 | |||||||||||||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||||||||||||
|
Passing Your Shop to the Next GenerationPosted 10/8/2007By Tom Nash
Whether you're passing down the business to family, selling it to longtime employees or investors, here's what you need to know to make the transition as smooth as possible.
Handing over the reins of your shop can be traumatic. Whether you pass the shop on to your children, a trusted employee or just sell it outright, there are pitfalls that can cause you grief. Here's some advice from those who have been there. The time will come - sooner or later - when you as a shop owner will face the very tough decision to retire, sell or step back from overseeing the daily operation of your business. This may happen for a number of reasons. Perhaps you just want to spend more time at leisure, enjoying the fruits of your labors. Maybe your health requires it. It could even be that you want to turn your talents to other ventures. Whatever the reason, it will be somewhat traumatic to leave the place where you have spent countless hours over many years, developing close relationships with your employees, customers, suppliers and business neighbors. It won't be easy to part with the place, people and memories that have defined your life for so long. Some factors may make it easier. For example, if you are turning over the reins to one of your children or another family member, you may feel quite comfortable in knowing that the shop is in good hands. The time they spent under your tutelage and training will help ensure that the business will survive and thrive. Or, the shop may be handed to a longtime, trusted employee, who you feel will carry on the methods and practices you successfully developed. In some cases, the shop may be sold outright to someone you may not have previously known. This scenario is a bit more concerning and difficult, but you may not have other options. Having the guidance of your business advisers - banker, attorney and accountant - will go a long way to help, but they aren't in the automotive service business, and they don't have the insider knowledge. Of course, your family and friends may also help you decide what's best. Whatever way the transfer occurs, there will be challenges and obstacles you will have to overcome. One of the best ways to prepare for the eventuality of stepping down is to learn what others - who have been through this situation - have experienced. Mr. B's Paint & Body Shop
Raymond Benavidez opened his collision shop in 1978. At that time, his sons, Robert and Scott, were just 10 and 8 years old. Shortly after opening, Raymond's wife, Rosie, joined the shop to help handle office chores. Growing up, the boys spent every summer at the shop learning the trade. At the time, the youngsters were not too happy about being confined to the shop, but with both parents working at the facility, it was a good way (actually, the only way) for the parents to keep their eyes on the boys - plus, the boys were learning the trade. Later, the boys began working in the shop full time, with Robert working the paint booth and Scott doing bodywork. They learned to perfect their skills for more than 12 years before Raymond began to let them handle the front end of the business. Scott thinks this was great training for running the business. "He made us work in the back first, before he brought us up front," he said. "This is a great benefit for us because we now know what goes on in the shop and in the office. This helps when we are talking to a customer, someone from an insurance company or our own employees." These days, Robert and Scott run the business with mother Rosie handling the accounting and father Raymond helping in the front office - "still doing everything he can get his hands on." Passing the shop on to the next generation has worked just fine for the Benevidez family. Mr. B's has just expanded the business with a brand-new shop next door. Rodine's Auto Service
Roger recalls, "It was great to have such challenging experiences at a young age. I learned from my father and started by disassembling parts and then rebuilding them to find out exactly how they worked. The more I became involved with the shop, the more I enjoyed it. It became a true satisfaction to repair vehicles and help our customers better understand their vehicles." As Bruce and Roger grew, so did the business. They were surrounded by every aspect of the business, from customer service to automotive repairs. After a devastating fire in 1972, the shop was rebuilt as an eight-bay auto repair shop and began to flourish. In 1980, LaVern retired, leaving his sons to run the business. "Our customers were pleased that we kept the family business going," Roger says. "They felt secure with the Rodine family name." In 2000, Bruce retired. Roger, his wife, Linda, and their daughter are now full owners and operators of the family business. Linda fills the role of the service adviser, but also does the office management, customer relations, building maintenance and even occasionally assists the technicians.
Roger's advice for other people who are thinking of bringing their children into the business is: "Give them as much hands-on experience and knowledge as possible. It is never too early to start." Seyfer Automotive Donny Seyfer never thought he would grow up to be a key part of his father's automotive repair shop. His dream to be a rock musician pulled him away from the family business. After his musical education, he spent 12 years working professionally and semiprofessionally, managing and playing in rock bands. The dream, he says, turned out to be somewhat of a nightmare. "I got really tired of the bad pay, smoky environment and constant travel." Fortunately, Donny had two sets of skills and two passions. The second was working on cars in his father's service facility, Seyfer Automotive Inc. in Wheat Ridge, Colo. "I grew up working on cars, long before I could drive one. I had two loves - music and cars. The second just seemed like a better, long-term job." So, Donny joined his father, Don, in the family business.
