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Business Succession: Lessons Learned from CCMI’s Recent Transition

11 Aug 2017 by: Matt Showley 

Alan Lakein said, “Failing to plan, means planning to fail.” This quote can be especially true when referring to business succession planning.  While CCMI has helped many clients through business transitions, we had the unique opportunity to plan and carry out our own succession plan.

With a lot of hard work, CCMI successfully transitioned from the founders to the second-generation owners on May 1, 2017.  Since all parties involved are financial planners, the transition should have gone smoothly, right?  Well, while we are happy to report that the succession plan unfolded without major incident and we met all of the target dates, there were plenty of lessons learned along the way.

Here are some of Matt and Brian’s lessons learned from the transition:

There is No Such Thing as “Too Early”

CCMI’s founders started their succession plan 11 years before the actual transition and it began with the hiring of Matt Showley.  Succession was openly discussed within the firm as time unfolded, then, about a year and a half before the actual transition date, all parties agreed to a Business Continuity Agreement and Letter of Intent, which allowed for the continuation of the business if something happened to the founders prior to the formal transition and it laid out the negotiated terms for the sale of the business.

About a year later, the formal definitive agreement was signed and it provided all parties eight months to complete the various steps of the transition.  Every time we contacted a banker, vendor, advisor, etc., the same response was received, “You are too early to begin the process.”  Our first lesson learned was that there is no such thing as “too early.”  Despite being “early,” we found that many of the parties we relied on to bring the deal to a close moved very slowly.  While not everyone is going to move at your same speed, don’t let them delay you by telling you that you are too early, otherwise, you may not meet your target date!

Know Your Breaking Points

While negotiating terms of an agreement, you have to know your breaking points.  In any negotiation, there are likely to be elements that one party is unwilling to accept.  The process of negotiating a deal that is fair to both parties will inevitably test these so called “breaking points,” which are the crucial elements on which one party insists on keeping or removing.  Being flexible in some areas and firm in others can be a good way to lead to a healthy compromise, but you must know your own breaking points before you enter the process so if the time comes where you should walk away from the negotiating table, you are prepared to do so.

Use Your Experts

While we have skills and qualifications to model many financial scenarios, we are aware that we are not experts in every discipline.  When we needed guidance, we turned to our group of experts.  For our transition experience, this was particularly helpful when it came to reviewing legal documents and selecting business entity structures.  Make sure you surround yourself with trusted experts . . . and take their advice!

Expect Surprises and Be Resourceful

While few, there were surprises that emerged along the way.  Even if you start early and are meticulously detailed, expect surprises.  It is the way you respond to those surprises that will ultimately determine your success.  When we experienced a surprise that impacted all parties, we jointly looked at alternative ways to accomplish our objective and we were able to successfully navigate to the closing of the transaction.

Everything is Negotiable

Finally, remember that everything should be negotiable in a transaction.  If you know your breaking points and your objectives, you can determine what is most important to you when finding the compromise that works for all parties involved.

Overall, CCMI’s transition from the founders to the second-generation owners went smoothly after many years of planning.  The lessons learned have been valuable and will allow us to help clients understand potential challenges as they go through their own transitions.  If we can be of assistance to you or someone you know who is going through the business succession process, please contact the CCMI team.




CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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