In this discussion for professional services founders, particularly those considering ownership transition, Managing Partner Clare Murray and Partner Zulon Begum discuss strategies for future proofing your firm during ownership changes, while maintaining culture, internal relationships and business stability. Watch the video or view the transcript, and see below for further details.
- Is your succession planning timely and strategic? Delaying ownership transition can result in financial and operational risks, including costly insurance liabilities and forced wind-downs
- What do you want your legacy to be? Founders should reflect on the continuity of their firm’s ethos, brand and culture and whether their name remains associated with the business
- What are your personal goals and what form should your transition take? Do you want a clean break, or a gradual transition with ongoing influence via an ambassador role? Clarity on personal goals is essential
- Which ownership model aligns with your firm’s structure and values? Consider the various frameworks available and which is right for your firm (e.g. Goodwill and Tenancy models, External Sale or Employee Ownership Trusts)
- Are next-generation partners adequately prepared and engaged? They seek transparency, structured progression, and meaningful involvement. Early inclusion fosters leadership readiness and retention
- Potential pitfalls and misalignment: Transition often fails when founders and next generation have divergent expectations. Documented succession plans and governance frameworks help manage expectations and mitigate the risk of partner attrition
- Is external investment part of your long-term strategy? Early planning is critical if external investment is anticipated as part of growth or succession strategy
- How will you safeguard your financial interests post-transition? Mechanisms such as profit rights and anti-embarrassment clauses can protect founders following their exit
If you have any questions arising from this recording or if you would like to discuss your firm and ownership transition in more detail, please contact Zulon Begum, Corinne Staves or Clare Murray.
Clare Murray is ranked as an “Eminent Practitioner” by Chambers and Partners UK 2025 for Partnership: “She is wonderful and universally known for her balanced judgement and measured approach. She is just great.”
Zulon Begum is ranked Band 1 by Chambers and Partners UK 2025 for Partnership: Non-contentious: “Zulon is extremely knowledgeable and technically strong on complex matters. I have a huge amount of respect for her.”
Corinne Staves is ranked as a Star Individual by Chambers and Partners UK 2025 for Partnership: Non-contentious: “Corinne is a very impressive individual. She is very empathetic and very commercially astute. She will get the job done at any cost, and make it look easy.”
CM Murray LLP is ranked Band 1 for Partnership by Chambers and Partners UK 2025:“CM Murray has a fantastic team with real partnership expertise and depth.”
Clare: Hello, my name is Clare Murray. I am managing partner of specialist partnership, employment and regulatory firm, CM Murray. And I’m absolutely delighted to welcome you to this discussion for the founders of professional services firms, particularly those who are interested in future proofing their firms and who are thinking about planning for ownership transition. A really sort of sensitive and potentially tricky issue and area and I’m absolutely delighted to be talking about it with my partner Zulon Begum. Hi Zulon.
Zulon: Hi Clare
Clare: I mean many of you will know her but Zulon is the co-head of our specialist and tier one professional services team where we seamlessly integrate market leading partnership, employment and regulatory advice for professional services firms and also partners.
Zulon recently discussed some of these founder issues in a session that she led at a recent IBA Academy for Leaders where she was one of the organisers and main tutors. It’s also really timely Zulon, right, because we are seeing a lot of professional services founders, including law firm founders, thinking about their options and thinking about the future, the future of their business, thinking about the options in terms of transition of ownership and what that looks like and also just how best to start exploring them because a lot of them say we need to think about this but I really don’t even know where to start. What’s the sort of first thing that they should be thinking about?
Zulon: Yeah, so I think there are a few things that the founders will be on the founders mind and they should be thinking about. Firstly, obviously they’ve spent many years investing their blood, sweat and tears into a business that hopefully is successful and thriving and they may have spent many years or decades doing that, building up that business. So understanding from their perspective as to what they want their legacy to be once they have stepped back. You know, if they’ve built up a particular type of practice, particular type of clientele, a lot of founder led firms tend to be boutique businesses. Do they want the firm to kind of continue in that kind of boutique style or they may have also kind of built up a certain type of ethos or brand or a culture around the firm that they may want to, again, want to continue after they’ve kind of stepped back from the helm.
