Who Will Reap the Rewards of Your Hard Work?
5 Steps to Succession Planning To Protect
the Value of Your Legacy
NEW YORK, New York – November 4, 2019 – As the holiday season quickly approaches, those running family businesses are reminded of the benefits of entrepreneurship. And while owning a family business can be wonderful and rewarding, it can also be frustrating and stressful.
One of the most difficult conversations any business owner will have with his or her family is succession planning. Believe it or not, families don’t relish the idea of discussing mortality. Add money to the conversation and you can almost guarantee everyone will try to avoid the conversation.
“While thinking about the future is not easy, it’s necessary. The sustainability of your business and the legacy you have built are at risk. Your family, their families, and future generations are depending on you to lay out a plan for the future of your business,” states Dave Cantin, President and CEO of the Dave Cantin Group.
Brian Brown, COO of the Dave Cantin Group believes “succession planning is about more than
retirement, it’s about ensuring the survival of your enterprise.” According to researchers Brady and Helmich, “few events in the history of an organization stand to have greater repercussions on its overall success [than succession planning].”
Did you know that, according to NAADA, over one-third of business owners don’t have a succession plan in place? Additionally, a Gallup poll shows that only 30% of family businesses survive to the second generation. That number dwindles to 12% of family business survival to the third generation. This means that over two-thirds of family-owned businesses don’t survive. These numbers should serve as a wake-up call because, in the case of succession planning, failing to plan truly is planning to fail.
If you have not yet created a succession plan, let this holiday season motivate you to establish a strategy for passing your dealership on to the next generation. In order to assist you in creating a succession plan, we’ve compiled 5 steps to creating a plan to preserve and protect the value of your legacy.
First, choose a team of people who have the expertise and ability to create a comprehensive succession plan. Think about it- your dealership, your family, and your legacy will all be impacted upon your departure from the business. Do you really want to trust something this important to anyone other than professionals? Work with a trusted group of experts who can walk you through each aspect of the succession planning process. This group should include, but not be limited to, your corporate attorney, as well as an estate attorney and your financial advisor.
Next, explore possible successors and their future rolesto determine what is best for your business. This will involve a series of discussions with your family, advisors and vital employees. It’s easy to assume that your kids want to stay invested in the family business. However, in order to create the most thorough succession plan, you need to sit down with your family and have open discussions about whether or not they want to continue to be involved. You will also need to sit down with your key staff members and figure out if they have interest in becoming owners, or part-owners. If ownership is not something they want, would they be willing to stay on through the transition period? Understanding the qualities of each individual you are considering partnering with in the succession of your business is critical. It’s also important to determine and define roles of potential successors. Consider where each person will have the most impact and propel the business in the future, and assign roles accordingly.
It’s important to then get the “OK” from the automaker. First, make sure to understand the dealer agreement’s fine print and franchise policies. By being proactive and closely examining and accounting for the details of each agreement, you are protecting future generations from possible legal burdens. Also, remember that the automaker has made an investment in you and your business, and they will have to approve of the succession plan. Manufacturers understand that it’s not just the owner that makes the dealership operate smoothly. Usually, there is another crucial team member involved in keeping things running. The automaker may request keeping this key person in place through the transition period. This one thing could possibly make or break the future success of your business.
Understand that the succession planning process is going to cost money. You have devoted yourself to building your business, and it is difficult to part with your hard-earned cash. Creating a succession plan doesn’t come cheap, especially since drawing up estate papers (wills, trusts and power of attorney documents) can run anywhere from $5,000 to $10,000, according to Merrill Lynch. Not to mention, if you choose to change the structure of your business, this will require even more documents. However, this could possibly be one of the best investments you can make in your business. By properly laying out the succession of your business, you are providing your dealership every opportunity for future success. Plan to set aside anywhere from $10,000 to $50,000, Merrill Lynch wealth strategists suggest.
Finally, don’t forget about taxes. According to the old adage, death and taxes are the only certain things in this life. Therefore, it simply makes sense to go ahead and set aside funds to pay estate taxes. We realize that much of your dealership’s finances are fixed, whether in real-estate, long-term investments, or capital assets. Your succession plan needs to make a way to create liquid assets for your family or partners. These funds would be available for them to quickly access as they need, in order to pay estate taxes or any unexpected expenses that come up while transferring the business over. This will not only make their lives easier, but it will also help sustain the success of your dealership.
Remember, the succession planning process is just that- a process. It will take time to create your plan, and possibly several revisions. The more quickly you set up your succession plan, the better it will be for you and your family. “Don’t let the discomfort of talking about the future prevent you from preparing your business to continue without you. The sooner, the better. Your family is worth it,” says Cantin.
About Dave Cantin Group Dave Cantin Group (DCG) is a full-service M&A firm that manages the sale and purchase of automotive dealerships throughout the United States. With over $11.5 billion in collective dealer acquisitions and $3 billion in dealership listings, DCG is one of the world’s largest automotive dealership M&A firms. Dave
Cantin personally has helped raise more than $150 million in the fight against pediatric cancer, and DCG is committed to donating a percentage of its revenue to the cause. DCG is headquartered in New York with regional offices in California, Florida, Illinois, New York, and Texas.