Auto Service World
Feature   February 1, 2002   by Charles Seguin and Luanna McGowan

Success & Succession: Putting a Plan in Action: 10 Steps to Tying It All Together


Over the past few issues, we have been looking at the various components required to complete a succession plan. It’s now time to tie it all together and get something started.

The following steps will help you get started and help you to overcome the procrastination that so commonly dogs succession-planning efforts.

The entire process can take as little as a few meetings covering about a month or so for simple and well-organized businesses, or several months for more complicated family and business organizations. The process is identical under any scenario, but the degree of intensity could very well be different.

Let’s get started by looking at 10 simple quick steps.

STEP 1

Take a blank sheet of paper and write down the answers to the following questions:

1. If something were to happen to me today:

a. Who could run the business?

b. Who would run the business?

c. What income would there be for me and my family to continue living in the style we have become accustomed to?

2. How much do I think the business is worth?

3. How much and what type of insurance do I have?

4. Who are the stakeholders in my business?

a. Family members

b. Business partners

c. Key employees

d. Franchisor or distributor

STEP 2

If you are like most people, you might need some help answering the above questions. Step 2 is obtaining that help. Call your business advisor, accountant, lawyer, or the executor of your will; any person who can talk through the issues with you and who can offer objective advice is suitable.

Spouses often play a very important role here. If you have not discussed these issues with your spouse, you will likely be surprised at how many sleepless nights your spouse has had worrying about some of these very same issues, although usually from a different perspective.

STEP 3

Review articles one to five in this series (they are all archived at www.autoserviceworld.com under Jobber News 2001 Issues, August through November) and write down a rough draft of the issues you would like to address.

Focus on the contingency plan, strategic plan, family participation plan, and succession plan highlights. Also, you may want your stakeholders to read these articles if they have not already done so.

Then, read the latest version of your will and compile your personal and group insurance coverage details. Read your franchise or distributor agreement to understand any conditions that you must follow under your contract (e.g. do they have the right to approve a new owner?). These are all matters that will need examination and it is best to address them up front.

STEP 4

Engage a family business facilitator to help you manage the family meetings and meetings with key employees. The facilitator’s role is to manage the entire process so that discussions will not get sidetracked and results not achieved. A facilitator differs from other advisors you may have for your business–tax accountant, lawyer, etc.–in that the facilitator is trained to bring out individual ideas and feelings in private and group sessions. They are also trained to keep the discussion on track, keep all parties at the table and to keep the project moving to achieve targeted results. The other professionals all add little pieces based on their area of expertise. The roles are very different. The facilitator is process-oriented; other professionals’ expertise is technical.

STEP 5

Call and hold the first family meeting to discuss management and ownership succession. At this meeting, the ground rules are spelled out by the facilitator and a rough schedule of meetings and timetable is finalized. A summary of what succession is all about is reviewed. Part of the process is educating your stakeholders on the process and objectives, and your facilitator will play the lead role here.

STEP 6

Your facilitator meets with all stakeholders individually to help each stakeholder understand the process and their own personal role and objectives in the succession plan. All obstacles, frustrations, and roadblocks are identified and each stakeholder is coached on how to make their opinions and desires known within the group.

STEP 7

The facilitator starts to assemble the key succession documents in point form for discussion with the entire group. The purpose at this stage is to structure points for future group discussion.

STEP 8

The group reconvenes and discusses the issues as openly and as honestly as possible. The group works through creating their own key points that serve as a framework for the overall succession plan. The group works with the facilitator to populate the details behind the key points, and the individual plans begin to take shape. The goal is one page each for the strategic plan, family participation plan, contingency plan, and succession plan.

STEP 9

The facilitator prepares a draft final document for discussion and review by all stakeholders. The group continues to provide input and discuss content, until a final draft is completed that meets all or at least most of the business owner’s objectives.

STEP 10

All support documents such as wills, estate plans, shareholder agreements, employment contracts, marriage contracts, insurance contracts, and tax planning are put into place. Only at this point can meaningful planning and execution of agreements take place. The basis for these documents and contracts is the four-part succession plan.

Of course, what if you decide that management and ownership succession is not in the cards for you? You wouldn’t be the first.

Many of our clients start out with the intention of transferring their business within their immediate family, but after going through the process described above, decide that this is not the best alternative for all involved. Other clients do not have identified successors. This involves overcoming an emotional and practical hurdle of deciding to sell the business outside the family. More than 60% of our clients opt for some form of outside sale in their succession plan.

Selling a business is not like selling other assets you might own. They require time to get the business ready for sale. Once the sale decision has been made, the short-term plan is to determine the value of the business, identify areas that diminish value and then set out on a plan to deal with those items so that the maximum sale price can be obtained.

When you are dealing with the proceeds from the sale of a business, your focus should be on net proceeds, i.e. money in your pocket, and not on the gross selling price. To do this it will be necessary to determine the form of sale that is most advantageous to you personally.

Some business owners end up selling the shares of their company to take maximum advantage of favorable capital gains tax incentives. Others end up selling the assets of the business, since this turns out to be their best personal after-tax alternative.

In the next series of articles we will be dealing with the implications of selling your business, valuation and some tax structures that might just be right for you.

Whatever the ultimate course your decisions take you, you must not leave this to chance. Remember it is your business, your sweat and hard work that you have exerted with a strong single-minded focus and determination. Your approach to succession planning should be no less important and focused.

Charles Seguin, CA, is partner-in-charge of the PricewaterhouseCoopersLLP Automotive Retail Practice. The cross-Canada practice focuses on retailer growth and development, operations improvements, succession planning, acquisitions and divestiture, accounting, tax and finance-related issues. He can be reached via e-mail at charles.l.seguin@ca.pwcglobal.com

Luanna McGowan, LLB, is partner-in-charge of the PricewaterhouseCoopersLLP Centre for Entrepreneurs and Family Business. The centre provides facilitation, strategic planning, retirement planning and wealth management services to entrepreneurs and organisations. She can be reached via e-mail at luanna.mcgowan@ca. pwcglobal.com.


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