And it might be a trite issue as well, but also thinking about the names often a big factor in the legacy for founders, whether they want to continue their name in the market. And that can be quite a significant factor to think about. So thinking about what legacy do you want to leave? And then a couple of other things. if you are, you know, spending a bit of time of introspection, actually, thinking about your own personal goals. What do you want to do after you’ve stepped back, whether that’s a gradual shift back or a clean break, what are your personal goals going forward? Do you want to go off to the beach and spend your retirement without having to think about work at all? Or do you want to keep one step, one foot in the door effectively and have some influence and ongoing role in the business, whether that’s an ambassador or…something like that. And then thinking about who you have in the pipeline and behind you, are they ready to step up and take over the helm and, know, steer, know, continuing with the sailing analogy, steer the boat forward into the future into being a much even more successful than how you’d left it. So who are the people behind you? And if you don’t have, you know, somebody immediately, are you able to kind of hot house certain people to kind of take on that role?
Clare: And it’s certainly the case when we see clients in this situation that they often leave it too late to start thinking about these things.
Zulon: Yeah, absolutely. My advice is always start thinking about this very early on. What you don’t want to do is wait for that kind of burning platform where everything becomes critical and you have to make decisions under a lot of stress and the firm is itself in distress. One of the typical kind of issues we see with regulated firms, for example, law firms is that founders leave it very late and you know, they’re faced with the issue of having to buy very expensive runoff insurance because, you know, if they can’t find somebody to take the business on, they can’t sell it, then they have to wind the business down and that can come with significant financial costs to them. So if you’re not thinking about it early, then it can have quite a, you know, a significant impact on your financial well-being as well, if you don’t.
Clare: So what are the usual ways that you see firms handling that kind of ownership transition from a founder sort of to the next generation?
Zulon: I think the options are quite closely interlinked with the type of model that you have or you would like to transition to. So you as a founder led firm, might, and we see this with quite a lot of founder led firms, which are still quite small. They, they sometimes tend to be on a goodwill model where the founder or the senior equity partners own most of the equity. And, you know, they would normally expect anybody coming into the equity to buy in for their share and buy the founders out. And that can pose quite a lot of issues around succession because it kind of requires a ready stream of people behind you with, know, deep pockets to be able to buy into the partnership. And often that’s quite difficult for, you know, the next generation of partners who may not have the money to buy in.
They’re often, usually in the 30s and 40s, which is a time where they might have big mortgages, have kids in school, et cetera. So they don’t have the ready cash to be able to buy in. how you can kind of enable that buy-in becomes quite an issue. again, issues around valuation. How do you value the equity? Especially if the equity is quite closely tied to the founder’s influence, if they’re selling and sitting on the beach is the firm’s worth as much as it would be if the founder was still active in it. So there is quite a key critical issues around buying in and also valuing that equity. The other kind of predominant model we tend to see is the tenancy model, which is very recognizable naked in, naked out. Where partners come in, contribute their capital, they reap the rewards of the partnership while they’re a partner, and then they leave, they just get their capital back. They don’t get anything for the goodwill. And we tend to see those models in obviously medium-large-sized firms, but they tend to work quite well because, especially if there’s a steady revolving door of partners coming in and coming out, and obviously, you know, you may need to…oil the wheels of that revolving door by having something like retirement age in your partnership deed, something like that so that you don’t get any bottlenecks, but that’s how it tends to work. And the other model we’re increasingly seeing nowadays is that, you know, the option of selling your business to or selling part of your business either to another firm or an investor.
And that can be a neat way to be able to transition a founder out and obviously also achieve a capital kind of reward for them having built up their equity over time. Going back to the point about legacy that we talked about earlier, what kind of legacy do you want to leave? you want to hand the baton to another, know, batch of star partners who are going to continue that legacy or are you going, do you want to sell it to a much bigger firm and be subsumed? Are you happy with that? And what kind of model do you want to kind of achieve going forward?
Clare: And of course, we’re also seeing just gradually, and there are a few really good examples of this firms or parts of the ownerships of firms being transferred into employee ownership trusts. And for the right culture and the right, the firm with the right sort of longer-term strategic plan, I mean, that can be another great option to consider as well.
