Pub. 2 2022 Issue 2

Succession Planning for Dealers in an Evolving Business Environment By Bank of America Corporation While there are many considerations in running a thriving dealership, one of the most important – and often overlooked – is developing and maintaining a succession plan. A strategy that allows for the transfer of ownership to the next round of leaders – whether family members, a trusted partner or an outside buyer – will position you and your business for future success. Why now? Having a succession plan is important for many reasons; however, in today’s environment, there are three crucial reasons that rise above the rest. 1. There’s a lot of buy/sell activity in the industry and accelerated consolidation. If your long-term plan is to exit the industry, you should consider the current market valuations and buyer interest. 2. The U.S. is on the verge of material changes in tax laws that could affect your finances and the value of your business if passed on to future generations. The estate and gift tax exemption, currently at a historic high of $12.06 million per person or $24.12 million per married couple, will drop by half in 2026 when the current tax law lapses. It could drop even faster if Congress passes a new law before 2026. 3. The market, labor costs, supply chains and other factors influencing dealerships continue to fluctuate. As the pandemic brought home to us, every business needs a plan in place in case top leadership can’t run day-to-day operations. Consider Your Priorities To begin the succession planning process, you need to identify your goals. Perhaps you’d like to sell – to family, management or a third party – to generate liquidity. You may also want to maintain some level of control of the business, particularly during a transition, if you’re gifting or selling the business to family members or selling to trusted employees. Or, you may want to step away completely and allow a third party to take over. In addition to identifying your goals, it’s important to consider how your decision wil l affect employees and the community to assess whether your actions align with your goals. Continued on page 38 37