You’ve worked hard for many years to build a flourishing business, earned the goodwill of your customers and are now wondering what happens to your legacy when you retire. How do you put your hard-earned business into the right hands and retire peacefully?
If this is you, you are not the only one. According to PWC’s 2021 US Family Business Survey, two-thirds of all family businesses in the US don’t have a robust and detailed succession plan in place. This just goes to show that succession planning is often the most overlooked part of a business strategy. It’s prevalent in every industry, not just in the body shop business.
Most entrepreneurs fail to include an exit strategy or succession planning when they start their business, until it is too late. Very often, the thought of retiring or exiting one’s hard-earned business is not always a pleasant experience. As an increasing number of business owners from the Baby Boomer generation contemplate retirement, it is not uncommon for their children to show zero interest in heading up the family business.
In my opinion, succession planning is critical in uncertain times and should be part of your strategy from Day One. An early business succession plan delivers real life benefits – a defined path to successful retirement, more financial security, and greater protection when unplanned events occur. Smart entrepreneurs involve their families very early on in the process, almost at the same time as they launch their business, so they are confident their business is insulated against any uncertainty.
In our network, there are quite a few family businesses that began many years ago and are now being run successfully by second- or even third-generation owners. How did they get there? The answer is smart succession planning. These owners planned their retirement and prepared the next generation to take over months, and even years, in advance of retiring.
An effective business succession plan is an extremely well-written, detailed, and clear document prepared with the assistance of experienced financial and legal professionals. It involves identifying potential successors and understanding tax and financial implications while preparing your exit strategy. Remember, you are not just passing on a few office chairs and workshop tools to your successor.
Succession planning is a complex and complicated process. Conflicts can arise at any stage of a business’s lifecycle, and transitions will always be stressful, especially when you are keen to maintain a fine balance between family and professional relationships. Here are some best practices to help you throughout the transition and beyond. Think about these steps carefully and set realistic deadlines for each.
Start the conversation early
This may well be your most difficult dinner-table conversation with your family, but it is something that needs to be done. Pick a time and place convenient for everyone. Be prepared for what could unfold when you ask your potential successor if they want to take over the family business. If required, get the help of a professional mediator who is acceptable to all family members. Make sure everyone in the family is in the loop at every step of the process.
Iron out differences
Disagreements are inevitable in family-run businesses. Family members will not agree on everything, and it will be up to you to determine the agreeable solutions where both the business and the family relationships are not threatened. It’s important to listen to everyone’s views to ensure there is a consensus on your ultimate decision.
Involving your team
Once you have found your successor, be sure to communicate this to the rest of your team so that your successor finds acceptance at the workplace and your team can support the new owner in every way possible. It is also wise that your successor shadows an experienced hand for a considerable period, so they learn processes quickly. In the meantime, review your organizational structure in consultation with your successor so you can plan a robust and effective operation.
Preparation and Mentoring
Running a body shop is not always easy and your nominee will require themselves to be prepared to run the show confidently after you retire. Be prepared to spend enough time teaching your successor all elements of the business. Encourage them to take whatever courses are needed to prepare for their new role. Do they need mentoring or to shadow an employee to learn more? At Fix Network World, as part of our franchisee empowerment, our operations team works closely with retiring owners and their successors to ensure that the business continues to be viable during the transition and beyond.
Step away entirely
Once the transition is completed and the new family member understands all elements of the business, it is wise to step away and allow the new owner to take charge. The designated family member is responsible for all business decisions and for all profits and losses.
Succession planning may seem like a huge challenge when transitioning a family business from one generation to another. Prior planning and the right support (or the lack thereof) can ensure whether your legacy is in good hands or not.
Steve Leal is the President & CEO of Mondofix, Inc. dba Fix Network World, the leading global automotive aftermarket services network which includes ProColor Collision. The family of brands spans over 2,000 points of service internationally. In the United States, Mondofix, Inc. has granted an exclusive license to 79411 USA LLC to the FIX AUTO brand.