A poorly designed and/or implemented Ownership Transition Plan has led to the demise of many A/E/P practices. We have seen this more even in economically challenging times when firms are sometimes forced to sell because of iniquitous programs, deferring program design and implementation until the major owners have advanced in age, and/or there is no strong second tier to lead and manage. Share prices can be so high that they drain the company of much needed capital to remain financially strong or discourage new owners from purchasing stock, deferred compensation programs that result in unfundable debt or conflicts that develop with lack of education and communication. Ownership Transition Plans are dynamic and need to be revisited periodically especially with firm growth. A plan to work effectively must be affordable for the company, include an exit strategy and “ramp down” plan for those who want to retire and get their money out of the practice and have an affordable share price for new Principles or existing owners who are ramping up their investment in the firm. To have a legacy practice the Ownership Transition Plan is crucial.
- Ownership transition methods and options
- Identification of plan key goals and objectives
- Assessment of current plan
- Review of financial statements in coordination with outside CPA
- Develop plan concepts
- Leadership management transition and succession
- Creation of desired owner criteria, performance metrics and selection process
- Candidate interviews
- Financial modeling to ensure fundabilitity of the program
- Firm valuation
- Options for financing
- Incentive and accrued compensation plans
- Profit allocation approaches
- Share offering documentation and coordination with legal counsel
- Internal transition versus external sale assessment
- Firm Vision, long-range and strategic planning
- Education and communication programs
- Share pricing
- Facilitation of the ownership transition process and conflict resolution if issues develop
- Assistance with formal share offering