Many an ad agency owner flies solo all through his or her career. This may be due to a number of factors, sheer passion for the work and the business they have built chief among them. But failing to plan for your exit from the business, especially an unexpected exit, can leave your “baby” high and dry—as well as your employees, clients and family.
For agency owners with family in leadership positions in the business, the business will likely face fewer traumas if you suddenly are gone than an agency where no heirs are involved, nor a successor in place.
If it makes it easier to approach the problem, treat your succession plan as simply a guide for what you will do to retire from the business. Will you sell the agency, and if so, to whom? Are those people in place within the agency? Are they in leadership positions, and are you training them to take over? Do you know what your agency is worth, and do you confirm that valuation annually? Have you discussed how the transition and payout will occur, and when you plan to start easing out the door?
We’ve written elsewhere about the details of building a succession plan. Here we just want to address the key element: determining who will take over in the event of your death or sudden exit from the business. Failing to name a successor or heir is the greatest guarantee that your business will not survive your exit.
Sole Successor or Management Team?
Appointing a single successor can work if that person is well-established within the agency’s leadership, and has the respect and trust of the employees and your clients. Make sure that they know your bankers, legal advisors and other key contacts, and that they fully understand the risks and expenses associated with owning a smaller ad agency.
Do all you can to determine if they have the right personality to lead. Do they have great people management skills? Are they realistic about all that is involved in running an agency, and able to make well-reasoned decisions? If you have such a person, lock them in to your succession plan and start providing them with chances to lead now, while you are available to mentor and advise them.
Another option is to appoint a team of successors who can function as partners after your exit. Take legal advice on how to set up a succession plan to include your future company officers. Start by creating a management team within your current agency structure, and a rough timetable for how they will assume greater control of daily operations. Who will be the key decision-makers? How will you apportion shares or stock ownership?
The team method assumes that you have good people in place right now—leaders who are terrific at what they do, deeply bonded to the agency’s ongoing success and viability, and seeking the opportunity to become part owners of the business. Critically important is their support of one another. A bonded team that works well in harness is just the ticket for team succession.
If you do not have these people in place right now, start hunting for candidates who may want to become the agency’s future owners.
Finding an Outside Successor
If you lack an internal candidate or team willing and able to assume leadership in your absence, your options narrow to an outside candidate, or selling the agency to another firm or holding company. The latter can be problematic because of the difficulties of merging cultures and people, and the sale may not deliver the payout you hope for. (As long as you’re alive and kicking, how you are paid for selling your agency should be a chief concern in your succession plan. Even if you are gone, that payout will be critical for your family and heirs.)
Recruiting an outside candidate, on the other hand, takes time—three to five years, potentially. Start now if you feel you lack an in-house player who could step up to become the agency’s next owner. Draw up a list of search criteria and qualities you would hope for in a successor. Obviously, past experience in a top-level agency position would be wonderful, as would actual experience as an agency owner. Put out feelers among your business connections and ask for referrals. Make sure your employees know you are looking at finding a successor, and ask them if they know anyone who might be a good candidate. Advertise the position in online job sites, or seek the help of a good recruiting firm.
When you have a candidate you feel would be a good fit, bring them to the agency so you can begin integrating them into the team, and building relationships among your top employees. If they indeed fit into your culture and work well with your existing team, start discussions about a timetable for the transition. Work out the financial details. Do all you can to make a transition pain-free and seamless. Over time, transfer more and more responsibility to your next owner, and begin to step back from decision-making. It’s a lot like letting go of your children as they mature and move out into the world. Teach them as well as you can, and trust them to make good decisions.
If you must pursue a search for an outside successor, make sure you have some sort of fallback plan in case of your sudden demise or unavailability. You need to leave instructions for how to handle the agency as a part of your estate. Talk to a good legal advisor about setting up an emergency process.
You can’t control what happens after you are actually gone from the agency, but you can set up the agency and your people for ongoing success. What they do without you will be their responsibility, but the plans you make now can protect all you have built, and the people who helped you build it.
See also: Business Owner Seeks Partner, Heir…
You may also like The Agency Owner's Buy/Sell Workshop manual.