As a successful dealer, you spend your days running your business and making sure that all the wheels are in motion for success. From the service station to the sales floor, you provide the optimal customer experience for every person who walks through your doors. Your business, however, just like your customers, requires care, planning and attention for the success of its future. When you’re ready to retire or sell the business, do you have a plan? If not, your business and your legacy could be thrown into chaos.
The data is surprising when it comes to succession planning (or lack of it). A recent survey performed by the National Alliance of Auto Dealer Advisors found that nearly one-third of auto dealers do not have a succession plan in place, though fully half of them recognize the importance of succession planning. For those who do have a plan in place, 79% are seeking internal transition to a business partner or family member.
What Is Timely, Thorough Succession Planning?
Succession planning is about taking all the moving parts of the business and assessing them to help dealers determine where they are today, where they want the business to go in the future and the map on how to get there. This kind of planning will tell you what needs to be done and will allow you to execute it with the least amount of friction.
● Are you emphasizing growth, and do you plan to add stores?
● Are you planning for growth before exit?
● Or are you focused on exiting, so you need to plan a strategy to maximize the value of your business?
Once you’ve carefully thought about your exit strategy with these key points, you can build a starting position and a framework to strengthen your succession plan to ensure a relatively easy passing of the baton. However, there are some major pitfalls to avoid before you get there. Many of them involve paperwork.
Decoding the paperwork. To make an effective transition plan and avoid running into problems and delays in the future, you need to take a close look at your dealer agreements and franchise policies, and a full-service automotive M&A firm can help you with this. They should take a thorough look at all your agreements and policies. Next, they should make a thorough and timely analysis of these factors to build a framework for next steps.
Whether your plan is for an internal transition or sale to a third party, the firm should read the documents and help you understand all the fine print related to manufacturer rights, something that trips up many dealers. The delicate details of a franchise agreement and the necessary factors to approve potential buyers are just a few of the things we can help dealers familiarize themselves with. To ensure succession planning without a hitch, these steps need to be taken carefully and thoroughly.
Defining the roles. Specifics here mean everything. Your M&A firm will help you determine and spell out what’s expected of you as the dealer and what’s expected of the successor. In the event of death or retirement, navigating the exact path and putting it all on paper might be nerve-wracking now, but it can save stress, time, headaches and money later. (It can also help prevent family rifts.) Who will handle the decision-making? How will disputes be resolved? These questions and more should be answered in advance and in detail.
Getting an early start. Early planning costs far less than leaving it to chance and coping with the avalanche of legal and financial troubles that can arise from poor or incomplete planning. Investing in your success plan upfront now will save you hundreds of thousands — maybe millions — of dollars later. When’s a good time to start? We recommend that succession planning for any dealer should begin between the ages of 45 to 55.
What Early Succession Planning Means For You
Early succession planning allows you to explore the different areas of your business that are critical to address. By analyzing key aspects of your business, you can determine next steps toward succession planning.
Be sure to identify key people in your organization who will support the succession planning process, and in turn, you can develop an action plan to take tangible steps toward succession planning development.
When you’re not succession planning, you’re not protecting your legacy. Succession planning is a critical component of protecting a dealership’s legacy — your own legacy — and ensuring business success for the future.