest behind is a great mental exercise to identify your key elements of success going forward. Imagine leaving behind all the excess baggage that is weighing your practice down. You would be poised for new growth and change.
Unfortunately, you don’t have a wildfire bearing down on you. Yes, I said “unfortunately.” It is the lack of immediacy that has lulled many practitioners into putting off succession planning. The other issue that gets in the way of succession planning is low self-esteem, something many firms suffer. As any marriage matchmaker will tell you, “Become the quality of person you want to attract and your ideal partner will appear.” Sadly, there are a lot of practitioners who haven’t spent much time looking in the mirror. They are avoiding the ugly truth about their own practice. When pressed as to whether they would buy another practice just like theirs, the reasons for avoiding the succession discussion become rather obvious.
If you wouldn’t buy your own practice, you can’t expect anyone else to either, including your younger staff members, 60% of whom are already planning their next career move. The old saying, “one man’s trash is another man’s treasure” does not apply to accounting firms in this economy. This is not like the show “Storage Wars” where speculators are willing to bid on the unknown contents of abandoned storage bins. With so many firms behind the eight ball on succession planning, larger firms are cherry-picking the clients they want and the staff worth keeping, and offering discounted value for the remainder.
So, rather than focus on succession planning, plan for success like there is NT (no tomorrow). It’s never too late to re-invent yourself. Imagine focusing on building a practice you wouldn’t want to sell with interesting clients who appreciate what you have to offer, projects that provide growth opportunities to inspire and engage your talent, and a practice that provides you with a strong recurring revenues and profits to enjoy.
If you think you are too burned out to pull this off on your own, engage your team; odds are they have been waiting for just such an opportunity to present itself. Make your re-invented firm the career move your young people are already planning to make.
It is inevitable that you will exit your practice someday. The details of that exit may be uncertain at this time, but circling around in a holding pattern is not the answer; you will eventually run out of fuel. If you build a quality practice you wouldn’t want to sell, you will be poised to get the greatest value from any and all succession options you are presented with.
Bottom line: If your practice is not saleable in its current state, it will never be succession ready. Plan for success and succession will take care of itself.