Succession planning is vital to maintain the stability and success of your legal firm – ensuring that your clients and the wider firm are taken care of should you decide to retire or if you are suddenly incapable of running the practice.
But did you know that a survey revealed that only 37 per cent of law practices were creating or already had an official succession plan?
It can be difficult to think about passing on your firm, especially with the many challenges that directors and partners can encounter when creating a succession plan.
However, having a clear strategy in place for both a natural progression or sudden illness can give you peace of mind that your client’s legal matters and firm’s future are in good hands.
To help you prepare a succession plan, we look at why you should create a plan for your legal practice and what you should consider.
What is succession planning?
Succession planning is a strategy for identifying future leaders at a company and preparing it for all contingencies by developing high-potential workers capable of advancement.
Such planning requires rigorous preparation, well in advance of planned retirement, transfer or sale, and judgement with the support of an experienced advisor that can assist owners along the way.
Why should your legal firm create a succession plan?
Succession planning within a law firm is vital for unforeseen events, just as much as it is for expected events, such as a sudden illness, family emergency or death.
- To ensure your clients’ legal matters are taken care of.
- To ensure your business and employees are taken care of.
- It can set you up to enjoy your retirement without having to worry.
Below, we have listed some key considerations when it comes to succession planning
Taking time to create a proactive plan:
Legal firms should have short, medium, and long-term plans in place for succession that include provisions for a sudden illness or death – something that has only become more relevant over the last year due to the Coronavirus pandemic.
Internal succession candidates, pin-pointing training and qualifications:
Consider passing on your legal firm to experienced and qualified individuals, whether they are inside of the family or not. Sometimes solicitors fail to spot ideal candidates right in front of them.
Do not discount other promising candidates and rather look for those who display the skills necessary to thrive in high positions – regardless of their current title or relation.
Treat a family member as any other employee, ensuring they have the skills and passion to lead the businesses when they are gone.
Invest in candidates’ training where necessary or support for them to gain experience elsewhere first.
Looking externally:
Although there are clear benefits to selecting internal candidates, sometimes it may pay to bring in external candidates as partners or directors
In some circumstances, new partners or directors may be able to bring new investment to the firm or a fresh approach
You may find that instead of passing your position to a single person that a merger or acquisition by another firm may offer more advantages
Planning the transfers of partnerships or directorships:
There are several tax implications to consider when passing ownership of a firm to others
By considering these in advance it may be possible to pass shares or a partnership to your successors in a more tax-efficient manner
To find out more on succession planning and how we can help, contact us today.