Succession Plans for Your Auto Repair Shop
In a recent industry study conducted by BOLT ON Technology and PTEN Magazine, more than half of shop-owning respondents indicated that they plan to retire in the next ten years. While many shop owners will be moving into the next stage of their life, what could this mean for the future of their shops? Many shops become too wrapped up in their day-to-day work and put off planning for their future. But there comes a time, whether a shop owner is prepared or not, that they will not be able to continue running their business. Most shops today either have to close their doors or sell their property unless they have a succession plan in place. In this article, we will explain the importance of planning for the long-term future of your auto repair shop, and we’ll give you some hard-earned tips to help you create a succession plan for your auto repair shop.
Why Does Your Shop Need a Succession Plan?
A 2018 survey delivered by Wilmington Trust revealed 58% of small business owners have no succession plan for their business. These small businesses are put at risk, and often fail, when owners or key stakeholders retire, die or become incapable of continuing with the business. It’s a shame, really. As an auto repair shop owner, you’ve poured your heart and soul into your business. It’s been your career, your livelihood, and almost a second home. And it’s your legacy.
But what happens to your business when you want to retire? Without a succession plan, you may be either forced to keep the company afloat long after you're able, sell the company at a serious loss, or watch the company go bankrupt with nobody to keep it going. But a good succession plan can help set your business up for long term success while also giving you the ability to retire when you’re ready. Whether retirement is quickly approaching or quite a ways off, planning for the future can give peace of mind and increase the longevity of the business shop owners worked hard to build.
How to Create a Succession Plan
Having a solid plan for what happens when it's time for you or other key people to move on is super important for any business. It's not just about preparing for the future - it also keeps things running smoothly in the here and now. With a good succession plan in place, you can reduce risks, make sure the business doesn't skip a beat when there's a change in leadership, and pave the way for a smooth handoff to the next owner or manager. Here are five tips to help you set the motion in play:
Create an Exit Strategy
Will the shop be transferred to heirs, sold to business partners, key employees or an outside buyer, or acquired by a larger brand? Having a clear exit strategy in mind early on will guide many of the decisions made in building and running the business. It's important to weigh the pros and cons of each option and plan accordingly.
Identify key leaders and successors
Can you identify a key, or "go-to", employee who can take on the owner's responsibilities in the event they are no longer able to? How are you nurturing that relationship? Coaching a successor takes time, so start identifying and training potential candidates well in advance. Offer mentorship, increasing responsibilities, and opportunities for growth.
Document and automate processes
Technology and strong processes can help shops run efficiently in the owner or manager's absence. In addition, a well-oiled business is valued higher if the owner decides to sell because the function of the business does not rely on the owner. Documenting standard operating procedures and leveraging tools for automation increases consistency and scalability.
Download our free guide with 10 steps to win over your customers and boost your repair shop.
Understand the shop's value
Conduct a business valuation to understand how much the shop is worth. The valuation helps to develop a retirement strategy, properly value shares, and attract potential buyers or investors. Enlist professionals to conduct a comprehensive valuation considering all tangible and intangible assets.
Focus on the long term
Planning for the future is worth the initial time investment. Plan for the long term success of the shop, rather than the short term wins of the day. While keeping an eye on immediate needs, continually evaluate and adjust the succession strategy as circumstances change.
As the auto repair industry ages, it's important to keep retirement plans and succession plans fresh. By focusing on the end game, auto repair shops will be better prepared for the unexpected. For more information on how to build processes that increase the efficiency and value of a shop, speak with one of our experts and see our software in action.
