How To Create Successful Agency Succession Planning

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Think of your business as a relay race, and youve just run a great first leg. Now what? Will the next runner drop the baton? Is there even a next runner? Researching, developing and executing a thorough succession plan keeps the relay running forward when you plan to exit the race, or if your exit comes unexpectedly.

We all know that large corporations spend considerable time and resources on succession planning. Remember when legendary CEO Jack Welch retired from GE? There was no mad scramble for the top spot. There was an orderly transition–for GE employees, for GE customers and, importantly, for GEs stock price. GE had a thorough succession plan.

The goal for any succession plan should be to provide the road map for a business to continue as a successful operation in the event of its leaders departure, whether that departure is planned or completely unexpected due to a life-threatening experience, such as a heart attack. Its no less important for senior agents to have a succession plan than it is for major corporations.

For you, a successful succession can preserve the value of your practice and provide for you in retirement or for your family following your death. For your clients, it can provide the ongoing support and services necessary to help them meet long-term financial goals. And for your successor, it can greatly increase the probability of success.

With business succession planning, just as in the relay race, youre passing the baton–youre passing the responsibility for running a business and youre passing the trust, respect, and goodwill that youve cultivated with your clients. To do this successfully, try following these basic, proven steps:

1. Define your objective. Do you want to retire from your practice in 10 years? Five? Two? Do you want to keep a hand in the business or leave completely? Also, because accidents happen, be sure to address the contingency that today, tomorrow or the next day will be your last.

2. Appraise your business. Since your own assessment is necessarily biased, its a good idea to invest in a formal valuation of your practice. That way, an objective professional will have established the starting point for negotiations with your successor.

3. Find the right successor. Networking has been an important part of your business and it will be a valuable part of your search for a successor. Work with a local agency or company leadership and ask friends or business associates for suggestions and referrals. You can even use direct mail, the Internet or advertise for a successor.

Once you identify some candidates, youll need to make a choice. Its okay to go with your “gut,” but its better if you have a set of formal criteria. To start with, some of the questions you may want to ask yourself include: Is this candidate responsible? Involved socially? Well educated? Well respected? Trainable? Energetic? Disciplined? Goal-oriented? Self-motivated? Ethical? Does this candidate have good communication skills? Good people skills? Is there a history of achievement?

Ask these questions about yourself and you may come away with a better understanding of what it takes to succeed.

4. Divide the succession into parts. A succession isnt like selling a used car–you dont just hand the keys to the buyer and hope that you never see him again. Successful transitions usually include a “trial period,” a “transition period” and a “succession period.” During the trial period, youre helping your successor become familiar with your business; youre constantly evaluating the progress of the plan and making necessary adjustments to the plan.

During the transition period, you begin to turn over the reins. You can focus on managing your top clients and mentoring, while allowing your successor to create new business, service existing clients, and manage goals and objectives.

Finally, during the succession period you “let go.” Youve handpicked this person, youve mentored this person and youve helped your clients to trust this person as they have trusted you. You have executed your succession plan; now, its time for you to pass the baton.

For every general step weve described here, there are dozens of smaller considerations–legal, financial and otherwise. You will value the support of a strong company who can provide a program designed to help you formalize the succession planning process and ensure that your plan is both thorough and complete.

And one last piece of advice: Start now!

Ralph L. “Chip” Crews, CLU, ChFC, is senior vice president – career agency system for the Penn Mutual Life Insurance Company, Horsham, Pa. He can be reached at Crews.Ralph@pennmutual.com.

Lawrence M. “Larry” Halperin, RFC, is president and CEO of Halperin and Company, Warwick, R.I., specializing in personal and family planning, wealth accumulation, estate planning, and business succession planning. He can be reached at Halperin.Larry@pmlmail.com.


Reproduced from National Underwriter Edition, February 10, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.