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According to a recent NAADA survey, “While nearly 50% of the dealerships surveyed recognize that succession planning is important, they also admit they haven’t dealt with it yet. For those who have a plan in place, 79% are looking at internal transition.”
It’s similar to most Americans today. People are so focused on the day-to-day grind. They are often shocked to find out what it will really rake to successfully retire. It isn’t unusual for dealers to avoid having this conversation or embarking on developing a succession plan.
We don’t like change. We certainly don’t want to contemplate giving up our leadership, getting tangled in a messy divorce or worse, having to think about what the business will look like should we not be here.
If your business is a family affair, you especially want to ensure the future of your loved ones. You may choose to be a lone ranger, but its’ also a good idea to consider outside help and consulting to make give you peace of mind. It can be confusing to figure out where to start, but once you get going you’ll be glad you did. Here are the “three Ds” to consider when thinking about succession planning:
- Decoding the paperwork: According to Ira Silver, CPA, taking a look at your dealer agreement and franchiser policies is a critical first step. “Our experience recommends an early analysis of some essential auto manufacturer controls that can fundamentally impact your ability to transfer your business – whether through an internal succession plan or a sale to a third party.” Reading all the fine print related to manufacturer rights, the delicate details of a franchise agreement, and necessary factors to approve potential buyers are just a few of the things you want to make sure you familiarize yourself with. At this time you also want to take a full inventory on any lingering business, tax, data or labor issues that are unresolved, clean up any messes or at least put plans in place to do so.
- Define the roles. Specifics here mean everything. What is expected of the dealer and the successor needs to be clearly spelled out. 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. Who will handle the decision-making? How will dispute be resolved? All of these questions and more need to get answered.
- Don’t Wait. I can’t stress this enough. Early planning will cost a small amount compared the avalanche of legal and financial troubles that arise from poor planning. Investing upfront now will save you hundreds of thousands, maybe millions later. A good time to be thinking about succession planning for any dealer is anywhere between the ages of 45-55. The earlier the better!