Succession planning for many firms is what the preparation of a Last Will and Testament is to a majority of individuals. Who wants to take time today to consider the (distant) end to something?

It is easy to move both of these future focused opportunities to the back burner — until urgency takes over.

Need data? For decades well over 50% of adults who have died in the United States each year die intestate, leaving it to a court to oversee the final matters of an individual’s personal estate. The emotional and fiscal limbo for family can be traumatic, and is wholly unnecessary.

The story isn’t any better inside most firms. Defining specific succession steps and processes can be difficult. But the disruption that accompanies the absence of a solid plan can threaten not just profitability, but viability.

Whether the unexpected loss of a visionary leader, the retirement or loss of a rainmaker, or even a change inside a key client’s organization, a lack of attention to the reality of eventual transition and the need for a viable plan can give rise to one of the most challenging seasons any firm will encounter. 

And though a relative handful might question the need for a proactive approach, inside most firms we work with there is recognition of the need to address continuity of both leadership and client relationships.

In this post we focus on the client relationship side of the succession challenge.

The Typical Scenario

You are far from alone if an audit of the past three-to-five years reveals fifty percent or more of your firm’s revenue connected to a handful of baby boomers 60 years of age or older. If you take an additional step with your analysis and project realistic near-term revenue from the next generation, you may be looking at a succession gap that is likely to cause some sleepless nights.

Even if you’ve just done the math in your head, chances are you are wondering how to close a sizable gap. You may have broached conversations with senior rainmakers in hopes of identifying heirs to critical relationship successors, and thereby generate a measure of continuity and stability. 

The problem, at least in part, is that these conversations tend to be relegated to task status. A blue-ribbon subcommittee is charged with addressing the crisis. In the process client succession becomes a siloed initiative that targets a few senior revenue generators.

And while any conversation is better than none, there is a much more holistic way for a firm to view every facet of succession planning.

Opportunity Versus Gap

Imagine sitting down with your best clients in order to design the future of your relationship.

Now imagine that instead of a succession gap you enjoy the benefits of a portfolio of client relationships that leverage the investments and work of the past in a way that fuels growth in the future. 

Think about the value of an approach to succession that accelerates your rise to trusted advisor status. 

Consider the cultural fabric that weaves its way through an organization when the young professionals you’ve recruited, mentored and trained are able to clearly see the future to which they are heirs.

In fact, far from marking the end of anything, succession planning is an often-overlooked cornerstone of growth and firm stability.

The illustration below suggests four phases of client relationship. To the degree that investments in client acquisition lead to a long term — even multi-generational relationship — a firm is positioned to enjoy a return that transcends its investments.

Key clients deliver ROR — a return on relationship.

By contrast, the failure to seed multi-generational client relationships results in the need to repeatedly make investments in new client acquisition.

This instantly limits ROR, and contributes to a sense of cultural instability as the next generation eyes the future with uncertainty and concern. 

How To Begin To Seize The Opportunity 

Here are four steps to focus on over the next four months in order to change the succession conversation in your firm. (Note that Launch a Succession Initiative is not on the list.)

1. Calculate your firm’s Revenue Succession Gap — this is the difference in revenue at risk because it is being generated by individuals within five years of a likely retirement and a realistic projection of growth in revenue that will be generated by those for whom retirement is more than five years away.

2. Calculate your firm’s estimated Cost to Acquire a New Client — this can be tricky for firms that do not have a client pursuit budget. Begin by estimating total hard and soft costs (including the cost of time) attributable to each new client acquired over the past 36-months. Then divide the total revenue by the number of new clients.

Seeing in real numbers what you invest in the identification, marketing and engagement of a new client will underscore the value to be gained from nurturing, expanding and retaining a client for the long haul.

3. Conduct Key Client Interviews — Your best clients, particularly those served by senior partners, are likely dealing with matters of succession inside their organization. Strategic conversations should establish your desire to collaborate with the client in order to ensure continuity in the face of change on both sides of the relationship.

4. Stage Leadership Conversations with those in the firm who are central to each key client relationship. These conversations should focus on the opportunities to (1) leverage investments already made in each relationship, (2) the responsibility to ensure continuity for the client, and (3) the role that a focus on multi-generational key client relationships plays in cultural stability. (And don’t expect one visit to change things. This is about an on-going dialogue.)

Don’t Expect Miracles

Two of the reasons succession planning becomes problematic are that (1) we view it through a problematic lens, and (2) we act as though a few committee meetings can fix everything. Recognize the problem. Create a committee to address the problem. Move on to the next issue.

Until the problem rears it’s troublesome head again. 

Rather, invest the time, do the work and focus on specific actions aligned with and linked to the core values of the firm. This is the key to institutionalizing behavior.

By understanding the opportunities — fiscal and cultural — that are attendant to a holistic succession strategy, visionary leadership can seed an entirely new conversation. It is a conversation broad enough to engage the most reluctant baby boomer, the next generation of leaders in your firm and the clients with whom you have already accrued the greatest relationship equity.

As a bonus, where client relationship succession is a foundational element of the culture, matters related to identifying and equipping the next generation of firm leadership are far less challenging.