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The Great Succession: The Decline of the Financial Harvester and Rise of the Legacy Leaver

Law as stated: 20 January 2023 What is this? This episode was published and is accurate as at this date.
Succession Plus CEO Craig West returns to Hearsay to interrogate changes to the goals of exiting leaders and to ideate best practice for exiting firm partners.
Practice Management and Business Skills Practice Management and Business Skills
Craig West
Succession Plus
1 hour = 1 CPD point
How does it work?
What area(s) of law does this episode consider?Exit strategies for business leaders and law firm partners.
Why is this topic relevant?For those starting out in the legal profession the world seems wide open with possibility; lots of infrastructure is devoted to transitioning young law students into professionals. But the other end of the legal career spectrum is less well catered for and the possibilities can seem much fewer.

Exit planning, or business succession, tends to be little more than an afterthought for many firm principals and business leaders. This episode looks at exit strategies, maximising returns from exit, and how to measure the success of an exit plan.

What are the main points?
  • The key to implementing an exit strategy is planning. Last minute decisions are unlikely to yield the best results, while a good plan can take years to implement.
  • There are different goals that founders and principals might have in mind for an exit. These may reflect their relative financial positions going into retirement.
  • The marketplace is changing. The financial harvest – or maximum dollars to fund retirement approach – is not the only way forward for many deciding to leave their business behind.
  • Other considerations have subsequently become more important. Craig terms the new approach the legacy or stewardship approach.
  • Legacy could mean passing the business to children or family, but it can also mean looking after employees, suppliers, customers and the people that otherwise make up a business. This may coincide with a desire for the business to continue well into the future.
  • Law firms – and other professional services firms – have an additional problem. This is because they are relationship-driven businesses.
  • Exit planning relationship-driven businesses should be conducted with a mind to gradually producing a relationship with the firm rather than an individual – such as de-identifying client legal work products.
  • Technology and new ways of working should be leveraged to produce this result – for example by putting in place subscriptions rather than time-based billing.
What are the practical takeaways?
  • Decide on a strategy. Maximum financial return is a valid position, but there are other strategies such as a legacy or stewardship approach.
  • Talk about exiting early and often. Build it into discussions about the direction of the firm. One method is to include exit planning as a recurring item in board meetings where applicable.
  • Where a firm is relationship-driven or time-based, consider involving other lawyers in client relationships and moving to alternative forms of billing. Subscription-based businesses trade on multiples far exceeding traditional law firms.
  • Young professionals are choosing different paths. Succession has been complicated by divergences in goals for younger staff. No longer can it be assumed that younger staff want to replace those at the pinnacle, instead preferring alternative options.