Taking the Next Step:

Some Thoughts about SUCCESSION PLANNING

prepared for the Principals,Directors and Managers of NAI Global

Las Vegas

January 2008

After a long flight, it is reasonable to expect a safe landing.

We want to prepare you for the transition of your business through successful exit or succession.

Some sobering statistics:

• Over the next decade hundreds of firms will transfer ownership through sales, merger or acquisition or close their doors altogether.

• Less than 20 % of independently affiliated firms set annual goals.

• Less than 5 % of independently affiliated firms have strategic plans.

Reminiscent of the old law school warning: look tothe left and to the right; in 5 years 1 of you will be gone.

Many of you are approaching a fork in the road with two strategic options:

SUCCESSION or EXIT

You do, of course, have the option of playing it out to the very end.

Nowhere is the old saying truer than here: failing to plan is planning to fail.

Two possible strategies:

SUCCESSION: the ownership and management of your company is transferred to new owners and managers and you maintain somerelationship with the firm. You are, however, slowly phased out by a successor or successors.

This is achieved through the implementation of a 3 to 5 year plan.

EXIT: the ownership of your firm is sold outright. In most cases you disassociate from your business totally.

Note: do not proceed without a personal financial plan!

And start a conversation NOW with yourspouse and children about the future.

This is the first decision of many you need to make about the future:

DO YOU HAVE A NEED TO STAY INVOLVED?

The choice between succession and exit depends on a series of factors:

FINANCIAL

These factors are systemically inter-related.

OPERATIONAL PERSONAL

MARKET

The Financial Checklist:

• determine your assets.

• determine your value

• assess the market (who would/could buy us?)

• assess different sell/buy-out strategies.

$$$$$$ FINANCES $$$$$$

Property and equipmentContractsReceivablesPeopleRelationshipsGood name, good willBrandMarket position

Determine your assets.

The question of valuation:

Rule of Thumb = 4 to 5 times multiple of net revenues

Future cash flow

Are there buyers?

Existing partners

Brokers and employees

Competitors

mergers

acquisitions Networks or

national firms

$$$$$$ FINANCES $$$$$$

The Operational Checklist:

• take a hard look at sustainability

• develop a phased-in plan of delegation

• find balance between being a lame duck and a fifth wheel.

Operations… Operations… Operations

LeadershipPotential partnersKids and other family members

AdministrationSales Staff

the case of the 20:80the case of the missing middlethe case of the empty cooler

Clients

Issues of sustainability

Need to delegate.

Need to find balance.

The Market Checklist:

• how will your clients react?

• are you connected to the next wave market?

• how will your competitors react?

The Personal Checklist:

� are you ready for this?

mentally ready?

financially prepared?

can you let go?

� what does your spouse think?

� what do your heirs think?

Legacy planning.

� START NOW!

VERY NEXT STEPS

1. Get your personal financial plan in order.

2. Determine what you CAN do with the firm.

2. Make a decision about what you WANT to do.

3. Set goals for where you MUST be in 3 years.

4. Take action.