Auto Dealer Monthly, February 2014

FEBRUARY 2014 AUTODEALERMONTHLY COM 29 3 COMMON SENSE Th e highest level of education my dad completed was grade school but you never would have known it He had a lot of common sense and always seemed to know what to do next He built a successful used car lot and then a new car dealership by making smart decisions every day and hes not the only one During the 1940s and 50s when so many of todays dealerships were founded most people had no choice but to go to work to help support their families Yes a good education comes in handy but you can be a successful dealer without earning an MBA Th e smartest person in the world would be daunted by the daily operations of a thriving dealership and the decisions that come with it Your successors will be eager to use their computer expertise and fi nance degree to take your operation to the next level and rightly so Just be sure they have the common sense to back it up 4 BUSINESS SENSE Good business sense requires a combination of day to day operational expertise and the ability to plan for the future Again an advanced education can help but most colleges dont off er courses in dealership operations Your successors must understand how your business operates and know everything there is to know about the products you sell Th ey also must know their competition You know how to learn from rival dealers and take advantage of their miscues You also know better than to cross ethical lines or be dishonest or deceitful with customers Finally you know to react quickly when things dont go as planned Do your kids know Start by mapping out contingency plans for all the diffi cult situations you have faced which may arise again Dont be afraid to discuss the times you made bad decisions Even the most successful businessperson stumbles from time to time and every dealer has dealt with personnel issues and the occasional unexpected natural or man made disaster You survived because you had the will to persevere and the business sense to react before it was too late 5 SOLID WORK ETHIC In the early stages of a new business individual initiative and ambition oft en make the diff erence between success and failure Many dealers have learned that the same is true in the long term Dealerships with absentee owners have a much higher failure rate Which course will your successors take If the person who will inherit your business has plans to be an owner in name only they will need a team of very good managers Putting the store on autopilot can work but only for a short time Someone needs to be able to deal with the day to day happenings at the dealership so they dont become major problems Finally I realize that many of you were successors yourselves once If thats the case try to apply the good advice your predecessors imparted to you And dont forget how left out you felt when they were still in charge and they didnt take your ideas seriously Maybe they had a good reason Or maybe it was diffi cult for them to surrender the leadership of something they put in all those hard years and long hours to build Take those memories to heart as you undertake your own succession planning Understand that your kids will make good decisions as well as bad ones just like you did Coach them and lead them but dont undermine their desire to continue the family business and make it their own David Keller is a partner with CliftonLarsonAllen a leading accounting firm with expertise in serving franchised independent and BHPH dealers and heavy truck and utility trailer outlets DKeller@ AutoDealerMonthly com ISTOCKPHOTO COM MONKEYBUSINESSIMAGES INCOME TAXES One often overlooked aspect of succession planning involves income taxes Did you know you can gift 14000 per year of cash or value stock interest to your kids without incurring additional taxes The total estate tax and gift exemption currently stands at 5120000 which means a substantial amount of stock value can be transferred to your successors tax free Gifting while you are alive transfers your tax basis in the stock to your kids Inheriting the stock after your demise will give the kids a step up in value to the fair market value at the time of death This can drastically reduce any future income taxes upon their fi nal sale of the stock to someone else or the sale of the majority of the assets and dissolution of the company Each dealers situation is different Your plan for transferring stock to your kids depends partly upon your estate value and the other assets in your portfolio so consult your accountant Its not pleasant but planning for what would happen if you died today is a good place to start You can always make additional estate planning changes in the future as time goes on and circumstances change N owhere on the list of qualifi cations for the job of running a dealership do the words dealers kid appear If you are a dealers kid and you are preparing to take over the operation youre in a better position to succeed than the average citizen But your pedigree will only take you so far To take your familys business to the next level you must arm yourself with a good solid work ethic adequate fi nancing good managers and employees who care about the business as much as you do Your primary goal is to be prepared for the hassles and problems that will invariably arise possibly in the very near future There are no guarantees in this business save one If you arent excited about taking over the business and focused on succeeding you will fail But your future is up to you If you dont want to be a dealer make your feelings known Dont hold up this major decision until it is too late for your family to fi nd another successor I can think of nothing worse than running a solid family business into the ground This is not the legacy that was left in your hands If you choose to embrace this opportunity you have an excellent chance of succeeding Many dealerships have survived grown and prospered beyond their founders dreams all thanks to the education ambition and hard work of their descendants DEALERS KIDS