Thursday, November 6, 2008

A primer for executing a succession plan

(While the article addresses investment advisers, the principles apply to any service business. DMW)

'Dearth of talent' in the business makes finding a successor difficult for retiring advisers


By Beverly D. Flaxington September 28, 2008

Many advisers are in their 50s or 60s, and they are thinking about retirement. ...

An adviser might consider selling the business or look for an opportunity to affiliate with a larger firm and stay involved in the business.

Another alternative is the adviser selects a successor, ...

Let's face it, an adviser with a thriving business who wants to transition out of a practice has worked hard to develop relationships that are based on trust and performance, probably in that order. The clients — and the firm — matter.

The practice could have the owner's name on the sign, and is the "baby" that the adviser has nurtured for years, making the decision to leave difficult.

The transition process is difficult. Taking the time to consider what constitutes success in this process is done infrequently. ...

It is important for a person facing a transition — or considering one — to ask, "Am I ready to do this? Why am I doing this and how motivated am I to make this work?" If there is any hesitation, the adviser will not be open enough to alternatives.

During the process, it is important to set priorities for the transition, with an emphasis on what matters most. ...

Taking the time to plan the priorities, to write the goals and to articulate them to a successor will help ensure the success of the transition.

Many times an adviser will set the priority as "cashing out" or "getting the most value from my firm." These are fine goals, but to achieve them requires a well-developed plan and a method of measuring success.

An adviser needs to consider what he or she is willing to give up to a successor, and the changes he or she is willing for a successor to make to the firm. Surely, a successor will want to put his or her stamp on the business.

The process of finding someone should also include identifying the qualifications, and most importantly, making certain the cultural fit between the firm and the successor is a good one. ...

Last, the process must include bringing the clients into the fold — not "announcing" a transition once it happens, but rather implementing a process so the transition is smooth and easy.

In addition, set checkpoints once you have prioritized and worked with the successor to measure what is working and what is not. ...

Beverly D. Flaxington is a principal of The Collaborative, a Medfield, Mass., firm that helps clients improve business practices

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