This month we are going to task about something that makes most of us very uncomfortable… What happens to our business when something bad happens? Anytime we bring this subject up most people tune us out, because we have never given any thought to the idea that we may not going to be in business tomorrow. Part of what makes us Automotive Business owners is the personality type that we are invincible. Succession planning is something we all need to have discussed, and have a plan in place; otherwise we can burden the business and our family with debt, uncertainty and fear.
What is succession planning? The dictionary defines succession as; “the act or process of following in order or sequence.” In most cases small business owners are so concerned and involved with running the business they never get to plan for the future. In our opinion succession planning needs to be a high priority, because without a succession plan the future of the business is not defined. What areas does the succession plan help us in?
• Preparing for loss of leadership.
• Responsible planning for the future.
• Leadership development of the younger generation.
• Smooth transition of control
In most cases we have not planned the future of our business; In fact we don’t give a thought to our exit plan. We work very hard for 20 or 30 years and then in the last year or two of our careers we decide what to do with the business. We have never spoken to our family (spouse, children) about what happens to the business when we retire or if we have illness or death. We need to have a succession plan for these reasons;
• Planning the future direction of the business.
• Provide a training plan for future leaders.
• Ensure business continuity.
• Reduce tax liability.
• Provide peace of mine for your family and employees.
• Security for your family.
The facts are… we as an industry are aging and have not realized it. Consider this; the average shop owner is 53 years old, and has been in business an average of 28 years. We have spent no time planning for the future and some cases we are in poor health. Long days, short nights, high stress levels and poor eating habits have made us the poster children for heart disease and strokes. And because we live and breathe only our business, we have spent zero time planning for the future; in fact we don’t plan next week much less twenty years into the future. Our biggest potential failure is that we keep all of the business information in our head, and when this happens, if we can’t function, the business can’t function.
Some interesting facts about family small businesses…
Only 30% of family businesses survive to the second generation, and of this 30%, only half make it to the third generation.
A lot of small business owners think the sale of their business will finance their business retirement, but in most cases the business has not been staffed or structured correctly to allow for a profitable sale. One thing to keep in mind is that if you are the main point of contact to the customer and you go to sell your business, it could bring half of what it is worth. If you have a team in place and they are the main point of contact your business is more valuable. Part of a good succession plan is an exit strategy for you that is planned and not based on a major negative event.
How do I start this succession plan? As we have talked about in other seminars and articles you need a Team of professional to provide guidance in many areas. We feel we need to have a relationship with these professionals.
Accountant
Attorney (a business attorney and a succession planning attorney)
Financial Advisor
Insurance expert
Business Coach / Consultant
Now, when I talk about a relationship with these professionals, I mean we want them to be familiar with you and your business. It’s never a good idea to wait until you need one of these professionals to hire them. Interview for these positions until you find someone you’re comfortable with, and then check their references until you find the right fit for you. Once you have your professionals located, put them on retainer, or build a working relationship, so that they can jump into action as/if needed.
After you have your professionals in place, the next step is to review and assess your current employees. Identify the strengths and weakness of each employee, and understand that not every weakness means they shouldn’t be there! . Ultimately, the end result is that you are looking do develop the Team so that we feel comfortable leaving our business. If you do not have the crew now, this needs to become a priority! Once the Team is in place we need to develop processes and procedures for the day-to-day shop operations.
We need to have enough processes and procedures that will allow the Team to run the business profitably, and without you! We have seen many shops struggle to survive because the shop could not function with the owner sick or worse, out of the picture all together. Your also business needs an operational manual, a step by step manual of how to perform each job in the business. Now do we need to spell out what direction the toilet paper should roll out in this manual, well maybe, that depends on the quality of the employees you have!
Having regular meetings with your staff is an important step to having a Team that has the knowledge to make sure the business survives. These meeting should include such things as an overview of what is currently happening within the business, where the facility is on the company goals, etc. Some of these meeting should also be used to develop an emergency operation plan as well as “what if” contingencies.
Next we need to developed leadership in our employees. You want a group of decision makers as employees, not followers, and then you need to empower them to make decisions. What is empowering your employees? Simply allowing your employees to make decisions based on their experience, AND the policies & procedures for your facility. Empowering your employees also means that you aren’t micro-managing them, which in theory means you have more time for working in instead of on your business.
We also need to cross train all of the employees to be able to cover all positions in the company, even if only basically and temporarily. Remember that cross training should make your life easier in the long run as it allows you to fill a temporary position from within.
What else should you do? Get all you legal issues handled. These should include but are certainly not limited to, a properly set up, living will or trust that is set up and funded correctly. Then there is the insurance required, be sure you and the agent of your choice have your insurance coverage set up correctly, and you have all the coverage you need! Failure to have the right insurance will cost you more in the long run in most cases than you’ll save going with the least expensive insurance.
You also need to have a date for you to exit the business. Don’t get mad, you don’t have to leave, just have a plan in place so your business is ready for you to leave. There are four basic ideas for an exit plan;
• Retain ownership and manage control
• Retain ownership, but not manage control
• Sell it and hope for the best. Most repair shops are sold and the seller carries at least part of the loan. In many cases they end up with the shop back in 3 to 5 years.
• Close the shop
By being prepared, empowering your employees, making sure your business is covered, and plan on selling will protect not only your investment, but also help protect your family and the businesses extended family!
Succession Planning is available as a recorded Webinar on our web site www.esiseminars.com. We have 17 1 hour long Webinars that cover all aspects of repair shop management available. Many of the Webinars come with other resources such as spreadsheets and sample documents to help you improve your business and profitability of your shop.