7 ways to prepare for your succession

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Lawrence Ian Geller, owner of L.I. Geller Insurance Agencies Ltd., recognized that older advisors need a better way to sell or pass on their practices. So he recently launched a website (SellYourPractice.ca) to address the need.

Read: Are you behind on your succession plan?

If you’re thinking of your own succession plan, consider these seven tips, lessons and strategies:

1) Begin preparing at least three to seven years beforehand. Many business experts suggest giving yourself a long period to create and execute a succession plan. Advisors who fail to plan properly risk reducing the value of their book when they attempt to sell it.

2) Preparing for succession can start very early in your career too. Geller suggests that you level out your commission structure as early as possible. This means that instead of taking 95% of the commission in the first year, and 5% in the second, you flatten it out, accepting less money in the first, and more in subsequent years. “You need to do work every year, especially for disability claims, so you should get paid for that,” Geller says. “It’s not always possible to have a more level structure, but if you can, it will increase the value of your business in future years.” This will make transitions more profitable.

3) Another tip for making your business more profitable and so more compelling for would-be buyers is to specialize, based on what you’re best at, and partner with others. “Specialists always make more than generalists, and specialist-partners always know more than you,” says Geller. These two long-term strategies can increase the value of your business and ultimately make it easier to sell.

4) Decide early on if you want to pass the business to a family member, a young mentee or outright sell it to another advisor. Each requires a different plan.

5) Ask yourself the tough questions. What is the realistic value of your practice? Can you afford not to be in your business? How will you structure the business and financing? And how will you preserve value during the changes? Start answering these early.

6) When you’re ready to start transitioning, be committed to actually selling the business, discharging or passing it on way before you make plans with other people, says Cindy Bowden, owner of Cindy Bowden Insurance & Benefits. A lot of people will start the process with a potential buyer only to pull out at the last second or never complete a full transition because they weren’t truly ready,” she says. So make sure you’re prepared to leave and then, when the time is right, actually go.

7) Some insurance companies offer succession planning support. For example, Sun Life Financial (Canada) Inc. and Great-West Life Assurance Co. offer succession-planning advice and resources. At Sun Life, advisors have access to succession-planning seminars and a program called Commission On Release, which guarantees that Sun Life will “buy an advisor’s book at any time based on the commission it generates,” according to the article.

Read: Most Canadian SMEs owners have no succession plan

Transcontinental Media G.P.