In the first of a two-part series, we asked jobbers that when planning succession, should family members take over or should you sell your jobber business?
For this topic, we needed to speak with jobbers who owned their own businesses, so we touched base with Dave Elliott from Wallaceburg Auto in Ontario and Douglas Squires from Colonial Auto Group in Newfoundland/Labrador to get their thoughts about the topic. Both had some great points. Judge for yourself and maybe learn something from their answers even if you’re not at the point of thinking about passing on your store to the next generation or a buyer.
1. What do you think jobber store and business owners need to consider when beginning a succession strategy?
Dave Elliottt: You need to figure out what retirement looks like to you and then find a willing party that will provide that to you. Planning is the key—involve your Accountant, Lawyer and Investment Advisor—your bank and life insurance agent might also be involved. Will it be an asset sale transitioned over time, or will it be a share sale, as the tax implications are different for each. It will take a team to get the deal completed. Write down what you feel is the perfect deal and timeline, and then try to find that. There will always be compromises however, when buyers and sellers negotiate.
Douglas Squires: The first thing to identify when building a succession plan is who your successor is most likely to be, either an internal candidate, a family member, or an external individual/company. Even after selecting your preferred candidate, it is important to maintain other options in the event your first choice does not work out. You also need to determine your timeline for departure as this will dictate when you need to start the transition process. You will also need to consider how much training will be wanted/needed by your successor as this will impact your timeline. Your retirement needs in relation to the company’s value and how these impact on each other is also key.
2. Where do you think these plans can often fail or not work as intended and what are some of the reasons why?
Dave: I think there may be a difference in opinion of the value of the business or the terms may be unreasonable. From what I have heard communication seems to be the main concern—lack of written communication about the plan. The more the buyer and the seller can agree to before involving the professionals, the more likely the deal will succeed. Talking through the issues is important. The Plan needs to be written out and then scrutinized by your lawyer and accountant. The Plan has to be acceptable to the sellers and sustainable for the buyers. A wise man said that communication is the cause AND the solution for all of our problems.
Douglas: Succession strategies fail due to insufficient advance planning. A succession plan will typically focus on one individual or one company, yet many things could prevent a chosen successor from taking over such as a lack of aptitude, changes in a successor’s personal life, or unexpected external factors. By starting early, continually updating the plan, and considering contingency plans, an owner can put themselves in the best position to ensure they will have a successor when it comes time for them to leave the business.