Updated: Nov 10, 2021
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, right up to the end of your final earn-out / deferred payment. One of the factors that can cause client leakage/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, as you approach your practice succession, flexibility wins out over all else. 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 there is an independent third party who controls the lease, it is likely there will be less flexibility. Typically any existing lease will be assigned to your successor at the discretion of your landlord.
In the situation where your lease is with an independent third-party, the perfect arrangement is for your lease to run out, just as your final earn-out / 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. Whether they want to remain in the current location, they can do so. To have the business stay in its current location, 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 considered thought and planning will be invaluable in terms of your upcoming succession journey. We have seen numerous examples where succession deals have fallen through because of a lengthy existing lease. Ultimately, the greater the flexibility with your office space, the better to appeal to the broadest market.
The most limiting scenario is when you re-sign 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 some other options before you commit to such a pathway.
We have all heard the saying, ‘First impressions count. Well, when it comes to your office appearance, they do in spades. If you have a neat, tidy, professional office, then this will set the right tone for your 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, 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 some new furniture and plants, remove excessive paper and client files. Your investment will be well rewarded when you are sitting across the desk from your future successor!