business advice | Jul 11, 2023 |
I’m ready to retire. How do I hand my firm off to my team?

Dear Sean,

I’m looking for advice on how to gradually retire from a successful design business. I have 10 employees and a strong number-two who is almost—but not entirely—ready to take over.

I would like to stay involved but have more free time. Is there a way to structure this, financially and practically?

Succession Support

Dear Succession Support,

Semiretirement absolutely can be done, and there is no one right way to do it. In recent years, several well-known designers have set examples by establishing senior partnerships while maintaining the firm’s name and identity, announcing the next generation of leadership or entering into name partnerships. Bunny Williams and Jamie Drake come to mind. There’s also the option of bringing in someone from outside to purchase or invest in your firm.

However, today let’s focus on the much more practical succession option, and the point of your question: turning your firm over to your current team. The first issue you must tackle is money.

I have seen many creative professionals try to transition their employees into business partners via only sweat equity, and not compensation. It never works. Why? At the end of the day, your number-two staffer will still get their salary, meaning they don’t really have anything at risk. Therein lies one key difference between being an employee and an owner. Firm leaders must make risk-based decisions of the kind that your deputy simply does not have to make right now. The only way that changes is if they put up their own money—funds that could disappear if things go south (they will not), but also will not grow if they don’t take the necessary business risks to find success.

Oh, and let’s get real: Your business is a micro-business, so unless you sell the whole thing, you are most likely talking about a minority stake. That means its value is what you say it is. You are looking for the amount that will be painful to put up, but not so dear as to be crushing.

The next guardrail I suggest is structure, structure, structure. You have 10 employees and a successful business—I assume you have processes in place that really work and that your culture is firmly established in them. The transition you want to make requires preserving the core culture, but allowing it to evolve to reflect how your right-hand person operates. This transition takes time and commitment. Perhaps you were fine with markups, but they want to be fee-based, or vice versa. Maybe you are old-school with watercolors, but they love offering renderings, or vice versa. Committing to the transition while maintaining culture is paramount. Simply, what are your core promises to clients, and how do you keep them? The promises never change; how you keep them can.

Last, keep financial benchmarks out of it. My guess is that you are still the primary salesperson for the firm, and, if your successor brings in business, it is largely under your halo. Your commitment to legitimize them as a leader in your universe will take time. So rather than measure money, measure happiness. Do your clients still feel taken care of during their projects? What about employees? Are they all still inspired to do their very best work even if you are not there?

Ensuring that the purpose of what you have worked so hard to create is both maintained and nurtured is essential. Set benchmarks of success that reflect this purpose. The end goal is that when it is finally time to let go, you will know that your firm’s DNA will remain intact in a future without you.

Homepage image: ©Nuthawut/Adobe Stock

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Sean Low is the go-to business coach for interior designers. His clients have included Nate Berkus, Sawyer Berson, Vicente Wolf, Barry Dixon, Kevin Isbell and McGrath II. Low earned his law degree from the University of Pennsylvania, and as founder-president of The Business of Being Creative, he has long consulted for design businesses. In his Business Advice column for BOH, he answers designers’ most pressing questions. Have a dilemma? Send us an email—and don’t worry, we can keep your details anonymous.

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