So NOW You Are Thinking Succession??

This is a topic that has been ignored for years by shop owners within the Aftermarket, however as business grows tougher and the business becomes more complicated, many shop owners are thinking "how do I get out, and what will I get for this?"

You are not alone.

With the average shop owner now being well into their 50's and some into their 60's this question is now being asked over and over. The unfortunate part is, these shop owners are now addressing this very important question "at the last minute" looking for their silver bullet answer. Very typical of the Aftermarket indeed. What a shame.

The following points are only guidelines to focus the thinking process in the right direction, but they must be thought out, fully discussed and addressed properly in great detail. You may not like the answers or process, but this is reality.

First, recognize that no business can be sold at your desired price if it is not creating the right sustained profitability that justifies your asking price. By this I mean it must be able to pay a "professional owner/manager" wage, show a decent net income after tax for the effort, investment and stress required, coupled with the fact the business must be able to pay out of current business earnings the "debt payment" required to buy the owner out.

Stumped already?

It means that this "Succession" is not a slam dunk. It means proper planning must take place and it would be wise to get your head around a 4 to 7 year process to make it happen. I have always counselled my clients to think 5 to 7 years of defined strategic work to put things into place for them to realize their financial dreams.

Consider the following:

- if family is taking over the business, then a "culture" of business understanding must be put in place. "Culture"? This means developing a business principle of embracing "excellence" ....to be the very best at whatever we do.....must be the natural way to think and plan. Attending industry specific business courses enthusiastically and wanting to take these courses on an on-going basis becomes a natural discipline. A complete "self discipline" must be learned and instilled to implement the necessary proven business strategies from these courses to ensure the business is profitable and can sustain "on-going" profitability.

- family members (if more than 1) must "mature" to recognize that there is no gift here, this is business, and one family member will be the "final decision maker" in order for the business to succeed. A President/CEO will develop from the family members and all family members must openly accept and support this. Jealousy can not prevail in a successful family business succession plan.

Laziness, lack of self discipline to implement and jealousy are the main three reasons why second and third generations fail in a family business.

- if internal ownership (staff) is going to take place to buy the business, then absolute and complete business training must be on-going, instilled and planned. Also, procedures for open access and discussion to all comprehensive business decisions must be put into place. Are you prepared to bring this person or people into "the full inner circle" of the business, opening the books to reality, admitting to your past mistakes and recognizing your faults but also recognizing present successes, strengths and what you have learned? Again the focus must be on "sustained" bottom-line profitability in order to provide for every circumstance. This means all business processes, measurement and analysis procedures must be open for review.


- if you are planning to go to the open market to sell your business, which is the most difficult, bottom-line profitability coupled with Return on Investment analysis must be recognized. What makes your business so special? All emotion is gone in this analysis. The math MUST be proven!! The pure math does not lie and it becomes the door opener or it could be the door closer. Once the math is reviewed and enticing, then you are talking and reviewing personnel (all staff) issues, equipment issues, inventory issues, facility issues (lease or purchase) and how all this will come together. Be prepared for a lot of discussion, analysis and negotiation. Hire the talent that is required to represent/work with you in these analysis and to guide you with these discussions.

There is no slam dunk to this topic.

This is but the tip of the ice burg in this discussion but I hope you can see by this short BLOG that a lot of planning must be put into place and the business must be revamped for a successful succession to proceed. Plan now and make the investment required to ensure that YOU, the current owner, has a great business to sell in order for you to realize your blood, your sweat and your tears you have put into this business you built ..........oh yes, did I fail to mention one thing?.....NOW the REAL work begins!!!!!