Zulon: That can be a neat way to kind of have the option of, you know, passing on the baton to your current crop of, you know, employees or junior partners, and having them take ownership, but enabling them to be able to, you know, buy you out gradually on a tax efficient basis. And without having to sell to an external investor who might, you know, have completely different objectives to what you have.
Clare: You probably just have to hang around though quite a long time to make sure that the founder who’s transferred their interest into the employee initiative actually can ensure that the strategy stays as planned and the money goes into the right places and so probably they need to continue to be involved in that even in that sort of model for a number of years.
Zulon: Yeah, and again, going back to the early point about, do you have a good pipeline behind you who are going to be able to build the business going forward and going to make it profitable enough to buy you out over time under the employee ownership trust is critical.
Clare: Thanks, Zulon, that’s really interesting. And obviously each of those different options has various pros and cons to it that we don’t really have the time to go into all of those details, but this is to give like a thumbnail sketch, an overview of what the typical options would be and that the founders that we’re speaking to are considering. Because they’re not existing in a silo, and they also have to take into account what the priorities and expectations are of their fellow sort of partners and also their other colleagues in the firm. So what are likely to be the priorities of the next gen of partners and colleagues? What should they be thinking about in that respect?
Zulon: So there’s inevitably going to be some tension between what the founders want and what the next-gen partners will want. But there’ll also be lots of common ground because, and one of the common ground will be that both the founders and the next-gen will want the firm to be successful for the medium long term because neither of their objectives were going to be met unless that happens. So from the next-gen’s perspective, what they’ll be thinking, they want a clear path to ownership in they want a clear path to influence and so a clear plan as to how they get there and a timeline for that so they can manage their expectations, well managing expectations from both sides around when things will happen. So thinking about what your current equity structure is and if you’re very much kind of most of the equity is still in the founders hand, how do you gradually transition that and what are the conditions for transitioning that?
You might have to look at your whole remuneration model as part of that gradual equity transition. And then in terms of influence, again, gradual is the name of the game, I think. Again, this is about long-term planning. So over the long term, equipping your next-gen partners to take over the management of the business gradually is a really good idea. So bringing them into decision-making early on and building them up over time is really, really important. And again, factoring that into your governance structure and how you make decisions. And that might be around, know, whether you have a board, who’s on that board, what kind of voting rights do you have on the board and at partner level? Do you know, does the founder still have veto rights? What kind of influence do the next generation of partners have and can they build that influence over time. So thinking about those things. The next-gen will want to see the opportunities of how they take the firm forward and the founder can be really critical in helping them to see that and have a vision for that. So coming up with a strategy together is really a good way to do that. But they also want some room for them to grow on their own and make their own mark as well. Because obviously the founders legacy has been what’s got the firm to where they’ve got to now. But they’ll be thinking about where do we get how do we get to the next point in the development of the firm. And they’ll want to be able to have a key role in that and mark their own kind of influence on that next stage of the firm’s evolution.
Clare: Where in practice do you see things going wrong between the founders, the founder or founders, and the sort of the next generation partners in this potential transition, arrangement or discussion?
Zulon: So I think where it can go wrong or not go as well as planned is where you have misaligned expectations between the founders and the next generation. So I think, again, going back to the first point around planning early, having those conversations between the two, the founders and the next generation partners early around how they see the firm going into the future, what their personal objectives are and how they can meet those personal objectives to achieve growth and success for the future. So aligning your expectations and that can be concrete things like, again, going back to how do you transition equity and influence around clear expectations around timing, how do you transition that equity and influence over time? I would really recommend documenting that once you’ve had those conversations, you’ve come up with a plan, factoring that into your plan through either a strategy document or even reflecting it into your governance documents would be a really good thing to do because that gives the next generation partners something to aim for and they know that there’s a clear path for them forward. Because if they’re not feeling like there’s a path forward, then they can easily get itchy feet and look elsewhere whether they might see better opportunities. So I think it’s certainly the founders interest to ensure that those partners are keen and engaged and in for the long haul.
Clare: And what about external investment? Is that changing thinking at all?
