Chris Kennedy, co-founder of Mayor + Kennedy Architects in Hanover, N.H., planned for his eventual retirement by bringing on a successful sole proprietor, Sloane Mayor, in a partnership role. Image copyright Sally McCay. Courtesy of Mayor + Kennedy Architects
Chris Kennedy, co-founder of Mayor + Kennedy Architects in Hanover, N.H., planned for his eventual retirement by bringing on a successful sole proprietor, Sloane Mayor, in a partnership role. Image copyright Sally McCay. Courtesy of Mayor + Kennedy Architects

When beginning to think about a future without project deadlines, self-awareness is critical. Look inward and honestly evaluate the degree to which you want to be engaged with your firm when you’re older, review your savings and financial options, and consider your comfort level with sharing leadership and control. “Your ability to mentor emerging leaders on all aspects of running a business will significantly impact the long-term value of your firm,” notes Rena M. Klein, FAIA, a partner at Charrette Venture Group.

Ask yourself three questions:

  1. Do I see the potential of accumulating sufficient retirement savings or investments as I currently practice? Will this be enough to fund my retirement?
  2. Am I ready to share leadership, decision-making, and power with potential successors?
  3. What legacy would I like to leave?

The answer to each of these questions opens up, and closes off, certain possibilities as a founder approaches retirement.

Courtesy of Charrette Venture Group

How do I identify my options?

If you can fund your own retirement, your decisions will likely be dependent on legacy. Do you want to leave your business to a future generation? Or would you prefer to work until you decide to close your business? If the latter is the case, you’ll want to plan for eventual firm closure. The option brings less pressure but may entail downsizing loyal staff and saying goodbye to beloved clients, purchasing “tail-end” insurance, or even creating a monograph to document your work.

If you could use extra resources to fund your retirement, and would like to profit from the business entity you’ve created, then your choices typically include:

  1. Sell the firm to an outside buyer. This is unusual unless your firm has an expert specialty or is in a market that can expand opportunities for another firm, without the founder’s continued involvement. Often these agreements require the founder to continue working for the new firm for a transition period.
  2. Merge with another firm headed by younger leadership. A small firm’s client base, built up over many years, is an asset that can be transferred to the new firm over time and may allow for phased retirement. Again, these agreements may require the founder to continue working for the new firm for a transition period.
  3. Hire someone with partnership potential and groom him/her/them over time. Significant time may be required to ensure the fit and capabilities of the potential partner.
  4. Transfer ownership to a trusted employee over time. This is often the best option if available. Successor(s) should be around 10-15 years younger than the founder, but care should also be taken not to disqualify anyone based solely on age.
  5. Close the office and seek employment at another firm at the principal level. For firm leaders growing tired of ownership responsibilities, this is a good option to continue earning income. Many larger firms welcome mature and knowledgeable architects on their management teams.

If profiting from the sale of your firm is a goal, then you must begin building value now. Look at your assets: tenured staff, repeat clients, market position, institutionalized knowledge, brand strength, financial health, and profitability. Focus on retaining your best assets and addressing weaknesses. Create a business plan that enables you to grow your profits consistently within a five-year time period.

Founders of 30+ year-old firm, Walcott, Adams, Verneuille in Fairhope and Gulf Shores, Alabama, identified emerging leaders Ryan Baker and Abby Davis (seated) and made them principals in 2013 and 2019, respectively. Photo by Devin Ford. Courtesy of Walcott, Adams, Verneuille Architects.
Founders of 30+ year-old firm, Walcott, Adams, Verneuille in Fairhope and Gulf Shores, Alabama, identified emerging leaders Ryan Baker and Abby Davis (seated) and made them principals in 2013 and 2019, respectively. Photo by Devin Ford. Courtesy of Walcott, Adams, Verneuille Architects.

Finding and developing emerging leaders

“Since transferring ownership to trusted employees is by far the most common transition strategy for small firm founders, identifying this talent and developing their leadership and management skills is critical” notes Charrette Venture Group partner, Emily Hall. “We see problems emerge when a few conditions exist:

  1. No one on staff exhibits the appropriate management and leadership skills.
  2. Emerging talent isn’t interested in—or doesn’t understand—ownership responsibilities.
  3. Firm founders verbally promise a future ownership role but delay formalizing it.
  4. Firm founders become an obstacle to new leadership by preventing them from effectively developing authority.”

Once transition planning begins, firm founders can better understand what their areas of focus should be in the years leading up to their retirement. Charrette Venture Group helps firm leaders identify transition opportunities and build their firm’s value during this important life cycle stage.

Do you have questions about running your small architecture firm? Contact CVG for a free consultation or visit our library of resources.