The path that Jeff Williams charted years ago was designed to ensure that Grand Wealth Management LLC continues well past his eventual retirement.
Williams knew when he started the firm 17 years ago that he needed to include succession as part of his business planning. That perspective included identifying future leaders who could someday own and run the business after his eventual departure.
Years ago he began acting on that mindset by selling ownership stakes to key employees. Williams sold a share of the Grand Rapids wealth management firm to three employees: senior financial advisers Steve Starnes and Anastasia Wiese, and office operations manager and chief compliance officer Janelle Anderson. Each became principals in the firm. The three have taken on greater duties and responsibility for running the business as part of the leadership team.
Williams describes Grand Wealth Management as now “in the midst of a transition of being a firm that I run, that I started, that I have controlled to one that will eventually thrive without me.”
“I really had this plan and vision from the beginning to build an ensemble firm that thrives beyond my tenure and that could remain local, independent and with multiple owners,” said Williams, who remains Grand Wealth’s largest shareholder even though his holding is below 50 percent. “I had that mindset from the beginning. I never wanted to be in a position where I would need to sell to an outsider or sell to one individual when I got ready to retire, so I began early on to find others that not only would want to work here, but would want to acquire ownership and be a part of management.”
Keeping succession in mind
Williams, 56, formed Grand Wealth Management in 2004 after leaving Ernst & Young, where he led the financial planning practice for West Michigan as well as the investment adviser practice along Lake Michigan that included West Michigan, Chicago and Milwaukee.
He started the firm with 12 clients, $27 million in assets under management “and a vision and a hope.” Grand Wealth Management today has more than 150 clients and more than $550 million in assets under management.
His practice of keeping succession in mind follows the advice that he and many professional advisers offer clients who own businesses, whether family or individually owned: Plan early for the eventual succession.
At Grand Wealth Management, having key employees buy into the business early allowed for a transfer of ownership before it gets too expensive, Williams said.
“If you don’t start transferring soon enough, it gets too expensive for people to buy all at once, and oftentimes you’re left with having to sell to a larger company or go the M&A route,” Williams said. “If the goal is to do an internal transition to sell to key employees, you have to start that process sooner than later, otherwise it gets too expensive for individual executives to purchase.”
Families lack planning
However, not many business owners follow that example. Only a relatively small percentage of business owners plan out their exit well in advance, according to industry data. That includes family businesses that may sell to the next generation.
“What I see in all family businesses is they don’t tend to plan. If you ask any family business executive or member of the family business, they will say they know planning is key. But if you ask if they have a succession plan, they will say, ‘No,’” said Ana Gonzalez, director of the Family Owned Business Institute at Grand Valley State University’s Siedman College of Business.
Just 18 percent of the CEOs at family-owned businesses surveyed in West Michigan had a formal plan in place, according to a 2019 Family Business Survey by the STEP Project for Family Enterprising, a global research organization on family-owned businesses. The number is similar to findings years ago in a Grand Valley State University analysis of local family owned-businesses.
At Grand Wealth Management, Williams has “too often” seen clients who own a business wait too long before planning their transition. That can limit their ability to sell to the “right buyer” and get their full value for the business, he said.
Starting transition planning well in advance “expands your options” and “it does allow you to identify the buyers of the firm” who can carry on an owner’s legacy, Williams said.
“Ultimately, it goes back to really wanting to have the firm continue and to have the same people that are here now carry on the firm after I retire,” Williams said. “If you really care about the business, you should be planning for that eventuality. The more you plan for that eventuality, the more impact you’re going to have on the business after you’re gone and you’re no longer affiliated with the business.”
Planning ownership transition well ahead also helps to retain talent and creates certainty about the company’s future, Williams said. Having key employees who can buy into the business and become part of the leadership as part of a multi-year transition process also “aligns the interest of the leadership team and allows everybody to grow,” he said.