Balancing Longer Term Succession Planning

Recently we were working with a client who had the potential opportunity to acquire another practice, however the transactional timeframes of the vendor were longer term, over say five years or so. Such scenarios are generally less common within the professions, we more so hear of the practice or practitioner that wants to be sold today and gone tomorrow. But, in this case, what was really exciting about this situation was that the vendor had a longer term view of sourcing the right party to take over their practice and clients. I’m sure they also appreciated the fact that they also have the opportunity to perhaps improve the practice where possible, which would translate into a better price. There would be an extra opportunity to successfully transition the clients across to the new party. So, both parties were conducting some initial investigations and enquiries to establish whether each were a good potential suitor. Both parties essentially had the time to perform some planning and preparation, every adviser’s dream when it comes to succession.

During a discussion with our client around some initial points of consideration it reminded me of the succession approach that was taken by our family doctor which I shared during the meeting. Our family doctor’s succession went essentially like this. He had been working from a house along with his wife, who was also a general practitioner, for many years. I’m not sure if they owned the house or rented it. It was only the two of them at the clinic, perhaps with a couple of administrative staff. Both were beginning to age, and patients, I’m pretty sure, were wondering how much longer this husband and wife team were going to continue.

Then probably around three or so years before the couple finally retired, the two doctors relocated to a local clinic, just around the corner. It was easy and simply, travel time was essentially the same, and whilst there were other doctors around, we continue to be treated by our family doctor. Now, not being someone who visits the doctor often, the next time I rang to make an appointment, I was advised that my doctor has finally retired and his patients were now being serviced by this other doctor. Great, okay that’s fine, I remember thinking, I’ll give this new guy a go given they’re still in the same location, it’s easy and convenient and known. So, I continued to visit my doctor’s replacement for a year or so, and whilst he didn’t have the same ‘bedside manner’ as my original doctor, the process tended to continue on without difficulty.

A short while after that and my prior doctor’s replacement had been replaced by yet someone else. Again, still in the same premises etc, so again I continued on to book appointments with that new doctor. His ‘bedside manner’ was better, however it was becoming increasing more difficult to obtain an appointment in a timely manner and you were waiting longer and longer in the waiting room beyond your initial appointment time. The last time I visited that doctor, I was meant to be the first appointment after lunch, and I was still waiting an hour beyond my appointment time. The doctor wondered why my blood pressure was through the roof by the time I got into see him, so I kindly shared my experience.

That was it, I was gone, I had had enough and was on the search for a new doctor, which is difficult when you don’t frequent the doctor often, and you’re perhaps trying to break in as a new client within an already well established clientele. Unfortunately success has yet to be found and I’m still endeavouring to source a doctor that works well for me.

However, what can be learnt from this experience are the benefits from preparation, planning and longer term succession. As advisers, we try to encourage the determination of business value well in advance of a business owner’s exit, which allows for business improvement strategies to be implemented should a better outcome be required by the owner prior to their retirement. Of course, this means the owner needs to know how much they need for live off post retirement. The process also involves the identification of potential successors, and so much more. What was key in this instance with my doctor’s succession was the ongoing quality of service. This changed somewhat, and not for the better, which placed relationships at risk. I remember one wise purchaser telling me that the best way to retain clients that you have acquired is to service them better than their previous provider. Not a bad motto to implement if this can be quantified.

For further assistance with your succession planning, please call us on (02) 9233 4333 or e-mail

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