By David Weaver, CEC, The Rawls Group
Succession planning is a hot topic in the automotive industry and has been one frequently discussed in the pages of Automotive Buy Sell Report. Recent articles by Don Ray and Robert Bass have specifically focused on successor identification and development, and how, in the absence of a qualified successor or the lack of management bench strength, owners are forced to sell their business.
Business owners are often faced with a lack of a family member interested in running the business or, if they do, generational differences, personality conflicts, immaturity, inexperience, lack of commitment, etc. cause an owner to stop and reconsider the value of ‘keeping it in the family’. We’ve all seen the numbers: Only 30% of family businesses survive past the first generation of ownership and only 15% survive to the third generation*.
In the case of no family member interest, your disposition options may include selling to a third party, selling to your management team (MBO), or bringing on an operating/financial partner. There are pros and cons to each option, including whether you desire an outright exit strategy or a method of cutting back while enjoying continued participation in earnings from the business.
But let’s assume you have a family member interested in the business and you’re excited about the notion of preserving the family legacy. With that in mind, how do you overcome issues such as lack of respect from long-time staff that may cause that plan to founder? It often involves looking outside the dealership.
Outside work experience a plus
Before you begin to attempt family-member successor training, let someone else have a crack at them first. Working for someone else for at least three years is a great way to gain experience outside of the family work environment, and earn respect with management.
I have a client whose son is an accounting whiz. With his natural talent, he could have come straight into the business after college and immediately added value. He probably would have discovered processes needing shoring up, or areas where expenses could be tightened.
However, if his family’s business was his first job, how much credibility would he have with the management? Instead, our whiz kid went to work for a CPA firm with a nice-sized automotive practice. He traveled around the country auditing other dealers for a few years. Through the process of talking with these dealers and their staff, he found what worked and what didn’t work.
When he came into the family business a few years later, he had some ‘seasoning’ that made him more knowledgeable in the business. But he still didn’t try to make suggestions and changes overnight. He had to earn the respect with of the local team.
Exposing and training your successor across all facets of dealership operations is critical to their understanding and future management of the business. I’ve seen too many dealers who bring family members in and stick them in an area they may enjoy (or where they can do the least damage) without exposing them to all areas of the business.
Training programs like NADA Dealer Academy and NCM management courses are key to providing structured learning across multiple areas of the dealership and best practices through exposure to other successor candidates and managers.
Assignments between classes allow them to take what they have learned and apply it in the business. Be sure your successor spends ample time under the tutelage of each department manager and gains experience, ranging from writing up tickets to desking deals. As for ongoing exposure and education, get your successor(s) involved in your 20 Group early on.
Remember that your son’s or daughter’s management style may differ from yours, but be equally viable. If they have the proper training, you can rest easier.
Talk to people who have been there
Your options may be limited or they may be broad when it comes to successor selection and development. Either way, development is a dynamic and critical component of succession planning.
The best advice I can give is not to navigate these waters alone. Talk with dealers who have successfully transitioned from one generation to the next and above all, find and work with competent advisors who can help you ensure the ongoing success of the business through the next generation.
* Small Business Administration
David Weaver, CSP, CEC is a Partner with The Rawls Group, a national business succession planning firm. He can be reached at 678-427-8098 or firstname.lastname@example.org. For more information visit www.seekingsuccession.com