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Succession

Planning for

Dealers in an

Evolving Initiating a succession plan will

Business bring relief in clarifying your goals
and creating strategies that maximize
Environment the value of your business and legacy.

By Jim Cockey, Bank of America’s every business needs a plan in place in lawyer, and accountant. Your external
Market Executive for the Central case top leadership can’t run day-to- team will consist of advisors who think
Region and National Dealer day operations. broadly and are strategic and defensive,
Financial Services Teams like a transition attorney, estate lawyer,
CONSIDER YOUR PRIORITIES investment bank and appraiser, or auditor.

While there are many considerations in To begin the succession planning process, MAXIMIZE THE VALUE OF
running a thriving dealership, one of the you need to identify your goals. Perhaps YOUR DEALERSHIP
most important (and often overlooked) is you’d like to sell to family, management,
developing and maintaining a succession or a third party to generate liquidity. You Once your team is in place, you’ll want to
plan. This strategy allows for the transfer may also want to maintain some level of get your documents in order. These include:
control of the business, particularly during
of ownership to the next round of leaders,
whether family members, a trusted partner, a transition, if you’re gifting or selling the 1. Financial and business information.
You should pull your business’s
business to family members or selling to
or an outside buyer, will position you and trusted employees. You may also want to financial statements and consider
your business for future success.
step away completely and allow a third conducting an audit if you plan to sell
party to take over. the dealership. An audited statement
WHY NOW? is a more powerful statement to share
Having a succession plan is important for In addition to identifying your goals, it’s with a prospective buyer.
many reasons. In today’s environment, important to consider how your decision 2. Updated appraisal. An appraisal
there are three crucial reasons that rise will affect employees and the community to will compare your business to other
above the rest: assess whether your actions align with your dealerships, their gross margins
goals. and growth rate. Key metrics are
1. There’s a lot of buy/sell activity in important, whether you’re selling or
the industry, including accelerated Finally, you’ll want to consider the financial benchmarking the success of your
consolidation. If your long-term plan implications of your decision, whether it’s business for future managers.
is to exit the industry, you should reducing the amount of taxes you pay or 3. Strategic plan. It’s an excellent time
consider the current market valuations generating liquidity for future needs. to create or update the strategic plan
and buyer interest. for your dealership. It will help you
2. The U.S. is on the verge of material IDENTIFY KEY PLAYERS look at your dealership in the context
changes in tax laws that could affect One of the most critical succession planning of how the industry is changing and
your finances and the value of your decisions is determining the organization’s evolving. Opportune times to update
business if passed on to future future leadership. While it can be difficult your strategic plan include any time
generations. The estate and gift tax and emotional to talk with family and key you experience changes in your family
exemption, currently at a historic high managers about the future, it’s an essential situation or senior management team.
of $12.06 million per person or $24.12 piece of the process. An honest talk about
million per married couple, will drop your goals and theirs will help clarify Initiating a succession plan can be
by half in 2026 when the current tax your options and develop a more realistic emotional, and the process will take
law lapses. It could drop even faster if succession plan. time. However, once you get started,
Congress passes a new law before 2026. you’ll find relief in clarifying your goals,
3. The market, labor costs, supply Facilitating the process will be two crucial understanding the intent of your family and
chains, and other factors influencing teams: internal and external. Your internal senior managers, and creating strategies
dealerships continue to fluctuate. As team will consist of key family members, that maximize the value of your business
the pandemic brought home to us, senior dealership managers, your banker and legacy. n

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