And how did Don Sr. feel about his son joining the family business? "Gratified. He had a very strong interest in automotive from early on. I felt it was important that he make his own decision about joining Seyfer Automotive. I felt comfortable in his vision for our business and the automotive industry in general. He was brought up with strong and honest values and has expanded on these philosophies." Don offers this advice to others thinking of bringing a younger family member into the business, "Make sure the roles in the business are clearly defined while the transition takes place. Be sure that all needs for customer service and technical skills are met by having the right people in place. The roles of the elder family member may be clear and defined, but the young person joining the business cannot immediately do those tasks. What they need to do is make sure all roles are fulfilled. In short, the child may have skills the parent did not possess and vice versa." Don adds, "The transition can't be accomplished quickly and expect success. Time spent working together is essential." Leasing Out the Business
He decided to turn his business, Rick Dube Automotive Service, in McAllen, Texas, over to three longtime, trusted employees. "Between them," Dube says, "they had 55 years at the shop. I decided the customers had kept coming because of these three men. Between them, they had all the skill sets necessary to run the business in a successful and professional manner." The transition was smooth enough. He leased the business to his employees, literally lock, stock and barrel. The building, all tools, equipment and contents are part of the package. Rick will be paid on a long-term scale. "This," Rick added, "allowed the new owners to immediately start running the business with little or no financial drain." Of course, Rick and the new owners had the guidance of banking, legal and accounting professionals. Dube's advice to those contemplating such a lease is to allow more time for the transition: "Take your time. It will take longer than you think." Transferring the Business through Purchase and Gifting Brothers Tony and Tom Bonfe are in the long process of becoming full owners of the family collision business, Bonfe's Collision Center in St. Paul, Minn. The transition is being done via the methods of purchases and legal gifting from their father, Roger. Roger Bonfe took over the business in 1972 from his father, who started the shop in 1952. "In those days," son Tony says, "my grandfather and father went down to the bank, signed one piece of paper and the deal was done. It doesn't work like that these days." For Tony and Tom, the process started about 10 years ago and is still not complete. "It's painfully long and expensive," Tom explains, "because the government and accountants now require an evaluation of the business every two years. They want to make sure the business is being estimated at fair market value." Tony cautions that going the gifting and purchasing route may not be the best way to transfer ownership to your children, and notes, "Doing it quicker is cheaper." He encourages people who are considering such a method to seek good professional advice from their banker, attorney and accountant before taking the step. He also notes, "Any improvements made to the business during the transition process must be purchased in the name of the receiving persons (in this case the children) to avoid paying for the improvements again upon full ownership."
Do it Right - Legally Right!
The new owners need total legal control of all business matters to run the business properly. If you continue to control any portion of the business, it may legally hinder them from making any serious decisions, such as financing, insurance, relocation, or even selling the business to a third party. Complete and thorough transfer of all business matters also protects you. If all the legal ownership papers aren't in the name of the new owners, some legal responsibility for liability may fall back to you. In short: don't leave a legal mess that will take time - and money - to correct. Your business advisers - attorney, banker and accountant - are the best guides for these legal matters. You should also have a detailed will stating your wishes and it should be updated every year. Keep all the papers related to the business transfer in one place - preferably a safety deposit box at your local bank. Make sure one of your relatives or friends has access to the papers should you become incapacitated or pass away. Doing so protects your family and estate. While it may not be comfortable to think about phasing yourself out of your business or the inevitability of aging and passing away, preparing for the future will help assuage the feelings of angst. Knowing that you are prepared for the future should bring you some comfort. The old saying, "Experience is the best teacher," holds true when facing the prospect of stepping away from running your longtime business. However, if you've never gone through the process, you don't have the experience. Hopefully, this article will offer some of the experiences of others to help you when the time comes to face the decision.
|
||||||||||||||||||||||||||||||||||||
Copyright (c) 1996-2009. Automotive Service Association®. All rights reserved.
| |||||||||||||||||||||||||||||||||||||
Whether you are passing ownership of your shop on to your children or a complete stranger, one thing remains the same - you must legally transfer all important deeds, business papers, rights to registered names, federal and local tax IDs - even the ownership of a Web site. Don't assume that you needn't transfer the legal rights of ownership just because your daughter or nephew is taking over the business. Make sure you protect the new owner and yourself.
