16 KENTUCKY AUTO DEALER SUCCESSION PLANS There are risks and benefits when leadership changes, and both are too important to ignore. Succession plans ensure a better transition between owners. They can also be the difference between surviving or permanently closing. Succession plans are about replacing yourself. They outline a process where the first step is to move someone into management before becoming the new owner. They are especially important for dealers because so many people within the dealership rely on its continuation. Suppose one or more owners want to transfer their business to someone else. In that case, the work to be done includes identifying and maintaining whatever makes the business valuable, developing employees who can potentially step into a larger role later on and figuring out the best tax strategy before and during the transition. In many businesses, the pandemic changed business transition plans, timelines or both. Some owners plan to transition sometime during the next decade. Regardless, the best time for any company to transition is when the company is prospering. There’s less chance of running out of needed resources at a key point of the transfer. As you make your succession plan, keep the following suggestions in mind. • Decide what you want to do first. There are several questions to answer before you start. Are you ready to sell your business? If you want to keep the business in the family, who could lead in your place, or should leadership involve several people? Is anyone going to feel bitter or unhappy if you don’t select them? If you want to sell the business instead, what will that mean short-term and long-term? • Schedule planning sessions as soon as possible. You want to maximize the number of choices you have, not be forced into less-than-ideal decisions by urgent circumstances. If you are selling soon, you need to enhance the company’s value as much as possible as soon as you can. If selling the company will happen later, the focus should be on preserving its value even if you don’t have to increase its value. • Ask the right questions by looking at your company from the perspective of the next owner. What should you be asking? Just as transferring an unprofitable company doesn’t make sense, it also doesn’t make sense to transfer a company whose success depends too much on retirement-age people. Figure out what makes the company stable and sustainable, and make sure the company’s success is not dependent on one or more key people
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