ONE PERSPECTIVE: Succession planning for you and your firm

By Thomas Pursel

Despite the importance of succession planning, it's all too often overlooked by busy lawyers who are focused on day to day client work and growing their practice. But a strategic succession plan impacts the current and future state of your business, and should be a priority for business owners of any kind.

While practice partnership agreements often include some of kind of succession plan, it's important to revisit it as you start to consider leaving or selling your practice. And if you're a single practitioner or don't already have something in place, taking the time to consider and plan your next steps is vital to success. To help adequately prepare for a major transition, whether you're nearing retirement, closing or selling your practice, here are a few exit strategy tips for you and your firm.

Start Early

Just as it takes time to grow your practice, it also takes time to plan your exit from it, typically several years. You can start by identifying when and whom you'd like to pass on your business, keeping in mind that it takes many businesses at least three to five years to transition successfully. Allowing yourself this time can offer greater flexibility to consider multiple options for how you'd like your practice to be handed off, including who will continue to serve your clients.

Seek expert advice

Throughout the years, you may have been the one offering the expert advice to clients. But as you begin to think about your exit strategy, you'll find there are many components of a formal succession strategy, each requiring a specific focus -- from a business attorney to tax advisors and accountants to a financial advisor. Working with a team of experienced advisors can help ensure all aspects of the transition are covered and executed effectively to balance both the current and future needs of your practice and yourself. It can also allow you the time and flexibility to continue to focus on your business and client needs in the present.

Assess your goals and objectives

As you begin to develop your succession plan, keep in mind what your goals and objectives are, beyond just the bottom line. While it's important to consider your short- and long-term financial needs, you should also think about your vision for the future of your practice.

Factors to consider include whether or not you'd like to bring in or sell to someone from the outside to help ensure the future of the business, or if your family will continue ownership. If your family will stay involved, it's important to define how involved you and your heirs will be. Whether you choose a family member, an outsider, or someone from within your practice to become your successor, the more time you have to transition the skills and leadership abilities necessary to take over your practice, the more prepared your clients and successors can be.

Once you've identified what you want for yourself and your business, consider how your family and community may factor in. Do you want to pass wealth to the next generation or build a charitable legacy within the community? By getting a head start on your estate planning strategy, you can try to maximize wealth for the next generation or the philanthropy of your choice.

Write it down

You know the importance of written contracts and statements, and a succession plan is no different. With so many parties to consider, having a succession plan in writing should make arrangements easier to execute. It's also a way of keeping track of your strategy and accounting for missing factors.

Remember, a succession plan does not have to be daunting but that it's an ongoing process of anticipating your future needs as well as of those around you. With an early start and the right support, you can try to make sure that all parties involved-including your clients, your successors, your family, and yourself-are prepared.

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Thomas Pursel is Private Wealth Advisor for the Merrill Lynch Private Banking and Investment Group in Detroit. He concentrates on the special needs of high-net-worth individuals, corporate executives and small to mid-size businesses. He can be reached by telephone at (248) 655-4026 or via e-mail at Thomas_Pursel@ml.com.

Published: Fri, Apr 20, 2012

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