Zulon: Yes, so certainly in some sectors, it’s become increasingly common for firms to sell to an external investor, whether that’s private equity or an angel investor, or, you know, we’ve had listings in the accountancy and legal markets over the years here in England. So that’s changed the landscape somewhat, certainly in some professions. If that is part of your strategy and you think that that is the model you’d like to follow, you need to again, think early about what changes you need to make to your governance and your structure, whether you might need to be a different structure in order to attract external investment. we, as you know, Claire, we’ve done some excellent podcasts on this very topic around external investments that people can listen to if they are interested in private equity investment in professional services, where we talk about governance and structures and issues around remuneration in those types of models. So again, thinking early, planning early for those kind of, if that is going to be your strategy going forward.
Clare: And let me ask you a question just around that. If you are a founder and you were to transfer ownership equity to the next generation of partners, say, you know, at no cost, you’re just sort that naked in naked out. And then that next gen decide to go down the private equity route. What protections can the founder consider at the point of transfer to, yeah, to, well, to ensure that they’re not locked out of that opportunity, if it happens within a reasonable period?
Zulon: There are a few ways to transition a partner out financially. What we usually see is some ongoing rights to profits. The founder may remain a albeit in more silent or a figurehead role, but have an ongoing right to capital and income profits going forward. If there was a sale, they would have a stake in that sale. If they don’t opt for that kind of option, they may ask for an anti-embarrassment provision in the partnership deed. So that if the firm was sold, say within a certain period after they left, that they would get a stake in that, the proceeds of that sale. So that is a neat way to kind of ensure that the founder doesn’t feel left out after they, you know, the risk of kind of missing out on a significant capital sum after they’ve left is reduced. And that can, again, least somebody out of the business, if they feel like that there is something like that in the horizon that they wouldn’t be missing out.
Clare: Yeah, and is there a typical, like in your experience, is there a typical period post-exit for the, when which those anti-embarrassment clauses would typically apply?
Zulon: Again, it really depends on the ongoing influence of the partner. So if they are still very much an ambassador for the firm, they still have key client relationships. They may have a much longer period after they’ve kind of stepped down from a full managing partner role, for example. If they are more of a somebody who wants a clean break and they’ve gone off and they’ve, you know, going back to the beach point as earlier and have had very little of it their ongoing kind of rights may be much shorter because, you know, they, you know, whether the firm is successful or not after they’ve left is more down to the next gen rather than themselves. So in those kinds of circumstances, you could see a founder’s influence diminish maybe 5 to 10 years. So that’s kind of length of anti-embarrassment you’d normally see because once you get to say 10 years, there’s probably very little that the founders influence has on the profitability of the firm for example because they haven’t really had a role in 10 years.
Clare: No, that’s really interesting. I mean, let me say this. I don’t know any founders who end up on the beach. I mean, it’s almost not. Founder to like, yeah, I did that. I’m going to the beach now. They go for about a month and then they start getting itchy feet and then they want to be back in amongst it. Um, unless they’re sort of actively restricted by whatever, uh, provisions and restrictions. Um, but yeah, uh, just saying for a friend. If you are, uh, a professional services founder, or founders, what should you be starting to think about now to plan for the next stage in terms of ownership transition?
Zulon: I think I’ve made the points that I’ve made already, Claire, it’s that starting in those conversations very early, understanding what your personal goals are, understanding what your next generation partner’s goals are, and you can only do that through conversations. And then having a clear plan once you’ve kind of had those discussions and understood what the objectives are on both sides, having a clear plan as to how you’re to achieve that and having a timeline around it.
And then considering those kind of mechanisms to buy the partner out over time, whether that they have an ongoing profit right or there’s an embarrassment right over time, that may be kind of ongoing for quite a long period of time, or it could be tapered over time, depending on, again, the role of the founder after they kind of effectively stepped back, whether they still have a key role in keeping the firm successful or not or whether it’s more down to the efforts of the next gen. I think starting early, thinking about it early is really critical.
Clare: That’s a great summary and great tips. Thank you. So thank you so much. If you’ve stayed with us to the end of this recording, I hope you found it helpful. If you are a founder or co-founder of a firm and you are interested in sort of transitioning ownership, the options, the pros and cons, what happens in practice, please do get in touch with us. Zulon would love to hear from you. And she works closely with our other partner in this area, Corinne Staves and they would be delighted to have an informal chat and see if they can help. Thanks again, Zulon. That’s really interesting and I really enjoyed it. Very informative. Thank you so much.
Zulon: Thank you Claire, good to speak to you.
