4 min read

Is Succession Planning On Your Radar?

Feb 25, 2015 6:30:00 AM

Today we’re sharing insight from guest blogger Ron Turpin, Gibson’s CFO and Fort Wayne Market President. We hope you enjoy Ron’s perspective and wisdom.

Succession_PlanningAs the Baby Boomer generation continues to enter the retirement phase of their lives, the need for effective succession planning is becoming more and more critical. This is particularly an issue in the service industries, where the value of your asset is based upon intangibles. These would be comprised of many things, including:

  • The relationships you have built over years with your clients;
  • The trust they have put in you and your expertise to help them in their time(s) of need;
  • Your intellectual capital earned over years;
  • And your brand within the community.

To maximize the value of these items, as well as the protection of your clients’ interests, it is critical to design and implement an efficient and effective succession plan.

Even though the need for succession planning is clear, it is not always utilized by business owners. According to the AICPA website, as of 2012, only 46% of multi-owner (accounting) firms and 6% of sole practitioners have a written succession plan. For financial planners the number is even lower; according to a 2013 article in the Financial Advisor only 29% of financial advisors had a well-defined business succession plan.

These statistics are not surprising to me as I have experienced it in my own professional life. For the last 14 years I worked closely with highly successful financial planners, many times talking with them about their business plans and what their aspirations for the future were. During that time, I discovered these consistent steps to the succession planning process:

Step 1 – Do You Have A Current Business Plan?

You would be surprised at the number of successful business people who have not put a plan together. It doesn’t have to be super-detailed, but it should involve your revenue and expense goals for the coming year, and the plan on how to achieve it. The best plans don’t just look at the current year, but go out for at least 5 years.

Most plans should be focused on three levels:

  1. A "worse than expected" scenario (i.e. business is down 20%);
  2. An "expected" scenario (revenue and expenses go according to plan); and
  3. A "better than expected" scenario (revenue is 20% higher than expected).

To do this, think about your current client listing and economic conditions. Will there be significant changes to either during the time horizon being looked at?

Having this plan will help answer the next question …

Step 2 – At What Point Do I Want To Start Transitioning The Business To Someone Else?

A business plan will help direct you as to when the right time to start looking for that next generation of leader should be.

Step 3 – How Do I Want The Transition To Look And How Do I Value My Practice?

You need to answer the question of how you want your succession to look. Do you want to sell and walk away from the business, do a long-term succession, or something in between? Knowing this and the time of when you want to start transitioning will help show you what the plan will look like. Additionally, there are a variety of resources available to help value your practice and the most effective way for you to realize that value (lump-sum payment, over time in payment etc.).

Step 4 – Where Do I Go To Look For This Successor?

How you want the transition to look will help guide as to where to find your potential successor. Resources like the CPA Center of Excellence® and peers in the CPA profession can help you with planning and to look to find the right person for your needs. For those in other industries, there are similar resources to help; look at trade publications and online resources in your industry. There is no one-way to create a plan, the key is to just start. 

I would also encourage you to start this planning regardless of your stage in life. An effective succession plan is a critical piece of risk management for your business and should be planned as carefully as you plan for other risks. We typically think only those who are within 5 years of retirement should have a succession plan. My experience tells me you should always plan for the unexpected. Part of being a smart business owner is to make sure that you and your family are protected. A key piece of this is planning for the future.

If you haven’t yet started down the path of a succession plan, I would encourage you to do so. There is no better time than the present.

 

This content was written and shared by Ron Turpin.

Turpin_RonRon is a principal, Chief Financial Officer, and Fort Wayne Market President for Gibson. He is responsible for providing executive leadership as a sales, culture, service, and brand champion to establish Gibson in the marketplace as the dominant commercial insurance, employee benefits, risk management, and trusted business advisor. Additionally, he oversees the ESOP and 401k plans, forecasting and budgeting, developing key stakeholder relationships, and serves as a member of Gibson’s Executive Leadership Team.

Prior to joining Gibson in 2015, Ron was Vice President of Finance at Lincoln Financial Group where he worked for 14 years in a variety of leadership positions in the Retail Sales division. Throughout his career at Lincoln he was recognized for his results-oriented, team-focused leadership and willingness to solve the unsolvable problem while never losing sight of a serve first philosophy.

Connect with Ron on LinkedIn and Twitter.

Topics: Risk Management
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Written by Gibson

Gibson is a team of risk management and employee benefits professionals with a passion for helping leaders look beyond what others see and get to the proactive side of insurance. As an employee-owned company, Gibson is driven by close relationships with their clients, employees, and the communities they serve. The first Gibson office opened in 1933 in Northern Indiana, and as the company’s reach grew, so did their team. Today, Gibson serves clients across the country from offices in Arizona, Illinois, Indiana, Michigan, and Utah.