Planning for the next generation of leadership at an agency can be a combination of excitement, uncertainty and lots of critical conversations. In our next series of blogs, we’ll look at the who, what, where, when, why and how of succession planning. We start off with a question many have yet to ask—why?

Why Start Succession Planning

The main reasons to create a succession plan are: relationships, money, and your business legacy.

Relationships are a big part of your agency’s success, and planning for your departure will make it easier to maintain these connections. Whether it be family, employees, or clients, making a plan means everyone will be ready for what happens next. This sense of readiness can establish clear expectations and address the emotions that are part of every agency transition.

Money is, of course, a huge portion of succession planning. There are certain tax implications attached to the different ways to transfer ownership of your agency. Plus, some ways will leave you with more cash than others. Your financial goals may differ depending on whether you’re selling to a family member, employee, or to someone not associated with your agency.  It’s important to take your time researching the different options so you gain the most from your agency’s transfer or sale.

Legacy brings a sentimental piece to the table. You have invested a lot of time and energy in your agency, and you want it to continue for years to come. By planning ahead you can ensure your wishes are instilled in the future of your agency.

How to Start Succession Planning

The best way to start your succession planning is to consider your “exit strategy” options. These include:

  • Transferring to family members
  • Selling to family members
  • Selling to one or more employees
  • Selling to an outside third party
  • Selling to other co-owners
  • Retaining ownership, but moving to a passive owner role

Each scenario has its own benefits and drawbacks. For example, transferring to a family member and retaining ownership mean you may continue to have influence on your agency’s operations, but you will have little cash gain. Selling certainly means a cash gain, but requires letting go of influence.

Think about what elements are most important to you, and begin putting together your own succession plan. As part of your decision, look into the marketability of your agency and the tax implications related to your options. The Center for Exit Planning offers great resources in this arena.

Get more tips on succession planning from the SIS blog or connect with colleagues via our Partner XE user community. As always, contact us to share your comments and concerns – we love to stay in conversation!

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