Exit Strategy

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What’s going to happen when you want to retire? John Tenpenny explains that planning for the future of your broker business means putting a succession plan into place and making sure your future is bright hinges on implementing that plan early enough

For small business owners like mortgage brokers, thoughts of retirement eventually lead to questions, including ‘When I retire, will I leave my business to a family member or a third party?’

Sadly though, like many entrepreneurs, broker may leave the question unanswered or fail to act until it’s too late.

A recent poll from TD Waterhouse revealed that three-quarters of Canadian small business owners don’t have a succession plan.

Having spent a lifetime building their business, sadly 76 per cent of the small business owners admitted they didn’t have a succession plan. Those surveyed also said the reason they don’t have a succession plan for their business is they are still trying to figure out what their plan will be (45 per cent) or that they just haven’t gotten around to it yet (31 per cent).

Not being fully prepared for the day when they will no longer be brokers disappointed and delay their plans to step back or exit the business altogether.

“It’s an important matter to address earlier, rather than later,” says Bryan Tannenbaum, partner, Financial Advisory Services with Deloitte. “Succession is really a strategy in creating value. You want to start early enough so you can position yourself at a further point with how you’re going to sell your business or how someone is going to succeed you in that business.

“If you’re an owner/manager and you leave, there has to be someone there able to step into your shoes that will be capable, equally or better than you in running that business. You then need to identify those people and mentor them and put together a development plan.”

For Gord Wintrup, president of VERICO - Bayfield Mortgage Professionals in Vancouver, putting off succession planning is a disaster waiting to happen.

“Without planning it could be gone tomorrow and that would be a shame,” says Wintrup, who has been in the business since 1972 and opened Bayfield in 1982. “Suddenly one day you wake up thinking, ‘I got old and now what am I going to do?’”

Putting a plan in place also means you won’t have to try and sell the business, which for Wintrup would be a poor decision. “I don’t believe you can just sell your book of business,” he says. “I don’t think that is doing your database any favours and I don’t think you would be getting the best value.

“Why walk away and get pennies on the dollar, when if you plan properly you’ll have an income for life.”

Gary Meger, co-owner of Neighbourhood Dominion Lending Centres in Barrie, Ont. is of the same mind. “At the end of the day, a lot of brokers may have a database to sell, at best, which you won’t get a lot for upfront,” he says.

“The best I observed was where the owner stayed actively involved over a period of time. He worked with his successor over years, gradually shifting more of the income to that person. He worked with them during that transition, getting them comfortable with their referral sources and that’s key. That’s what we’re doing.”

The seed of succession was planted Meger says at a conference workshop a few years ago entitled “beginning with the end in mind.”

“That was the first time we really starting talking about it, about what would you have to do? What would that look like?”

The “we” Meger is referring to is his 24-year-old daughter Danielle Cawley, who has been working alongside him for the past two years.

“I’m blessed that she’s got the ability, drive and is a family member, because I probably wouldn’t have looked at somebody without any experience otherwise,” says Meger. “There was no urgency, where I had to have her in place next year, so it’s been a gradual process where she’s learned through osmosis.”

“We started this when I was in university. From there I went and worked at a major bank for a couple of years and gained a good understanding of that side of the industry,” explains Cawley.

For Meger, it was important that Cawley learn from the bottom up and soak up every aspect of the business.

“There’s no way for me to gain 30 years of experience in only a few years,” says Cawley. “It’s a gradual process. My dad gives me a lot of rope, but he also trusts that if anything comes up or if there are any questions that I have, I will come to him right away.

“We have daily communication about the process. We talk a lot about it, probably because I’m eager and I push a lot and put a lot of energy into this,” she says, adding that they are at a point now where things can run smoothly at the office whether her father is there or not.

At Bayfield, Wintrup has been grooming his successor for the past four years. In the last two, Inder Matharu, VP in charge of broker recruitment and development, has been on the front lines of the brokerage that currently has 47 agents and broker as well as a staff of six.

“As I ease out Inder would be in my chair,” says Wintrup, whose idea of retirement is to spend a few days a week in the office. “At this point I can honestly say I will probably never retire, I love the business and I still have the same passion for the business that I had 40 years ago.”

Inder, who oversees training for the company is ahead of the curve on technology, according to Wintrup and that’s something he thinks the brokerage needs going forward.

Going forward also means letting go and ensuring the hands you leave the business in can care for it. Wintrup has tried other candidates over the years, but feels confident in his choice of Matharu.

“Inder and I think alike. We have similar goals and have the same values and ethics and that’s so important,” says Wintrup.

“Where you have multiple employees and brokers, every one of those people has to respect and feel comfortable working with your replacement.”

Clients will also have to feel comfortable with your replacement or it could impact the business’ bottom line. Communicating your plans to customers is key, says Meger.

“People deal with us because of the experience they have, so try and create that same experience with my team,” he says. “At the first possible moment we introduce the team concept and we tell people that Danielle is my daughter.”

It seems to be working.

“More often than not, when people find out we’re related, all of sudden walls come down, as clients are more than happy to move forward with me because there is that solid foundation,” says Cawley. “As long as clients are feeling confident in my abilities, I find that they are happy and willing to work with me.”

You also have to give the process some time, say Wintrup.

“You know your database and you’ve taken years to build it up and it’s going to take some time for your referral sources to get comfortable with your replacement and it’s going to take some time for your replacement to get to know the needs and wants of your clients,” he says. “The person handling your succession has to understand how and why you do things and you have to give it ample time.”

You owe that much to everyone who comes in contact with your business.

“I feel at Bayfield we have a duty of care to brokers, agents, employees and to our investors (the company manages three MICs). You can’t just walk away. Over the years there has been a lot of trust built,” says Wintrup.

“It’s an evolution over time, where people like Inder are attending all the meetings and dealing with the brokers and agents to the point now where brokers will call Inder instead of myself in some instances.”

And you have to be prepared to share your position, says Wintrup. “You can’t micro-manage. If you have the right people in place, then let them do their job. You know within when it’s time and you have to give it time.”

That might be hard for some, but in order for the plan to work, you have to be clear about what you want and how you’re going to achieve your retirement goals.

“What is it you’re trying to achieve?” asks Wintrup. “In my case, if I were to step back my lifestyle could change, so is my plan going to give me the cash flow I require? I would like to see Bayfield continue long after I’m gone, but I’d also like a comfortable retirement.”

Being really clear about what’s important has made it easier for Meger to envision what the future will look like, even though he’s still passionate about the business.

“Eventually I’m going to remove myself from the day-to-day routine that all of the brokers are immersed in,” he says. “I hope I can still be coming into the office 10 or 15 years from now. It might be only five per cent of my time, but could still be involved to some extent.”

But Meger knows with the succession he’s put in place, his involvement won’t be required to guarantee the business will be successful over the long term. If he needs any reassurance, all needs to do is pick up the phone.

“I call clients after closing and I’m getting a great response from those that have dealt with Danielle and some of the other brokers. And that gives me confidence in letting go.”


How do you prepare for transition?

• Establish clear but flexible timelines to help keep you on track.

• Set milestones for achieving goals and objectives.

• Keep the succession plan up-to-date to reflect any changes or decisions; review and modify your plan at least once a year as things can change quickly in the business world.

• Prepare a communication plan for notifying your successor, employees, and customers of your succession plans.

• Seek professional advice.

(Source: Business Canada Network www.canadabusiness.ca)


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