Mistiming Your Exit Won’t Necessarily Result in a Shorter Transition Period

Mistiming Your Exit Won’t Necessarily Result in a Shorter Transition Period
Trying to get the timing right for your departure from practice is often one of the most difficult aspects of succession or sale. People often say that by the time someone decides to resign, leave or otherwise change their circumstances, the decision in reality was made at least six months prior to the actual verbalisation of the intention. We experience this all too often during practice or equity sales, generally in one of two forms.

Number One …

Where an equity holder is departing the firm and is selling their equity to either another partner or an employee within the firm, such activities still require a proactive approach to the transitioning of client relationships.

It doesn’t really matter whether the departing partner has given six months or three years notice; activities to start cementing client relationships with other representatives within the firm must start from day one rather than being left to the last few weeks or months of their presence within the firm. Whats even worse is if its left till after they have actually retired. The latter approach is likely to spell danger for any firm, particularly where the individual departing is a figurehead within the firm and/or has significant connections with a reasonable proportion of the overall client base.

Number Two …

The other scenario is where a practitioner is selling their firm, having finally decided to sell, actually realises that they wanted to be gone from the practice quite some time ago.

When talking about or considering the post settlement transition, they now endeavour to negotiate as shorter period as possible before they are completely removed from the day to day involvement. They don’t necessarily mind being contacted for some time after should any queries pop up, but they no longer wish to be committed to participating in regular client meetings. For practitioners who find themselves in these circumstances, the common transition period is typically 6 months to a year. We have heard requests for as long as three years; the shortest we have ever experienced is probably three months.

However, the concept of a walk in, walk out scenario is not something we have experienced and in our view will dramatically reduce the price and/or upfront payment sum where requested. So be prepared to compromise where your participation in the transition process is shorter rather than longer.

Essentially, for those heading out the door, please note; just because you wanted to be ‘gone’ six months ago doesn’t mean the purchaser should accept anything less than a fair and proactive hand over or transition. If this isn’t to be assured, then be willing to accept a lower price or value.