The automotive industry has become highly fragmented due to the high concentration of family ownership within businesses. It is very common for ownership within car dealerships to transfer to the third and fourth generations. However, a majority of dealers have no cohesive long-term plan for an organized transition of their business interests. Furthermore, many dealers do not take enough time to contemplate the problems that can arise when passing ownership and control to the next generation.
Manufacturers are clamoring, some now mandating, for dealer principals to have a succession plan in place. Manufacturers must approve the successor (through a successor addendum) and many require that the successor have an ownership stake in the dealership. However, dealers may be hesitant to give up control. Dealers also may not be ready to think about or plan for their own death or retirement. The truth is that both events will happen to many dealers. Without proper family and business succession planning in place, a dealer is more likely to leave behind a legacy of litigation, hefty estate tax bills, and broken family dynamics rather than a profitable business and happy family.
A common misperception is that dealers think developing a cohesive succession plan equates to giving up control. However, a proper succession plan can allow a dealer to transfer ownership to the next generation while maintaining control and a steady income stream. Furthermore, if you have several children and not all of them are in the business, it is difficult to create a fair estate plan when 70-80% of your net worth is tied up in the dealership and real estate.
Planning Solutions Group has over 20 years of experience working with auto dealers and their families helping to identify what the family goals are while incorporating what is in the best interest of the business. Succession planning can be challenging, but it is important to put a plan in place while you are alive and in control. Both Donald Hannahs and Chris Dionot are actively working with the NADA Academy and State ATAE executives to bring awareness, clarity, and solutions to the membership.
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Phone: 757-271-8824 Toll Free: 888-740-3501
Planning Solutions Group, LLC