Ironically, it can be easier to build a successful professional services practice than to find a way out of it. This is particularly true in the SME marketplace. Succession planning is a key aspect of this process.
Many professional services practices start out small, but over time can grow to a substantial size to become very profitable enterprises. When the founders get to the point where they want to move on, they sometimes find they don’t have a viable way to realise value from their hard earned investment. Who would have thought 20 years could pass so quickly? It’s all too easy to be left holding the bag.
Just head to the beach?
Well, you can always close the doors and head to the beach. But a better answer lies in an early and relentless focus on succession planning. The transition from the old guard to the new can be a five-to-ten-year process. And that means getting an early start on succession planning is critical. Many founders put off making a start. Why? Not wanting to admit your professional life does have a sunset clause is one reason. Some founders fear the loss of control. Who wants to give up their hard earned creation? Your identity is often strongly tied to the practice you and your current co-owners have built.
Making a start is good but it simply isn’t enough. In my view, you need a succession plan that is hardwired into the practice’s strategic plan development, its talent and professional development processes and its career development models. And that succession plan needs to be predictable and enduring; allowing the founders to progressively exit; new co-owners to enter and, over time, for the new co-owners to also leave when the time is right.
Position for the future
If you are going to hand the reins to your senior team members, this needs to be reflected in how you position the practice for the future. There is little to be gained from handing over a practice in decline. Who would want to buy into that? Often your senior team members will have valuable insights on where your industry is going from a market, client and technology perspective. They inevitably see the world through a different lens. This needs to be reflected in your strategic plan for the practice. If done right, it can help position the practice for a future revenue uplift.
New skills and experiences required
The skills to become a new co-owner of a professional services practice are not necessarily the same discipline specific skills you need to be technically competent. This is true whether the discipline is accounting, architecture, law, engineering, or information technology. If your new co-owners are going to come from within your firm, you are going to have to help them succeed in all aspects of profitable practice management. Remember how awkward business development felt when you first tried it?
Have a helicopter view
Having a career model which gives a helicopter view of a team member’s possible career path and the milestones that are likely to apply helps give a sense there is a viable pathway to ownership. An individual’s career progression will be determined by their circumstances rather than the specifics of a career model. However, a model helps with team member retention and gives a stronger sense about their potential to become part of the most senior governance group. That career model also needs to signal there is a fulfilling role for those professionals who decide becoming a co-owner is not for them. There needs to be room in the firm for a variety of different professionals with a wide array of career aspirations.
Start now to monetise later
Want to monetise the value of your investment in your professional services practice? Start thinking about succession now. Succession planning gives you the option of leaving the practice on your terms. Designing a succession plan takes time and doing it properly requires a combination of strategy, tax and legal advice. Poorly planned successions can destroy the value of your brand and hard earned investment. Starting now means you will avoid the conflict of being close to retirement, but knowing you are responsible for the livelihoods of a group of loyal team members and feeling as if you have to keep on keeping on when you’d rather not.
In my next post, I’ll talk more about how to identify your next generation leaders. Stay tuned!
