Automotive News Canada - June 2023 - 22

EXPERT INSIGHTS
DEALERSHIP SUCCESSION PLANNING
Dealers can become so focused on success
that they forget about succession-
and not the television series. With all the
demands imposed by the ever-evolving
automotive industry, succession planning
seems as if it can be put off into the
future-and then tomorrow becomes
today. Many dealers also are reluctant to
begin a process that is, in a sense, the
first step in letting go of their business.
To help those skittish dealers take those
first tentative steps toward a comprehensive
succession plan, Automotive News
Canada spoke with Farid Ahmad, Founder
and CEO of DSMA; and Chris Schaufele,
National Leader, Dealerships, at MNP.
They offer guidance for a successful succession that preserves the dealers'
legacy of service and sweat equity.
Q: Dealers have the unique and complex task of succeeding in a fastpaced
industry where they must also direct extensive long-term planning
across all divisions of their business. If they don't already have a
succession plan in place, what do you think may be holding them back?
Farid Ahmad: It can be a combination of fear and indecision or simply a feeling
that it is too early to make this kind of decision. Succession planning involves
looking ahead and making important decisions, which tends to be a complex
and emotional process. So, the fear of change and uncertainty may indeed deter
dealers from initiating succession planning. They could still be running their businesses
and in a state of assessment of
what the future holds. Not to mention that
some dealers may not fully understand
the importance of succession planning
and underestimate the time and effort
required to develop their comprehensive
transition plan.
Chris Schaufele: There could be many
factors holding a dealer back from initiating
succession planning. For some,
the immediacy of day-to-day operational
decisions can overshadow longer-term
planning for their future; and for others,
they may not want to lose control over
the decision-making within their dealership,
as it is a big part of their identity.
The fear of the unknown and a lack of understanding the importance of succession
planning can also prevent these important conversations from being had.
Q: According to DesRosiers Automotive Consultants Ltd., from an article
in Automotive News Canada, more than half of all new-vehicle sales in
Canada are controlled by large auto dealership groups. When we think
of dealership succession planning, are we referring to individual dealers,
or are there dealership groups that still require an exit plan as well?
Ahmad: Both. Many groups across Canada are structured with one single
owner overseeing multiple stores. It has been noted across the board that we
often see succession planning being delayed because dealers assume it signifies
retirement and the end of their journey. However, succession planning
marks a new beginning, providing owners with strategies for achieving personal
and business goals. The key is to determine the right strategies specific to
"
Left to right: Farid Ahmad, Chris Schaufele
the unique visions, set by either a familyoperated
business or a large automotive
group. The visions may vary depending
on the size of the company and the competitive
landscape, affecting competition
and growth projections. No matter the
size and ownership structure, it is critical
to ensure that you have a strategic plan
in place to carry the business forward.
Schaufele: Every organization and individual
should have a succession plan, no
matter how big or small their group or
single store might be. From our experience,
however, it is often the small groups
or single-store operators who are least
likely to have any planning in place and
Succession planning involves
looking ahead and making important
decisions, which tends to be a
complex and emotional process. So,
the fear of change and uncertainty
may indeed deter dealers from
initiating succession planning.
"
- Farid Ahmad, DSMA
could therefore benefit the most from having conversations on their retirement.
Q: The term is " succession planning, " but the underpinnings are tied to
years of hard work and family dynamics. For dealers, is there an emotional
element to working through a dealership succession plan? And if
so, how does it factor into the final agreement?
Ahmad: Talking about succession planning can make people feel uncomfortable,
particularly when it comes to family. This process is a very emotional one
for the dealer, as they have to deal with the future of their baby-the business.
Ideally, dealers would prefer to pass on the business to one of their family
members, such as their children. This could be because it is the best solution
for the dealer from a tax perspective and
from a retirement perspective, as with
recurring income.
A lack of qualified family members to
take over the dealership or group is also a
common reason family business owners
decide to sell their business to an outsider.
This can be extremely emotional for the
dealer as well as their family members.
Schaufele: Emotional and relationship
considerations are as important to a successful
succession plan as financial considerations.
In many cases, the dealership
carries the family name, and they want
their legacy to carry into their retirement.
While the new owner, be it your kids or a
third-party group, may not run your store
exactly like you did, it is often important for dealers to know their legacy will be
kept intact.
Q: Dealerships are some of the strongest independently owned businesses
in Canada. Once a succession plan has been finalized, how often
does the plan need to be reviewed, given the long-term probability of
the organization?
Ahmad: Business succession planning is an ongoing and evolving process.
Once created, the dealer should review the plan annually to ensure he or she
is still on board with the decisions made. The business is changing rapidly; a
good succession plan should remain somewhat fluid until it is time to execute.
Regular reviewing and updating of the plan can help ensure its effectiveness
and alignment with the dealer's evolving needs and goals.
Automotive News Canada - June 2023

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