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Time and time again, PSMJ research shows that transition planning is one of the biggest long-term challenges facing A/E/C firm leaders.

Many are struggling to answer the question of who will run their firm tomorrow. But, instead of taking action to develop and implement a proven transition plan, too many firm leaders are putting it off...instead staying focused on near-term client demands, keeping backlog high, and other day-to-day priorities. However, ignoring transition planning puts the firm's capitalization, clients, and employees in great say nothing of the evaporating shareholder value that is a near certainty.  

ACTUAL Transition Planning Mistakes Made By The Ill-Prepared

For more than 40 years, PSMJ's transition planning experts have been helping A/E/C firm leaders to avoid the land mines and capitalize on the proven strategies that work to manage affordability, leadership development, and all of the other facets of this complex challenge.  Many of these ACTUAL transition planning mistakes that we've helped to fix or manage likely seemed innocuous at the time, but the impact was severe.  

Here are some of the most common...and most damaging: 

  1. Relied on a poorly-written buy/sell agreement and ended up financing three competitors launched by former Principals.
  2. Failed to correctly plan 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 created 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.

How do you avoid mistakes like these?  The answer is actually quite simple.  You just need to take advantage of the learned knowledge and experience from those who have been there before you. Thousands and thousands of A/E/C firms have gone through ownership and leadership transition over the years.  Why would you attempt to write your transition planning starting with a blank sheet of paper?

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