Part 1. The Sweet Spot
Automotive dealerships are complex businesses. Owners must be entrepreneurial with strong leadership skills, an ability to take risks and effectively manage resources. In Canada, dealers are typically family businesses, which holds true in Ottawa. With the combined dynamics of a big business, a family business has several stakeholders who are dependent on the continuity and proper succession of the business. This blog is the first of 5 dealing with Succession Planning Dealer. This first entry deals with understanding the connections between the business, owners and family. Future blogs will address:
- Structures and Process;
- Understanding the Status Quo;
- Tips, Tools and Taxes; and
- Planning Transition and Real Estate Options.
As highlighted in our diagram, the sweet spot reflects the intersection of the business, family and ownership. The sweet spot refers to the successful management of the common interests of all the stakeholders. The sweet spot also refers to individuals that are part of the business group, the family and the ownership group. As the dealer becomes successful and grows, there should be more conversations that include the various stakeholders and contemplate their specific needs and objectives. As the number of stakeholders benefiting from the success of the dealer increases, the topic of succession planning becomes one of those conversations.
How can owners manage the Sweet Spot? One of the challenges is that many of the decisions, customs and rules that have developed within the business over time are unwritten. This may include intangible but important matters that have not been codified and which must be taken into consideration such as: the owner’s vision, family and business values. Philanthropy, for example, could be a significant value for the owners that may be expressed through the business. However, the family stakeholders may have different values when it comes to giving back to the community. There may be other unwritten rules regarding family members working in the business having to prove themselves worthy by working their way up through the ranks before being considered for leadership roles. These unwritten rules need to become written ones – this provides clarity for all involved and can avoid confusion and disagreements
It is important that these unwritten values be clearly communicated, recorded and agreed upon. It is an integral part of building a structure and process that will maximize the benefit to shareholders from the transition.
Are you ready to take your automotive business to the next level? Partner with Welch LLP and experience unparalleled expertise in automotive accounting. Our team is dedicated to helping you streamline your financial processes, maximize profitability, and stay ahead of the competition.
