Preparing the family for the family business
The dealer market is filled with second- and third-generation family businesses.
But in order for those businesses to remain “family” operations for generations to come, they will need to pass on from one family member to another. And if you’ve ever done that before, you know it’s not easy.
Creating a succession plan and transferring ownership of a business is a long and extensive process. It takes years of careful planning, preparation and execution to succeed.
It’s the kind of thing you need to start on today if you plan to retire in 2020.
Allen Phibbs, professional advisor at KEA Advisors, says a dealer principal’s first step toward building a succession plan in a family business is seeing if any of his family members actually want to be in the business. The idea of a fifth-generation business family business can be enticing for a second-generation owner, but he has to have a relative to pass the business on.
Phibbs says dealer principals who hope to pass on a family business when they retire need to active in looking for successors while they are on the job. This can start years, even decades, before the dealer principal actually plans on retiring.
It’s during this time that a dealer principal should create a timeline with an exit strategy and multiple succession plans. Even if a potential family successor has been found, Phibbs advises dealers to create a strategy for exiting the business through a family succession plan or a straight sale.
After the timeline is created and the successor is identified, it is imperative for the dealer principal to make sure the next-generation owner learns about the industry, the OEM and the business.
It is best if this is done over several years, says Keith Ely, managing partner at KEA Advisors, with the successor slowly working his way through the business or another company in the industry.
There also should be constant communication from the dealer principal to the successor during this time. The successor needs to know what is expected of him to move up in the business, and Ely says the dealer principal needs to keep him informed of his timeline.
“You have to lay out all of the information. What is Junior’s role going to be? What is his career path?” he says. “[The successor] needs to know what they need to do to get from Point A to B to C and beyond.”
Contact with your OEM also is essential at this point, says Ely.
Future dealer principals must be approved by OEMs before being taking over a location. If you want to move your son or daughter into your office one day, Ely advises they spend time working with the OEM now. A strong relationship can accelerate the approval process.