Leadership & Business Sustainability Explored
Auto body shop succession planning and having a vision helps collision shop owners align their families and businesses for generational wealth.
About six years ago, I was flying to Miami to attend a conference. Sitting across the aisle from me was a couple around my age, so we started chatting, and the husband told me that he owned a successful collision shop about 35 miles from my home. When he asked about my business, I told him I was a financial advisor specializing in working with family businesses.
His next question was one I’ve heard many times from family business owners: “Do you help them create a business succession plan?” Despite having two sons working in the company, he wasn’t certain if they would have the skills or desire to run the business.
This is one of the biggest challenges business owners face — especially in the collision repair industry. Since this conversation, I’ve spent years helping automotive shop owners align their families and businesses for generational wealth.
The Same Profile
Most of the shop owners I’ve met have the same profile. They started in shops as technicians or sweeping floors and worked their way up. Eventually, they either bought the businesses or started their own, and their hard work ethic propelled them forward. As more cars come through their shops, they build larger facilities or multiple 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 themselves the same questions my client on the airplane asked:
- What do I want the rest of my life to look like?
- How do I transition the business?
- Do my kids take it over?
- Will they run it into the ground?
- Do I sell it? To whom do I sell it?
- What is my business worth?
- What roles do the family members see themselves playing?
- How can I assist my family members in achieving their visions?
As the shop owner, these are questions that you need to answer, especially if the shop is a family business.
Stephen Covey, in his classic book “The Seven Habits of Highly Effective People,” lists habit No. 2 as “Begin with the end in mind.” He defines this 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 life gives you purpose and meaning. Yet, my experience is that most shop owners never discuss this with both themselves and their families. Consequently, they put out fires and create uncertainty among their families, resulting in a less desirable outcome than they could have achieved.
Back to the story about the shop owner I met on a flight to Miami. After returning 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 multimillion-dollar facility with 27 employees. Even though his sons grew up around the business, they did not become involved until they were adults, so they did not really get to see the owner’s processes and struggles while the business grew.
I always follow a detailed five-step process to analyze the business and family needs to develop a fruitful financial strategy. These steps include:
- Creating a vision for the business and family
- Carrying out a detailed situational analysis of the business with an emphasis on shortfalls
- Laying a roadmap to guide the family towards its vision
- Implementing the plan after covering risks such as divorce, disability and even death
- Acting as 911 for the business by continually monitoring the plan and conducting the right pivots when a strategy is unsuccessful.
As I proceed through the five-step process, it’s crucial for me to understand the family mindset, so I interviewed family members of the collision shop owner. The two sons, the key employee and the wife all expressed an interest in the business, but they each had different ideas about its future. One party wanted to grow the business to a multi-location facility, but the other one wanted to maintain the status quo. The key employee wanted to take a greater role in operations yet was caught in the middle. The wife wanted her husband to pass the business on to them. The husband was struggling because he did not want to lose control of his hard work of 30 years. Chaotic, right?
Since 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 meeting.” The wealth tied up in a business will ultimately benefit the entire family. So, these meetings should include those involved in some aspect of the business and those family members who are not, including spouses, adult children and siblings.
One of the first steps I use in this meeting is to have the owner tell the story of how he or she started the business and succeeded. I find it fascinating how many family members have no idea of the difficulties and challenges the owner has met, and often the spouse says to me, “Thanks for having them tell the story. Their family never gave them the opportunity to understand what it takes to build a business.”
Instead of focusing on surface-level issues, I dig deeper, find the underlying causes, then address them one by one. For example, several problems cannot be resolved if you try to micromanage them. In these cases, I recommend that clients step back and gain a fresh perspective.
A Common Vision
The next step in these meetings is to find a common vision that everyone can agree upon, which involves the business and their lives. Maybe one of the children wants to take over; maybe another loves the sales and marketing aspect and wants to fill that role. However, there could be another child who has no interest in the collision business but wants to be in an ancillary business or something completely different.
The process helps us identify how the family can meet this dream as part of a legacy. We can also identify potential conflicts in the family and then establish guidelines the whole family can follow. The result is that everyone in the family has a voice and buy-in to the family vision, creating a feeling of deep unity.
In a nutshell, family meetings aim to figure out the role and ambitions of the human capital. Additionally, business owners can answer crucial questions, such as when to retire and when to pass the business on. Finally, families can take a clear course through communication and discussion about the future.
This does not 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 its vision. This includes but is not limited to:
- Ensuring you have adequate funds available to live the lifestyle you want
- Installing the proper retirement plan that will allow you to maximize your savings, minimize your taxes and provide a proper benefit for your employees
- Creating a business structure that will provide multiple independent income streams
- Implementing training and development programs for children and key employees who may either take over or run the business
- Ensuring you have adequate risk management vehicles in place in the event of a crisis
- Having a “self-buyout plan” that will allow you to dictate the terms of a transition.
Building a Pyramid
Aside from creating a vision, the goal of family meetings is to develop a team culture with the family. Visualize each session as an added step towards building a pyramid of strong mindset and vision. “Trust” is the bottom foundation. By creating 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’re ready to move on to the third step, “commitment”, which leads to the peak, “attention to results.”
Of course, life throws us wrenches, like health challenges, divorce, mental health issues, caregiving for aging parents and even death. It’s good to have an advisor who has your best interests in mind and has vetted professionals in each field to help you manage those challenges. By acting as your point person, this advisor can lead you to the right person or firm and help coordinate a solution for you. This leaves you free to focus on growing your business, caring for your family and contributing to your community.
So, how did the story end for the shop owner? Well, it continues — but with a path ahead. The son and the key employee have taken leadership roles. The owner is mentoring them as they run the business and decide how to evolve as the industry changes. The other son found that he really wasn’t happy in the collision industry, yet the family is working on developing other roles or businesses that fit his skills and interests.
I’m delighted to see the family progress in building financial resources to manage their daily personal and business responsibilities and address any potential risks they may encounter. But most importantly, there is much more harmony and clarity in their lives — and for me, that’s the greatest reward!
Article Credit to BodyShop BUSINESS.
What is your view of developing a succession plan for your business and focus on creating generational wealth for your family? Have you ever thought of that? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.
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