How to Turn Around a "No" When Seeking Ownership

The idea of internal succession and transferring ownership to the next generation can be sticky for a lot of advisory owners. The process is daunting and giving up any amount of control can be hard to fathom. For these reasons, top advisors seeking equity and ownership are sometimes met with resistance or flat-out rejection.    

As in most areas of life, anxiety is best alleviated with information. Doing some prep work to offer a clear understanding of the succession process can make owners more amenable to the idea. Plan flexibility, clarity of progression, available guidance, and business benefits can all help to assuage reluctance. 

There are also times when anxiety and pressure are not the harbingers of “no.” Circumstance is. When met with a “no,” you have the opportunity to turn it around by asking some questions and gaining a better understanding of why. The following are some common reasons for denying next-gen ownership buy-ins and how you can turn a “no” into a “yes”–or at least into a “not yet.”

“My plan is to just sell the business outright when I’m ready to retire.” If retirement is several years down the road, perfect, this is exactly the situation for internal ownership. Reiterate that the transfer can be incremental and gradual, structured to aim for a full buy-out on their exit timeline. Wouldn’t they rather the business and its clients go to a trusted team member rather than an unknown?

If an external sale is more imminent, however, leveraging your expertise and commitment can help to increase the value of the sale. More and more strategic buyers are prioritizing talent acquisition to keep with the industry demand for experienced advisors.  Advancing your ownership path could even become part of preferred buyer criteria, and you can work together to strengthen any leadership skills in the meantime.

External searches for partial ownership buy-in are not unheard of either. Internal succession now does not exclude external sale options in the future.

“I have a different successor in mind.” This answer is not an invitation for competition. Instead, it is an opportunity for cooperation. You can now reframe your ownership ask to include the benefit of adding you to that successor team. Illustrate how your expertise and strengths align and complement those of planned owners to create an even stronger leadership structure. Communicate with tapped successors and establish your value add to earn their ownership recommendation.

There’s a business case to be made here as well: a multi-generational ownership team increases growth rates and profitability. A single successor is not enough. If you effectively demonstrate the qualities and contributions of a good business owner, there’s little reason why you shouldn’t be considered for ownership alongside your colleagues.

“I’m not sure I’m/you’re ready for ownership.” Sometimes this response is just a matter of gaining more clarity into the benefits of next-generation owners and what expanding the ownership circle really looks like. However, sometimes this truly comes down to needing more evidence. Since you’re having the conversation already, take the opportunity to clarify what their priority ownership traits are. Perhaps you can work together to define expectations and milestones as a pathway to ownership further down the road.

Another way to assuage this type of reticence is with a testing period. It’s common for internal succession plans to structure initial buy-ins to allow for an off-ramp if things aren’t working out for either party. Additionally, synthetic equity is an option that might be more appropriate ahead of an authentic ownership transfer. These agreements offer a set period of time to demonstrate commitment and transparent contributions while being appropriately compensated for stepping up in those areas.

There are as many reasons as there are people for why an owner won’t offer you ownership. You can always ask the clarifying questions. If they’re open to the discussion, you have the opportunity to use what you’ve learned to address their concerns and turn their answer around.

Unfortunately, there are also scenarios where you won’t be able to flip the “no.” In these cases, you have to decide whether your continued involvement with this firm is more important than your goal of being a business owner.

Helping the owners of your firm understand the process of transfer and how it can work within their existing plans makes the idea of internal succession and next-generation participation much easier to get excited about.