It’s inevitable…someday you will leave your firm. While planning for a leadership transition may seem like a daunting task, it is essential to ensure that both you and your firm are able to move forward successfully.
Below are examples of the most common and most damaging potential mistakes during an ownership transition, if the process is not properly managed.
1. Relied on a poorly-written buy/sell agreement and ended up financing three competitors launched by former Principals.
2. Failed to plan properly for stock redemption liabilities and created a “bubble” that nearly bankrupt the company.
3. Used an ESOP as a place to “dump stock” and the result was that owner worked ten years longer than she wanted to.
4. Sold the company to an ill-prepared next generation and ended up having to re-join firm to stand any chance of getting his note paid.
5. Created poorly-structured transactions that caused huge unexpected tax liabilities for incoming owners.
6. Used equity-based incentive compensation to finance transition and inadvertently created a major capitalization problem.
7. Relied on general legal counsel to draft elaborate transition plan that ended up being of zero interest to any incoming owners.
Planning for a successful ownership transition is one of the biggest long-term challenges facing A/E firm leaders today. The next challenge is how to take such a complex and multi-dimensional process, and translate it into clear steps that you can actually implement.
If you would like to learn more about ownership and leadership transition planning, please check out some of the resources we offer.
A/E/C firm owners who fail to plan properly on ownership transition are leaving the firm exposed to the potential for undesirable outcomes - including significant loss of firm value, brand equity deterioration, and loss of market position. Instead of being another ordinary seminar teaching you how to develop a plan, PSMJ's A/E/C Ownership & Leadership Transition Roundtable takes you through virtually every transition planning obstacle you will encounter (from affordability to leadership development and more) and how to overcome it.
PSMJ's complimentary e-book About Ownership Transition goes into real tangible insight and advice on:
How to start planning for transition on the day you start your firm
An understanding of how transition effects every management decision you make
Common pitfalls in the transition process and how to avoid them
How to keep your architecture or engineering firm focused on its vision through a transition
You also might be interested in these ownership transition related blog posts: