Click here to subscribe to The Zweig Letter for free and receive business management advice from industry experts to your inbox every week!
Transition planning takes time, and the results are gradual – but if you do it right, the rewards are endless.
Succession planning, reorganization, and leadership development all lead to one thing: ownership transition. This is one of the most pressing issues that architecture, engineering, and construction firm leaders are facing today. According to Zweig Group’s 2022 Principals, Partners & Owners Report, ownership/leadership transition is rated the second most urgent challenge principals have to deal with.
Transition planning takes time, and the results are gradual. If you do it right, the rewards can be incredibly fulfilling, and if you do it wrong, you can degrade your firm’s value and the quality of your life. This article is not a step-by-step process of how to create a successful ownership transition plan or the tactics needed to develop your second tier of leadership, but rather an overview of the general phases of transition firm owners go through, and some keys to success:
-
The beginning. This phase can be difficult because it requires a great deal of foresight and reflection. It can be overwhelming to get started and is oftentimes met with hesitancy, confusion, and sometimes anxiety! These reactions are completely normal and are just a few of the reasons many firm owners wait too long to get the program rolling.
Depending on your overall timeline and progress, getting started can be stressful – especially if you are late in the game. You are tasked with picking the right successor(s), developing and training them appropriately, helping them forge strong relationships with your contacts and key clients, determining a valuation methodology, and finding a way to entice them to buy into your firm. There are a number of components that are required to make this a success. Setting some parameters for negotiating the buy-in for the upcoming principals, figuring out how to finance the transition, and managing risk for yourself and your successors are all additional layers that have to be addressed. This all has to be done while making sure the current day-to-day operations of your firm remain profitable and efficient. What an endeavor! - The middle. Transitions take a long time. They take five or 10 years – or longer – just to allow the overall debt obligation to get satisfied. Regardless, if you put it off until you are 65 or decide to prepare early – a starting point will arrive. If you want more work and stress on your plate, start ownership transition later in your career. If you want to set yourself apart and have better peace of mind for your personal well-being (and your firm’s!), start with the end in mind. The level of planning you do ahead of time, and your ability to remain flexible along the way, allows you to reduce some of the friction associated with transition. Having more time on the clock also gives you the ability to course-correct and make adjustments that will surely happen along the way. Acknowledging this in the beginning and handling this with focus and purpose will better orient you for this phase of transition planning.
-
The end. This is where you can define your legacy. The mechanics of the transition plan have been in place for some time, the relationships with leadership have solidified, and the firm’s management is in focus. You have the option to be repurposed in the firm and change your role or to simply exit. Ideally, the successor(s) you put into place are running the show and continuing your legacy. This is where great satisfaction (and dissatisfaction!) can take place. This is the why. Understanding and coming to grips with how you plan to exit is very important. It can hurt and leave scars, or it can be one of the most fulfilling times of your life.
If a well-thought-out plan is in place for yourself and your firm, this phase can be seamless because you have taken the time to realize how life will look. Since the expectations were set in the initial phase(s) of your transition planning, you already had the time to prepare yourself and the firm. This is where you let go and enjoy a new chapter of your life.
Transition planning is very interesting, because you have the opportunity to design your end point and propel individuals in your firm to start their own new beginnings. You must start with the end in mind. This is ultimately the evolution of a firm principal. You have to understand your importance in building the firm up, but also have the humility and self-awareness to know that you won’t always be a principal at the firm. There are so many variables, but it’s a worthy endeavor to pursue because it teaches us the art of letting go for others to succeed. We have to close old doors in order for new ones to open.
Ezequiel Tovar is an analyst within Zweig Group’s ownership transition team. Contact him at etovar@zweiggroup.com.
