Becoming Succession Ready: Your Office/Your Lease
Updated: Mar 12
Two items that are worth addressing now as you approach your succession journey are:
Your office lease; and
Your office appearance
The ideal scenario might be for you to remain in your office through your succession until the end of your final earnout / deferred payment. One of the factors that can cause client/fee leakage (and ultimately a reduction in your financial gain) is changing office location. Suppose the business can remain in its current place through your succession. In that case, this will likely enhance your ability to maximise any deferred payment/earnout payments as part of your final settlement.
Ultimately, flexibility wins out over all else as you approach your practice succession. If you have control/ownership of your office, perhaps you can be flexible with the terms of any lease arrangement with a potential successor. If an independent third party controls the lease, there will likely be less flexibility. Typically any existing lease will be assigned to your successor at your landlord's discretion.
When your lease is with an independent third party, the perfect arrangement is for your lease to run out just as your final earnout / deferred payment is completed, and you no longer have a financial interest in your business. If the new owners wish to relocate the business, they can do so. They can do so if they want to remain in the current location. To have the business stay in its current place, up to the end of your earnout-out / deferred payment period, significantly reduces your financial risk and assists your successor in getting to know your clients in a familiar environment.
Assuming you lease your office space, some thought and planning will be invaluable in your upcoming succession journey. We have seen numerous examples where succession deals have fallen because of a lengthy existing lease. Ultimately, the greater the flexibility of your office space, the better to appeal to the broadest market.
The most limiting scenario is re-signing to a new lease before you embark on your succession journey. In some cases, this option cannot be avoided, but at the very least, it would be helpful to consider other options before committing to such a pathway.
We have all heard the saying, 'First impressions count. Well, they do in spades when it comes to your office appearance. If you have a neat, tidy, professional office, this will set the right tone for future successor meetings from day one (in a positive sense). Conversely, if you have a tired, untidy, unruly-looking office, again, this will also set the tone for future successor meetings (in a negative sense). The wrong office impression may lead to concerns about the quality of your client base, the quality of your staff, the quality of your files, potential risks, and the list goes on, all of which will impact the price of your business in the eyes of your successor.
The simple advice is this, if your office needs a spruce-up, take immediate action now and do what you need to do to raise your office presentation to a higher professional standard. Update your office, invest in new furniture and plants, and remove excessive paper and client files. Your investment will be well rewarded when you sit across the desk from your future successor.