Succession Planning: With an Internal Candidate [THA 190]
Bob Ward is the President of Wardden LLC, Bob began his business career at a franchised car dealership, overcoming obstacles to learn and earn the required skills to become Controller, General Manager and then, a minority owner of Tacoma Dodge in Washington.
A native of Seattle, Bob serves as a financial advisor and consultant to small business owners throughout the United States. He believes that your business should always be ready for expansion or sale, you should get paid for what you built and, when you decide to leave it, your company should continue to prosper. He believes in a Perpetual Business where there is Value, Continuity and Legacy. Look for Bob’s Previous Episode HERE. Warden LLC website HERE.
Steve LaFleur, owner of Prescott Import Car Service in Prescott, AZ. Steve has made an agreement with two internal candidates to pass on ownership.
Steve began his career in the automotive field as a technician in 1976 while working for Volvo and Mercedes dealers and has held an ASE Master certification since 1978. In 1983 he went to work in the shop that would later become Prescott Import Car Service, purchasing it from the owner in 1985.
In 1992, Import Car Service became an authorized Bosch Car Service Center and a Volkswagen Authorized Service Dealer, performing O.E.M. warranty repairs and service for VW and Bosch products.
An ASA member since 1988, he received an Accredited Automotive Manager degree from the Automotive Management Institute in 1998. Steve was president of the Prescott chapter of ASA Arizona from 1997 to 2000 and continues to be active at the state and local levels.
In line with his desire to strengthen his management skills, Steve was a member of the Bob O’Connor Bottom Line Impact Group (a focus group for independent repair shops) for several years and afterward was involved in a state-wide “Twenty Group”—an offshoot of the O’Conner organization—made up of several state-wide independent repair shops.
Committed to running an ethical business, he sits on the advisory board of the Better Business Bureau of North Central Arizona.
Now nearly forty years later, Prescott Import Car Service has evolved from a small one-person shop into a six-bay, eight-employee operation, with about $1.4 million in sales annually.
Dave Mendez, co-buyer of Prescott Import Car Service and a 10-year employee.
Key Talking Points:
85% of all small businesses do not survive the departure of the current owner.
They will sell as liquidation or sold to an inside or outside buyer. Only two choices
You plan on selling your business on the day you open
We are going to leave this planet and we are going to stop working someday.
You need to have assets to sustain yourself when you retire.You must plan for it
Steve has been in business for 35 yearsHe has included his people in business decisions for a long time
That helped prepare them to understand the business better
Open your mind to listen to your peers on succession planning. Ask and learn
Consider having serious discussions with internal candidates to find their tolerance for becoming a business owner.
With every interview, you must put succession or ownership on the table to find out the potential employee’s leaning. Give people the possibility of more than just a weekly paycheck.
Steve took a class from Bob in July 2017 on building a ‘Perpetual Business’.
The place to start:The realization that you are leavingTragedy may strike
A call to action in the event of a tragedyPasswords, Signing Checks
You can do all of this to prepare for succession.
Discover if there is a great chance to sell to a cash buyer outside the company
You must plan
Consider allowing an opportunity to the people who have helped make your business great.They must have passion and commitment. You can solve for all other needs, but passion, commitment, and dedication are required.
Give your internal team all the tools, mentoring, coaching, learning
Decide to get a signed, sealed agreement by a certain date.
Your internal candidate can be nervous about becoming an owner and that can be humbling and challenging.
In this case, the wives were on board with the transaction.
One in four succession plans include two candidates according to Bob’s practice
The transaction must feel right or it will fail.The relationship must be strong and there needs to be a strong bond.
Internal candidates: Think of them as partners and if you can imagine that, they may be consideredYou will look at your employees differently.
Who has the aptitude and passion for being an owner?
Essential conversation for every staff member“I am always planning for the continuity of my business. What is most important to your career. Where do you see your future, ultimately?”
Owners earn the people they have, and their success.
Outside candidates may not necessarily treat your customer the same as you than an internal candidate has understood.
Start planning now
Find a new employee for a needed position. No matter the position. Put this statement in your ad.‘The possibility of ownership.’
You may attract a candidate who has this goal.
Break the ice with your people. Ask.
You must discuss with wife, family, and what does life look like after a sale.
It takes time to build a transaction.
The people are the business. They make money. They are your most important asset.
Business owners must have an ownership culture in their company and build their company around the team.Everyone can be treated like a partner with that culture.
It is the growth and development that is the highest calling of leadership. Quote from Harvey Firestone
A special thanks to Bob Ward, Steve LaFleur, and Dave Mendez for their contribution to the aftermarket.
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