Succession takes more planning than you think

Succession takes more planning than you think

Succession takes more planning than you think

Folding a business built with years of blood, sweat and tears isn’t fathomable for most broker-owners, and while succession is their legacy’s only chance of survival, they first have to avoid pitfalls.

Neighbourhood Dominion Lending Centres’ Gary Meger and his daughter Danielle Hill serve as an example of a successful handover, but the process took a decade and wasn’t without its share of tribulations.

“Everyone will exit at some point,” said Meger, 67. “I might have a database, a database with employees, and a database with employees and systems, but which one will give me the best return? We build it so that when we do exit, we’ll get the maximum amount of money we can get. Few people have received a lot of money, but not enough to retire on.  Ours was done over time, almost like an apprenticeship. Danielle learned how to do it and at one point we swapped salaries.”

Today, Meger is removed from about 90% of Barrie-based Neighbourhood’s daily operations, and in another month and a half he‘ll take another salary reduction. It’s for reasons like these that he advises preparation, both financial and emotional.

“If the individual is not prepared to let go both mentally and financially, it’s going to cause problems,” he said. “If I didn’t put myself in a position where I don’t have to keep working, it would be much different for Danielle to take it over and she likely wouldn’t have hung in.”

Hill, 31, learned the ropes by shadowing Meger and listening in on many meetings over speakerphone. Cultivating comfort with referral sources, whether realtors or financial planners, proved challenging, though. 

“It took a good couple of years before some of the main ones would start calling me, realizing I was in the office when Gary may have been out doing something else,” she said. “More recently, at the end of this period we’ve gone through, the last and final piece of trust has come from the private investors, who now reach out to me to offer lending money on deals or to hear what I have to say about a particular deal. Over the last year, they’ve acknowledged I’ve been in the space for the last 10 years and we’ve started to build that trust. At the end of the day, it’s their money and Gary’s been doing this for so long, and they have a lot of trust in him, and to transfer that trust into someone who’s decades younger than him is huge.”

Hill did not merely rely on Meger’s book and quietly wait in the wings. Instead, she went to markets where he didn’t have existing partnerships and drummed up her own business.

“It gave me the confidence to continue running with the existing business I was taking over,” said Hill. “I think it gave Gary confidence, as well, to see that he has the right person, because he was able to see the growth happen before his eyes. As the phones were ringing and the business was being redirected my way, I’d hold onto deals that Gary didn’t always necessarily know about. It was probably really hard for him knowing there was business in the background that he didn’t know about, but if you tip-toe around, the transition won’t happen. The person who’s up-and-coming needs to have the ability to run with it, but it can certainly be a sensitive area.”

Money is doubtless the most sensitive facet of the transition. Meger and Hill have had minor disagreements over it, and it can sometimes be made trickier by family members on the periphery, but Meger says it also illuminates the necessity of contractual agreements.

“Because we’re family, we didn’t have contracts,” he said. “But if it isn’t family, the party in my chair would have to have a contract in place because they’d be exposing everything they built. It’s a high-trust hand-off and it involves customers, lenders and private lenders.”

Ultimately, a clear vision—and again, mental and financial readiness—must be established at the outset, and that will benefit both parties. Meger and Hill also had coaches whom they say were crucial to transition’s success.

“The fact that Gary was open-minded from day one made a big difference,” said Hill. “He encouraged an entrepreneurial spirit, he invested in me. He had me go to different coaching events in the States; I went to MPC every year; I was constantly being exposed to new ideas and different people. When preparing the incumbent, if the broker-owner is very much stuck in their way, they could start slashing the incumbent’s spirit and energy.”