Are You Mithunda?

Amar Pandit , CFA , CFP

Amar Pandit

A respected entrepreneur with 25+ years of Experience, Amar Pandit is the Founder of several companies that are making a Happy difference in the lives of people. He is currently the Founder of Happyness Factory, a world-class online investment & goal-based financial planning platform through which he aims to help every Indian family save and invest wisely. He is very passionate about spreading financial literacy and is the author of 4 bestselling books (+ 2 more to release in 2020), 8 Sketch Books, Board Game and 700 + columns.

I was speaking with a gentleman about Succession Planning, but it was apparent he was confusing this with sale planning or selling the business. The word Succession Planning is often misunderstood. We think of it in terms of selling the business. We start thinking in multiples (based on the stories we have heard or read) or in percentage of assets under management. “My business is better than his/hers, so I must get this multiple,” is the common thought. The focus is often on the terms of the deal rather than selecting the right partner/successor and ensuring an effective transition. This post provides a roadmap for making this important decision for your business.

Some definitions first.

Succession Planning is the orderly transition of clients, and business management to people who have the skills, know-how, and passion to perform these duties. Sale Planning on the other hand is selling ownership of your business to a buyer who may or may not be able to serve you clients and manage the business.

Do you see the difference between succession and sale planning?

It’s very important to know this distinction because whether you wish to sell the business or not, you must have a Succession Plan in place right from day one. The succession plan must be in place (way) before you even decide to sell.


Because we don’t have the key to immortality.

We could leave life right now. Despite knowing this fundamental truth, we all behave as if we are going to live forever.

But other than this, there are many reasons to start planning and implementing your succession plan now.

1. Business Continuity:

This is the most important reason why you should start Succession Planning today. Building such a business means building a real pool of talent, leadership at different levels, a commitment to excellence, world class processes, client experience, a solid commitment to marketing, client acquisition and growth. Your clients have to feel that their lives will not be disrupted should something happen to you. While they might not voice it to you, I can guarantee that it’s going on in their minds.

The best part is that you don’t have to do it alone. It’s time for a plug for HF. You can do it with a partner who believes in all of the above and has already invested significantly in building the wealth infrastructure and client experience for the future.

2. Growth:

The biggest driver of valuations is your growth rate (and future potential). How fast have you grown in the last 3 years? What is the potential for growth? How is the firm positioned to capture this growth?

Don’t simply sit on the high horse of a glorified SIP book.

Instead focus on modernizing the firm and the client experience, processes, client conversations and most importantly the value proposition.

Many firms can enhance their valuation by 2-3X in a very short period of time by addressing this important area.

A well designed and executed succession plan is also a sustainable growth plan, one that helps you maximize the value of your business. The way to improve the terms of your deal is by creating a succession plan that helps you in term create a sustainable growth plan. This is because you have created capacity, scale and expanded geographical reach in your business by modernizing the firm.

3. Edge over Competition:

A world class Succession Plan will not only protect you from competition but also has the potential to make competition irrelevant. It will also position your firm well in the event of any regulatory change or in the event of commissions going down further. In the US, the SEC is planning on a new rule that requires registered advisers to meet strict and expensive guidelines for succession /business continuity plans. It’s not just a “Nice to have” plan anymore. The day is not far when AMFI and SEBI might require this too.

4. Protection against Deal Terms:

Most real acquisitions will contain terms tied to growth, continuity of key personnel and performance. If you change any of these variables, the value of your firm will go down. The firm I mentioned at the start had thousands of clients and yet the owner wanted to exit to start another business soon.

5. One Firm, One Data Place.

I can’t tell you how important this is. Two weeks ago, I wrote, “Straddling your Strategy” post where firms keep their existing strategy while simultaneously trying to adopt the strategy of a competitor. You should check it out if you haven’t already. This is exactly the problem I witness with many – I will start my new clients at HF while continuing to do whatever I was before. My friends, this will never work. You will not be world class at any – neither at HF nor with your old process/value proposition. You can’t be a tiger and a rat at the same time. You have to assume one identity that is clearly known to your clients, team and other stakeholders. There is no right or wrong answer. But stick to one. It is extremely critical to have all your data in one place instead of it being scattered in multiple disparate systems.

6. Guaranteed Buy Back:

If the Succession Plan is in place, you can not only improve the terms of the deal as I mentioned above but also create an opportunity for a guaranteed buy back in place. More on this in a workshop that we plan to host in our Mastery School of MFDs.

If you knew some or many of the above, why is it then you are not taking steps to implement a Succession Plan for yourself.

What’s stopping you today?

For many it’s inertia… And we thus hide behind the wheel of busyness.

But like this funny meme shows, you will pay the price of this inaction and indecision. The bullet might not hit you now but be assured it is coming your way.

Unless you are Mithunda.