Handing Over the Keys to Your Business

None of us will retire leaving a legacy quite like Steve Jobs.

However, with the hubbub and hoopla surrounding his retirement announcement last week, I have been thinking about the succession issues that surround many financial advisors and entrepreneurs.

What do you want to leave after you've gone?

Coincidentally, there’s a list of 6 Succession Planning Tips in a recent edition of Financial Planning, which provides financial advisors with a good start in framing this issue:

1. Plan ahead and leave enough time for your departure. A 5-year window is a good time frame to shoot for.
2. Have a strategic vision for how you want to exit the business, as well as the legacy you’d like to leave.
3. Use a trusted, outside advisor to provide objective input on what’s best for you, your family, your firm, and your clients.
4. Identify internal candidates to lead the business when you’re gone.
5. In order to secure your best employees, find ways to link their success to the future success of the firm, e.g. equity ownership.
6. Practice what you preach and spend some time thinking about your own retirement goals. Don’t leave a void in your life where your career once was.

For those of you who are members of Horsesmouth, there is also this thoughtful discussion authored by Helen Modly and Sandra Atkins, “How long can I work as an advisor?” (Subscription required.) As they point out, many financial advisors assume that they will/can work well past the age of 62. However, given that studies indicate that once we pass 60 years old, the likelihood of dementia doubles every five years, what’s the health risk for those of us who desire longer careers? (The recent sobering news on Pat Summitt reminds us that it can happen to the best of us.)

For those financial advisors who intend to sell their practice as a means to fund their retirement, there are a host of additional important issues.

Many of these are related to the fact that there is a very-real demographic bulge of financial advisors in the U.S., who are in their mid- to late-fifties, who hope to wind down their careers and sell their practice in the next 5-10 years...all at the same time. With the large number of financial advisors with this same intention the question needs to be asked…What are you selling, and to whom?

It seems probable that, in the coming years, buyers of financial practices can be very choosy because they will have many businesses to choose from. Therefore, as the owner of your financial business, what have you done with your business that creates sustainable value, post-departure, such that you can command a premium sale price today?

One of Steve Jobs most remarkable legacies is the 313 patents that are linked to his name, including the ornamental design on the staircase of many Apple stores. While it is unlikely that any of us will leave a footprint as deep and as long-lasting as Jobs, it is also likely that many of us want to leave some small trace of our good work.

What have you planned for?