I was speaking with an advisor friend the other day. “You know, I’d sell my practice,” he said, “but truthfully, I’m getting so much psychic income from it that I just can’t see that right now.” He’s 68. No successor in sight. A nice practice, too.

Psychic income cannot be included in real or monetary value, but there is real value in emotional satisfaction. Psychic income motivates our economic activity, but for many of us in this business, money is not the motivating force to our work, but rather the means to satisfy our psychic life. Unfortunately, the psychic income you receive from your practice may be preventing you from making your move toward succession.

Mark Hurley of Fiduciary Network in Dallas tells us that there is an optimum time for advisory practices to be sold. “If your firm is too small, you probably don’t have the sustainability for a sale. If you haven’t fully prepared for a next generation with processes and systems, your practice may not withstand a transition. Considering that the majority of older advisors work with baby boomers, you probably have an aging asset base, with more decumulators than accumulators. Not many buyers are interested in a depleting oil well.”

Even if you think you have the right plan in place, you might want to take a few minutes and review your plan from a purely business perspective, not an emotional one. Let’s set aside the psychic income for now and focus on some basics.

I thought it might be helpful for you to follow a simple thought process to access where you are in your firm, where you would like to take it. Let’s start with whether you have a lifestyle firm, a practice or a business. If you have a lifestyle firm, everything revolves around you and your schedule. You have no intention of building value and expect that one day you will just be too old to work or die at your desk. While this used to be the default for many practices, frankly, if you care about your clients, you care what will happen to them when you are not there to serve them. And many advisors tell me that their clients are asking them about what succession plan they have in place.

Think about how you operate today. If you have a practice, you
• Take anyone who fogs a mirror (no focused market);
• Give indiscriminate service (no prioritized clients or service);
• Your profit is what’s left over after overhead (do not include your salary as an expense);
• You do everything (do not leverage yourself and your activities);
• You design around personalities (staff with who is there, not who is best);
• Will do whatever a client asks (sacrifice systems for “one-offs”);
• You die, the business dies (have not created value).

If you have a business, you
• Take only profitable clients (know the viability of a client relationship);
• Give prioritized service (have a prioritized service mix);
• Your profit is what’s left after you pay yourself (adequately track your profitability and pay yourself for labor as well as everyone else);
• You are operating at your highest and best use (leverage yourself well);
• You hire the right person for the job (whatever job that is);
• You’ll only do what fits your business plan, systems and predetermined operations;
• Your business is a big asset.

Now that you have determined where you and your firm are, you need to determine what you would like your firm to look like in the future, assuming you have not selected a lifestyle firm. (A lifestyle firm does not plan on surviving its owner.) Mark Tibergien at Pershing, shared his “Personal Definition of Success” strategy with me long ago. Answer these questions.

• How old will you be five years from now?
• At what stage in your career do you expect to be?
• What do you want your role in the firm to be five years from now?
• What will your ideal lifestyle be in five years?
• How many hours will you be working and who will be working with you?
• Will you be working from home, office or another location?
• What will your responsibility be to your family (spouse, children, parents)?
• Where do you expect to get your income?
• How much will you need to be earning?
 • What will be your role in the community?
• How will you spend your leisure time?
• From what will you receive your greatest satisfaction?
• What are your values that you will want to use when choosing a business strategy?
• What part of your work will be most personally satisfying?
• How will you know that you are personally successful five years from now?

I suggest that you address these questions for 10 and perhaps 15 years, too. When you can answer these questions to your own satisfaction, you will then be ready to formulate your action plan.

I believe that no matter how you execute your succession plan, you will want to be certain that your practice is ready for transition. For example, if you would like to transition within the firm, identify key personnel who might be good successor material. In our practice, we identified five advisors that we felt were committed, passionate and capable of being our successors. We spent years giving guidance, opportunities and education to be able to assume positions of ownership, and eventually these people became our management committee. If you are transferring within the firm, management is the first step in preparing your successors to become owners. If you can’t identify someone, look to the college and university programs or younger advisors who would be a good strategic hire for future succession.

Today, the ownership of our firm has expanded to include key operations and support staff, as well as advisors. Our management committee, with elected positions, is charged with the strategic direction of the firm. Day-to-day management of the firm falls to the managing partner, but other administration positions such as director of operations, chief investment officer and chief financial officer have their own autonomy, but report to the management committee.

If, on the other hand, you decide to sell to another entity, remember that it is very rare that a seller is not involved in the new business for a period of years. You will need to design what your new role will be and how you will exit gracefully from client relationships as well as staff relationships. This is probably one of the most difficult tasks because most advisors are emotionally attached to their firms. Most advisors suffer from “founder’s syndrome.”

Some symptoms of founder’s syndrome:
• The firm is highly dependent upon the philosophy and personality of the founder.
• The founder makes all the decisions, no matter how small.
• Key staff are personally loyal to the founder and are often selected to support the founder’s efforts and philosophy.
• New professional staff may have difficulties integrating into the firm because the founder dominates all activities.

In short, you started your practice, you designed the way you wanted it to run and you have not visualized the firm past where you have taken it. One thing that helped me was to admit that I was limited in my vision for the firm. I decided that I really wanted it to grow and thrive, so I needed to pass it on to new visionaries who could take it to the next level. It should not matter whether the next visionary is inside or outside the firm.

It’s harder to emotionally overcome founder’s syndrome if you sell to another advisor or entity that will eventually manage what you have built. Tibergien once told me that 35% of acquisitions fail because of cultural differences that could not be resolved. Here are some issues you’ll probably want to explore before you make the decision to transition.
• Do you essentially share the same philosophy?
• How does your potential buyer/partner treat client relationships?
• Do you both have processes in place that will facilitate a smooth transition?
• Are you prepared to lose staff, either by voluntary or involuntary decisions?
• Are you prepared to accept another role within the firm to ensure a successful transition?
• Are you prepared to relinquish certain management decisions?
• Do you respect the buyers?
• How will your staff (or remaining staff) acclimate to the new entity and environment?
• What are your ultimate transition goals—how can you receive psychic income from the next phase of your life and career?

Just as a good business is transferrable, your psychic income is transferrable too. You can and will receive great satisfaction from the next phase of your life, assuming you have planned well. You’re a planner. You know the benefits of planning at any phase in your life. Get busy. This is not just your exit strategy; it’s your entrance to a new and challenging “next phase” as well.

Deena Katz is associate professor in the personal financial planning department at Texas Tech University, a partner in Evensky & Katz in Coral Gables, Fla., and the author of several books on planning and practice.