Dos and Don'ts for Transition and Succession Planning

Streamline this process by understanding the following dos and don’ts for transition and succession planning:

Dos for Transition and Succession Planning

Start Planning Early
Creating a succession plan isn’t a last-minute thing. Your private practice didn’t achieve success overnight. Likewise, changing ownership also takes time. Planning early can help you identify potential successors, set clear goals, and address challenges without unnecessary pressure. Proper planning also maintains staff and client trust. They’ll see you’ve taken a thoughtful approach to safeguarding the business’s future.

Identify the Right Successor
Choosing a successor is an important decision in transition planning. A successor should have the values, work ethic, and leadership skills necessary for continuing the practice’s success, whether they are a key employee, a family member, or an external buyer. Conduct thorough evaluations and interviews to ensure the successor aligns with your business’s mission and vision.

Document Key Business Processes and Relationships
Take stock, chart procedures, and keep thorough records. A successful transfer requires detailed documentation of day-to-day business operations, client relationships, and key processes. Outline workflows, supplier contracts, billing systems, and marketing strategies. Creating a clear road map equips your successor with the tools and knowledge needed to run the business. Complete documentation also makes your practice more attractive to potential buyers as it minimizes disruptions during the handover.

Communicate Transparently With Staff
Your employees are the backbone of your private practice. Naturally, sudden news of an ownership transition is unsettling and can affect emotions and productivity. Share your plans with staff at the right time and in the right way. Doing so will ease concerns and build confidence in your leadership throughout the process. Include employees in key discussions early on and provide regular updates on the transition timeline. Doing so fosters trust and ensures your talented team remains engaged during the transition.

Seek Professional Guidance
Struggling to find the right successor? Enlist a broker to sell your business. Navigating the complexities of succession planning can be overwhelming, especially if it’s your first time. Seeking professional guidance from legal advisors, financial experts, and other business specialists makes the process go more smoothly. Find an experienced broker. They excel at finding qualified buyers, negotiating terms, and ensuring the transition goes well for all parties.

Don’ts for Transition and Succession Planning

Don’t Wait Until the Last Minute
Good things don’t always come to those who wait. Procrastination can cost you. Waiting until the last minute reduces your options for potential successors, leaves less time to plan, and places unnecessary strain on your practice. Rushing the process may also result in selling your business for less than it’s worth. Instead of waiting for retirement or unforeseen circumstances to force your hand, prepare a succession plan no more than five years before your intended departure to ensure you have ample time.

Don’t Overvalue or Undervalue Your Practice
Seek expert valuation of your practice and all its assets. Having an accurate valuation of your private practice is critical during negotiations. That said, be accurate, and don’t exaggerate or sell yourself short. Many business owners inflate their expectations or undervalue their legacy due to emotional attachment. Find and work with a reputable valuation expert or a licensed broker who will objectively assess your business’s market worth using industry-standard methods. This assessment ensures you’ll receive a fair price reflective of your efforts and investment.

Don’t Overlook Transition Timelines
A private practice ownership transition isn’t a one-day event; it’s a process. Overlooking the importance of overlap between outgoing and incoming leadership creates challenges for staff and clients alike. Establish a seamless transition, staying involved for a predetermined period to introduce the new owner to key stakeholders and present guidance as they acclimate themselves. This overlap builds trust and loyalty among your team and clientele.

Don’t Ignore the Tax Implications
Selling or transitioning your private practice comes with tax consequences that significantly affect your personal finances. Failing to consult a tax advisor will lead to unpleasant surprises. Professional tax planning helps you reduce liabilities and maximize financial rewards. Advisors also help structure the deal to benefit your successor.

Don’t Neglect Your Legacy
Your private practice is a reflection of your hard work and dedication. A thoughtless transition damages its reputation. Failing to choose the right successor or cutting corners in the planning process harms relationships with clients and employees. Protect your legacy by ensuring the succession plan honors your practice’s commitment to delivering exceptional service and maintaining ethical business practices.

Justin Farmer is a lawyer, licensed real estate, certified business intermediary, and entrepreneur. He formed Private Practice Transitions, Inc. in 2012 after going through the arduous task of vetting a private practice that he intended to purchase. Justin has combined his passion for business, entrepreneurial spirit, and business experience to form Private Practice Transitions, a full-service business brokerage assisting the owners of accounting and tax firms with preparing, valuing, marketing, and selling their businesses for top dollar.