Succession: handle with care

Our industry is a vibrant community of passionate and professional individuals with a common purpose: helping clients achieve what's important to them in life and/or getting them from point A to point B.

Collectively, we are helping build better futures.

This community is very diverse in terms of composition, location, experience, values and objectives – just like the clients that we serve daily.

In a recent post, I shared that the business that I have led for the last decade has recently been sold. I discussed the rollercoaster of emotions I experienced during this process – and yes, it is a process. I care deeply about it as it has been a central part of my driving purpose and my life. It's been a great journey that I am extremely proud of and grateful for.

Right now, I am torn between two focus points: reflection and resetting for the future. This piece will focus on the reflections.

While it's still incredibly raw, I felt that now was a good time to share and reflect on some of the areas that I believe set us up for achieving a great outcome for all stakeholders involved: business owners, staff, clients and the purchaser. 

This is also, I believe, a highly relevant topic to many in our industry who are considering such a transition over the next five to 10 years. This could be as high as 30% of current registered advisers.

I give these insights based on my experience and my journey, but I acknowledge there are many different pathways.

Reflection 1: It doesn’t happen overnight! Be patient but also be deliberate.

This moment has been eight years in the making. Building great businesses takes time and perseverance and a relentless focus on continuous improvement.

Reflection 2: You need to build strong foundations for the business. 

You want to make your business as attractive as you can to any potential purchaser. That doesn’t mean being ready to sell straight away, but you are constantly refining your offering, your operational processes and your client engagement to put you in the strongest position possible.

You are also setting the business up to run well even when you are not there. Having the right team in place with aligned values is a core pillar. In some situations, and certainly in larger practices, having a strong "second in command" in the business can be very attractive to the future buyer, particularly if they are staying on.

Reflection 3: Everyone needs to be on the same page and understand where you are heading and what role they can each play.     

As a business owner and leader, you need to be clear on your vision and direction for the business. You need to be communicating consistently and transparently and provide opportunities for your team to engage and participate.

This is a shared journey, and you need to share and reward progress towards the endgame. Providing opportunities for all staff to participate in small parcels of equity or an incentive pool can align hearts and minds to business success.

Reflection 4: Business fundamentals need to be attractive and sustainable.

You need to have efficient processes and they need to systemised and repeatable. They need to be compliant, too.

You need to demonstrate that you have a track record of improvement and delivering strong financial performance. This is a window into how well you have managed the business. It's also ultimately what the buyer is paying for.

You need to ensure that you are delivering value to the clients that you look after. Don’t lose sight of two of your biggest assets: your clients and your staff. Most purchasers want to know that both will come across with minimal disruption.

Reflection 5: know your numbers, know your negotiables and non-negotiables upfront.

This needs to be based on market reality rather than a pipe dream. Know the market and do your research.

It's very important to be clear on what you want to achieve and why. Having an external party's view of this before engaging a potential buyer is a valuable tool to overcome you own bias and blind spots.

Reflection 6: Assess whether your potential buyers are a fit for your clients and your staff.

If your objective is to have a smooth transition and maximise value, you need to invest time.

If your transition pathway is selling internally, you have great insights into cultural fit, value-set fit and trust that staff and clients will be managed professionally and respectively.  As businesses scale up and value increases, this pathway can become more problematic depending on the financial position of the internal buyers.

For those advisers transitioning out in regional areas, you want to do everything possible to have a successful transfer as you will most likely be bumping into clients in town after the sale.  One of your greatest assets is your clients and the trust that they have in you and your team. 

The cultural fit is equally as important with an external purchaser, but you may be in a situation where you have less knowledge and time to assess it. This is sometimes a case where a transfer within the same licensee who knows the buyer can lessen the burden and disruption to the clients. 

With an external buyer, there is also normally a material proportion of the value realisation dependent on a successful transition, and this process could take from one to three years. It's in everyone's interest to get this right.

I believe that when you find the right pathway and the right buyer, it will feel right. And you will know at that point that it's time to take the final step. This requires confidence that the clients and staff who have made it all possible will be looked after – during and after the sale.

In my situation, both I and the team had many years of working closely with the buyer in a licensee capacity and there was strong mutual respect for the leadership team and direction. For our clients and our staff, this was an important factor in the decision.

When you have invested your heart and soul into your business for many years, it's natural to be feeling a broad range of emotions as you pass the baton to the new owner. I am certainly going to take the opportunity to celebrate and give myself enough time to get comfortable with my next challenge and journey.  

The big reset is underway.