Succession planning isn’t typically at the front of a business owner’s mind if they aren’t planning on going anywhere soon, but that doesn’t mean it’s smart to ignore the issue. Having a plan in place can give tire dealers the peace of mind to run their business in a way they might not if they were the only ones holding the keys to the kingdom. Consider whether family members are ready to assume control, or if key non-family employees will be able to run the company effectively. Will the value of the business be better protected by the sale of the business to a non-family member in order to better achieve family objectives? Will the owner be able to retire and keep the family business intact? Does the business owner have an adequate retirement established? An effective plan answers all of these questions.
In this month’s episode of Rolling with the Numbers, we take a look at how many tire dealers have a succession plan in place, as well as whether it’s worth the trouble.
Here’s a transcription of the video:
David: Hey Christian.
Christian: Hey David.
David: Christian, have you thought about what you’re going to do when you grow old and retire from this show?
Christian: This is my second day. So… no?
David: You’ve gotta have a plan! Perhaps another Tire Review editor will take your place, just like you stepped in for this show’s former co-hosts? I think now is a good time to remember all of those editors who have come and gone on this show. Roll the clip, please.
Christian: … You know they are both upstairs? I just talked to Maddie about 2 minutes ago, she told me you haven’t done any work for, like, a week – is this what you’ve been working on?
David: My point is that one day when you get too big and too famous you might leave this show, and if you do, you need to have a succession plan.
Christian: I appreciate your concern but… let’s talk about this after the show.
David: This IS the show! Today’s episode is on succession planning.
Christian: Oh! OK, interesting topic. What does that have to do with independent tire dealers? Don’t most of them have a succession plan?
David: Ah, that’s where our data comes in – you know, the data that gives tire dealers information to keep their tire businesses rollin’ with research conducted with our independent tire dealer audience.
Christian: Of course.
David: So, what percentage of our independent tire dealers have a succession plan according to our data? Exactly 50%! Exactly half have a succession plan.
Christian: That’s not what I expected. Do you think COVID had anything to do with that number not being any higher?
David: Good question, but actually, 60% of tire dealers who took our survey said COVID had NO effect on their attitude toward succession planning, and 33% said it made them MORE interested in finding a succession plan.
Christian: Also not what I expected.
David: So, at first I was shocked at the 50/50 split, but think about it. We’re not talking about big giant corporations, here – these are independent tire dealers. Most dealers I talk to aren’t sitting behind a big desk with a big cigar in their mouth barking orders at their employees – they’re on the shop floor, or behind the counter taking care of customers. They’re selling tires, maintaining their shop equipment, keeping an eye on inventory. They’re busy people, and finding the time to create a succession plan – especially if they aren’t anywhere close to retiring or getting out of the business for any other reason – it just isn’t a priority. I get it!
Christian: Oh absolutely. I’ve been living off frozen chicken nuggets for two weeks because the grocery store isn’t a priority for me.
David: Not the same thing, but same concept.
Christian: I guess there’s a little more at stake when it comes to succession planning. Knowing whether you plan to leave or sell your business to a family member, sell the business to an employee, sell to another company, sell to a business partner or – hell – maybe you just want to liquidate the whole thing, I don’t know – knowing that gives the owner not just peace of mind, but flexibility to run their business in a way that perhaps they wouldn’t if they were the only one holding the keys to the kingdom.
David: For sure – and for dealers who DO have a succession plan, funny that you just said everything you did in the order you did, because that’s the popular order for dealers too, according to our data.
David: A majority of dealers we surveyed told us that they’re passing the business down to the next generation or selling it to an employee. Many of the independent tire businesses in our industry are multi-generational and family-owned, so that makes a ton of sense.
Christian: Who do you even talk to if you want to start the process? Do you just write on a piece of paper “I leave my business to Janet” and put it in a safe?
David: I’m… honestly not sure whether that would hold up. But, here are the most popular answers to that question, according to our data. Obviously, seeing a lawyer, a financial advisor or someone who specializes specifically in this field is probably going to be the best bet.
Christian: I’d be interested to know how many independent tire dealers have even been approached to sell their businesses, too.
David: Believe it or not, Bryce, cue the chart please. It’s 49%! Almost exactly half, just like our last chart! Honestly it’s not surprising, this is a hot market right now. But who is approaching independents to sell their shops?
David: OK, so here’s our data. And, if you’ve been in this business any length of time, there are probably no surprises here for you. Private equity has ramped WAY up in the past couple of years, other independents and national tire chains already know the business, same with another auto service businesses. This is nothing new. But it is interesting to see the sheer AMOUNT that private equity is out there knocking on doors with fists full of cash.
Christian: Most definitely – and, by the way David, while you were talking, I think I did come up with a succession plan for myself, even though I’m not going anywhere anytime soon.
David: Oh excellent! What’s the plan?
Christian: I’ll… probably just give the gig back to Maddie or Tess, because they’re… right upstairs. Like I said.
David: A solid plan!
David: For more business intelligence data to help boost tire dealer profitability, be sure to watch out for our next episode of Rolling with the Numbers. If you subscribe to our newsletter, it’s in there, look out for it! Until next time –
David & Christian: Keep on Rollin’!