By Joan B. Kaye, Senior Vice President and Relationship Manager, Key Private Bank
As we cruise toward the end of the year, it’s important for auto dealers to pull over, pop the hood, and examine the state of their business.
How has the dealership measured up against goals for 2019? What lessons were learned this past year? How can those reflections help set the stage for a profitable and productive 2020?
No matter where your auto dealership falls in its lifecycle, there are critical checkpoints to make sure your business goals align with your wealth planning objectives. To ensure the dealership you build fuels the lifestyle you want, here are six financial tasks to complete whether you’re just starting your business, revving up the dealership or handing over the wheel to a successor:
Slow Down to Speed Up
As an auto dealer, in the same way that you become obsessed with all aspects of your dealership, you should also take the time to mine through the details of your personal financial life to ensure there’s a solid foundational plan in place to guarantee your wealth grows alongside your business. Don’t overlook the importance of pressing the brakes to examine the fundamentals of budgeting and saving, before pumping the gas on more complex investing and financial planning matters.
Chart Your Financial Roadmap
Understand from the get-go how your money is allocated. Should 100% be tied up in the dealership? Are you well-diversified in other areas? Are you anticipating funding 100% of your retirement nest egg with one liquidity event? Scenario planning can help you anticipate roadblocks and be prepared to handle unsystematic risks. Meet with your financial advisor so you have a clear roadmap for the near- and long-term.
Refurbish Your Wealth Potential
The truth is most businesses aren’t worth what their owners might think. As a dealership owner, however, you have an opportunity to maximize your company’s value and, in turn, your opportunity for wealth, if you execute a thoughtful and strategic plan to reduce the amount of risk within your business. Whether contemplating a sale or transfer, or looking to operate an efficient, profitable dealership for the long haul, make sure you understand your dealership’s risk profile and take a disciplined approach to right-size any gaps long before it’s time to fund your retirement.
Stay Liquid to Avoid Red Lights
Since the majority of a dealership owner’s wealth is often tied up in their company, access to capital isn’t just a business problem. Work with your financial planner to develop an investment portfolio that’s properly diversified and generates the right amount of income, so you have the financial horsepower to afford the lifestyle you’re accustomed to in retirement.
Cultivate Future Drivers
To preserve and protect your legacy, it’s important to identify who will take over once you’ve retired or moved on from your auto dealership. In fact, seven in 10 wealth advisors at Key Private Bank say not having a succession plan in place is the most common wealth management pitfall for business owners, a Key Private Bank Advisor Poll revealed. To ensure the stability of your dealership’s future, develop a succession plan that addresses ownership and change management. No matter where your business falls on your transition timeline, taking steps now to plan and educate successors can help prepare the next generation of leaders at your dealership.
Hand Over the Wheel
Business owners often have trouble letting go of their business once they’ve retired. Handing over the wheel after building something from the ground up can be emotionally trying and, in practice, difficult to do. Rest assured, if you’ve taken the time to lay the groundwork, optimize your dealership to run efficiently, and prepare the next generation, trust in the system you’ve built—you’ve done well.
Creating and sustaining a successful dealership is like driving down a multi-lane highway: owners must weave in and out of traffic to manage multiple priorities, overcome any obstacles that may arise and progress toward a prosperous future.
Yet as we approach a new year, it becomes even more important for auto dealers to look in the rear-view mirror to get a holistic view of past mistakes and where the business stands against critical checkpoints. Only this knowledge will help improve performance and ensure the dealership will continue to grow and protect wealth in 2020 and beyond.
Joan B. Kaye is senior vice president and relationship manager with Key Private Bank. She can be reached at Joan_B_Kaye@KeyBank.com or 1-516-660-9851.
This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice. KeyBank is Member FDIC. KeyCorp. © 2019. CFMA #191202-703278
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