The Business of Surveying: A Surveyor’s Retirement

Creating an Ownership Transition Plan (Last in a Series)

Too often, surveyors who own their firms wait until their 60s or 70s to begin thinking of retirement and ownership transition. Retiring and turning one’s firm over to another is one of life’s most important decisions. It is one that should not be made in haste or without proper planning.

It is also too frequent that surveyors fail to have an identified successor and end up simply closing the doors and liquidating assets.

For a surveyor who has spent years building a practice, creating a good reputation, and making a good living, there is more value in his or her firm than just the assets. To such a surveyor, an ownership transition plan is as important, if not more important, than a business plan, marketing plan, or strategic plan.

Here’s a few facts to keep in mind—

  • Nearly 40 percent of all business ventures end in liquidation;
  • Up to 80 percent of a business owner’s net worth can be tied up in their business; and
  • Liquidation usually results in the owner getting less than 100 percent of a business’s value and fails to provide a return on your investment in “good will”, reputation, and client base over a period of years.

Charles Pecchio, a consultant on ownership transition and seminar instructor for several surveying organizations, believes a few basic steps are critical to the successful transfer of a firm. They include starting transition planning early (5-10 years before your planned retirement or sale), formalizing a succession plan as part of a larger business plan, and developing a written business succession plan with an implementation timetable. If you plan to implement an internal sale, to employees, a leadership development plan must be designed and implemented.

To whom you will sell your business depends on a number of factors, particularly the legal structure of your firm. If you are the sole owner the transition will be different than if you have partners, shareholders, investors, or even other licensed surveyors on staff. There is no one-size-fits-all answer to selling your business.

Many states have laws governing ownership of a surveying firm, beyond laws governing licensure as an individual surveyor. These requirements must be kept in mind when planning the sale of a firm. If you have a younger family member who is a licensed surveyor and the heir apparent, the transition can be relatively easy. If you have partners, each partner and part owner need to be part of your exit strategy, as well as their own. If you sell outside of your current employees, the sale is more complex.

There are different types of sales, but they all have financial, tax, retirement lifestyle, and family implications.

An owner can sell and get out, leaving the firm upon the sale, sell and stay on for a few years, or sell with the intent of staying for a longer term to run the firm for the new owners.

In any case, discussing your strategy with your spouse and family, accountant, attorney, business partners, and financial adviser is an important first step.

Here are a few things to keep in mind when executing a transition:

  • Keep things confidential, or closely held, for as long as possible. Word of the sale of the firm could demoralize employees and discourage clients from continuing to do business with you. Never advertise or publicize that your firm is for sale and never let your name or the name of your firm be known. Use a broker or consultant to assist with your transition and insist that they require any interested party to sign a nondisclosure agreement before providing the identity of your firm or any proprietary information.
  • Think of potential buyers. Are there employees who can assume the firm? Are there friendly competitors or fellow surveyors you know through your state surveyors society who have similar cultures, ethics, business approaches, or you believe would be a good fit, with whom you can discuss a deal in confidence?
  • Begin developing or updating essential information about your firm—financial information, client lists, major on-going contracts and projects, an inventory of equipment and other assets, staff resumes, etc.
  • Work with your accountant and bring in a consultant who knows how to do a valuation of a professional service surveying firm.

If you don’t know what EBITDA is, start studying. It stands for Earnings Before Interest, Taxes, Depreciation, and Amortization and is a metric used to evaluate a company’s operating performance. Some view it as a substitute for a cash flow analysis. In finance, EBITDA is used to describe the overall operating profitability of a business over a given time period. Optimally, the firm should have cash on hand and no debt when entering a sale.

While it is important that you take care of yourself in the transition, focus on the longer-term well-being of your employees and clients as well.

Finally, don’t let ego get in your way. You’re not indispensable. With the right successor, your firm can fly to new heights. That should be your goal. As Jim Collins pointed out in his best-selling business book Good to Great, a great leader is one who has enough self-confidence to set up their successors for success.

John Palatiello is Executive Director of Virginia Association of Surveyors, Pennsylvania Society of Land Surveyors, and Maryland Society of Surveyors, as well as national government relations advisor the National Society of Professional Surveyors (NSPS). With more than 35 years of experience assisting design firms, he is a partner in Miller/Wenhold Capitol Strategies, LLC, a public affairs consulting firm based in Fairfax, VA, providing government relations, public relations, association management, strategic planning, event planning, and management and marketing consulting services to private firms, associations, and government agencies with an emphasis on the architecture and engineering; geospatial, mapping and GIS; information technology; construction; transportation and infrastructure, and land use sectors. He has advised numerous surveying and mapping firms on transitions.