Body Shop Succession Planning: Having a Vision

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About six years ago, I was flying to Miami to attend a conference. Sitting across from me was a couple about my age, so we started chatting, and the husband told me he had a successful collision shop about 35 miles from my house. When he asked me about my business, I told him that I was a financial advisor who specialized in working with family businesses.

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His next question was the one I’ve heard many times from family business owners: “Are you helping them create a business succession plan?” Although two sons work in the business, it was uncertain whether they would have the skills or the desire to run the business.

This is one of the biggest challenges facing business owners, especially in the collision repair industry. Since that conversation, I’ve spent years helping auto shop owners align their families and businesses for generational wealth.

The same profile

Most of the traders I have met have the same profile. They started in workshops as technicians or floor sweepers and worked their way up. Eventually, they either bought the companies or started their own, and their hard work ethic propelled them forward. As more cars come to their stores, they build bigger facilities or more locations, and some create lifestyles they never dreamed of before.

Yet there comes a time when they look up from under the hood and ask the same questions my client on the plane asked:

  • What do I want the rest of my life to look like?
  • How to make the transition of the company?
  • Are my children taking over?
  • Will they sink it into the ground?
  • Am I selling it? Who do I sell it to?
  • What is my business worth?
  • What roles do family members see themselves playing?
  • How can I help my family members realize their visions?

As the store owner, these are questions you need to answer, especially if the store is a family business.

Stephen Covey, in his classic book “The Seven Habits of Highly Effective People”, lists habit #2 as “Begin with the end in mind”. He defines it as “starting with a clear understanding of your destination”. The goal is to know what the future holds so that your actions are always in the right direction. Having a vision for your business and your life gives you purpose and meaning. Yet my experience is that most store owners never discuss this with themselves and their families. Consequently, they put out fires and create uncertainty within their families, resulting in a less desirable outcome than they could have achieved.

5 step process

Let’s go back to the story of the store owner I met on a flight to Miami. When we returned from our trip, we discussed his situation in more detail. He bought the shop from the gentleman he worked for when he was young and converted it from a one-bay garage into a multi-million dollar facility with 27 employees. Even though his sons grew up around the business, they didn’t get involved until adulthood. So they couldn’t really see the owner’s processes and struggles as the business grew.

I always follow a detailed five-step process to analyze business and family needs in order to develop a successful financial strategy. These steps include:

  • Create a vision for business and family
  • Carry out a detailed analysis of the company’s situation, emphasizing the gaps
  • Development of a roadmap to guide the family towards their vision
  • Implement the plan after covering risks such as divorce, disability and even death
  • Act as 911 for the business by continuously monitoring the plan and making the right pivots when a strategy fails.

family mindset

As I progress through the five-step process, understanding the family mindset is key for me, so I interviewed family members of the body shop owner. The two sons, key employee and wife all expressed an interest in the business, but each had different ideas about its future. One side wanted to grow the business into a multi-site facility, but the other wanted to maintain the status quo. The key employee wanted to play a bigger role in operations, but he was caught in the crossfire. The wife wanted her husband to pass the business on to them. The husband was struggling because he didn’t want to lose control of his 30-year-old hard work. Chaotic, right?

As everyone was pulling in different directions, it caused a lot of tension within the family. So, as a next step, we brought the family together for a “family reunion”. Wealth tied to a business will ultimately benefit the whole family. Thus, these meetings should include people involved in certain aspects of the business and family members who are not, including spouses, adult children, and siblings.

One of the first steps I use in this meeting is to ask the owner about how he or she started their business and became successful. I find it fascinating how many family members have no idea of ​​the difficulties and challenges faced by the owner, and often the spouse says to me, “Thank you for telling them the story. Their family never gave them the opportunity to understand what it takes to build a business.

Instead of focusing on surface issues, I dig deeper, find the underlying causes, and then address them one by one. For example, many problems cannot be solved if you try to micromanage them. In these cases, I recommend that clients take a step back and gain a new perspective.

A common vision

The next step in these meetings is to come up with a common vision that everyone can agree on that involves the business and their lives. Perhaps one of the children wants to take over; maybe another likes the sales and marketing aspect and wants to fill that role. However, there might be another kid who has no interest in collision business but wants to be in an ancillary business or something completely different.

The process helps us identify how the family can achieve this dream as part of an inheritance. We can also identify potential conflicts in the family and then establish guidelines that the whole family can follow. The result is that all family members have a voice and buy into the family vision, creating a sense of deep unity.

In a nutshell, family reunions aim to identify the role and ambitions of human capital. Plus, business owners can answer crucial questions, such as when to retire and when to pass on the business. Finally, families can take a clear course through communication and discussion about the future.

It doesn’t happen overnight. It usually takes a few meetings to work out all the details, but once an overall vision is set, I can then help the family develop a plan to achieve their vision. This includes, but is not limited to:

  • Make sure you have sufficient funds to live the lifestyle you want
  • Install the right retirement plan that will allow you to maximize your savings, minimize your taxes and provide appropriate benefits to your employees
  • Create a business structure that will provide multiple independent streams of income
  • Implement training and development programs for children and key employees likely to take over or lead the business
  • Ensure you have adequate risk management vehicles in the event of a crisis
  • Have a “self-redemption plan” that will allow you to dictate the terms of a transition.

Build a pyramid

In addition to creating a vision, the purpose of family meetings is to develop a team culture with the family. View each session as one more step towards building a pyramid of strong mindset and vision. “Trust” is the bottom foundation. By creating an artificial harmony, the fear of conflict is overcome, which leads to the next step: having “clear communication”. Once family members are open about their expectations, they are ready to move on to the third step, “commitment,” which leads to the top, “results focus.”

Of course, life throws wrenches at us, such as health issues, divorce, mental health issues, caring for aging parents, and even death. It’s good to have an advisor who has your best interests in mind and who has selected professionals in each area to help you manage these challenges. By acting as a resource person, this advisor can direct you to the right person or company and help you coordinate a solution. This leaves you free to focus on growing your business, caring for your family, and contributing to your community.

Summary

So how did the story end for the store owner? Well, it continues – but with a way to go. Both the son and the key employee took on leadership roles. The owner guides them as they run the business and decide how to grow as the industry changes. The other son has found he really isn’t happy in the auto body industry, but the family is working to develop other roles or businesses that match his skills and interests.

I am delighted to see the family making progress in building up financial resources to manage their day-to-day personal and professional responsibilities and deal with any potential risks they may face. Most importantly, there’s a lot more harmony and clarity in their lives — and for me, that’s the biggest reward!

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