Who will take over in the future is an unanswered question for many jobbers.
“I’m not going to call it a succession crisis, but it is certainly an issue,” says Charles Seguin, PriceWaterhouse Coopers.
“It really doesn’t matter if you are corporate or an independent–it is an issue. Typically big corporations deal with the issue of succession on a regular basis. It really does focus on day to day management and ownership.
“When you get into the entrepreneurial space there is a third part; you end up with a lot of non-business issues that enter into the equation.” Issues of family, ownership, retirement and the value of the business–as well as the ability to pay for the business–can create problems for everyone concerned. It may be death-related or an issue of retirement, but either one can put a business at risk.
“There are a number of good quality companies that have really foundered on the issue of succession. Many owners want to sell to a family member, but end up selling to a third party. They want to keep it in the family but they generally make the decision to sell. Four out of five do that.”
Research conducted in the jobber community by Jobber News Magazine in conjunction with PriceWaterhouseCoopers, DesRosiers Automotive Research, and the Automotive Industries Association of Canada revealed a great number of business owners have not prepared well for succession.
While about one-third of independent owners are over 50 years of age, have 20 years experience or more, and about two-thirds have a family member in the business, some 76% do not have any succession planning in place and a full 15% do not even have a will.
Also, only half of owners have a plan to cash out on their business, something which can take a considerable amount of planning and time, considering the number of hard assets involved.
Seguin illustrated several scenarios of how a succession plan can be developed, but reiterated how critical it is to the entire community that more businesses plan for the future in ways that can provide a transition to new management and ownership, not just minimize tax burdens.
“You need lead time to turn hard assets into cash. Planning comes into play in a big way.
“This is something that should be alarming to everyone. Within one year, in excess of 30% of respondents to the survey want to be retired or semi-retired. And 65% of the respondents want to be retired in five years. This is clearly an issue in terms of the minds of those in business.
The migration towards retirement is imminent. It creates opportunities for those who want to expand, but it creates problems for those who want to retire.
“The other interesting issue is that for those who have a will and plans is have they discussed it with anybody? The whole idea of discussing your future plans with people who are going to be affected is one of the most difficult things to do on this planet. We’ve all had friends or business partners who have unexpectedly passed away and the family is left holding the bag.
“The biggest barrier to this going forward is procrastination.”