James Stephenson has worked with hundreds of businesses through his company, Lotus Private Equity Group. And he doesn’t hesitate while trying to recall how many had an exit strategy in place to leave the business when he began working with them.
“None.”
Stephenson, who is a shop owner himself and a founding member of REV Coaching Group, says that he was no different when he started out. He wasn’t thinking about the end of his career; he was just trying to make it to the end of the day. That quickly changed when he realized that he was struggling and he needed help. He reached out to shop owners that he admired and got coaches to help him and now he’s paying it forward by sharing what he’s learned along the way. One of his biggest pieces of advice: start planning for the future—now.
Many shop owners can’t even leave their shop for a long lunch without it falling apart, let alone think about a vacation or an eventual retirement. Stephenson’s group helps by providing aid for shop owners that are having difficulty seeing a light at the end of the tunnel. His company will either buy the shop outright or work with the shop to build up its value.
“Our industry is facing one of its biggest challenges. Most shop owners don’t have a real exit plan, and as fewer people enter the trades, the pressure is getting worse. Many aging owners find themselves with businesses that depend completely on them, and they don’t know how to transition, transfer leadership, or prepare for the next stage,” Stephenson shared with Ratchet+Wrench.
The owner of Precision Auto Group offers his insight on how to begin thinking about a succession plan.
Backstory:
Stephenson began like many in the industry—with a passion for repairing vehicles but minimal business knowledge. He opened his shop 20 years ago with $600 to his name. After his first day on the job, he knew that he needed to figure out a better way. That first job, he spent all of his money on the parts for the repair and his customer ended up telling him that he was going to go elsewhere unless he agreed to do the job for less. The next day, however, gave him hope. He met a customer that still comes to him to this day, and he realized that there were good people and that he had an opportunity to reframe his mistakes as opportunities.
He began working with the likes of industry veterans like Bob Cooper and Joe Marconi and he was finally able to work on growing the business. He eventually began coaching himself and acquiring businesses and, down the line, he realized that there was a real opportunity to help owners by working with them through a standardized operation and a really great bullpen of people. Out of that vision, Lotus was born.
Problem:
All of the owners that Stephenson has worked with have had this in common—they work all the time for what feels like nothing in return, and they have no idea how they’re ever going to leave the company. Sound familiar?
The problem with succession planning is that many start thinking about it way too late and then they run into a multitude of issues. Whether it’s who to leave the shop to, what to value the business at, or how in the world to keep it all from falling apart the second they walk out the door, many owners are absolutely clueless about where to start and how to handle the inevitable time when they are ready to move on.
Solution:
There are a number of different paths to take when it comes to exiting your business and Stephenson says that he has worked with shop owners in many different scenarios. For shop owners that are looking for a few pieces of advice, Stephenson shares some tips:
- Decide whether to sell or maintain the legacy. The biggest decision, arguably, is deciding what you want the future of the business to be. Do you want to keep the name and legacy alive, or are you ready to be bought out? Either way, there are companies who can help handle the transition for a buyout or acquisition by lending their expertise in marketing, coaching, staffing and accounting to help build value.
- Name a successor. Whether it’s a family member or someone who has worked in the business for years, it’s important to know who you want to lead once you’re gone. Stephenson says he’s seen many situations where the person the shop owner selected is really not the best choice. Before you decide, make sure that individual doesn’t feel pressure; they need to really want it for themself. They also need to have the right personality type, as not everyone is meant to lead. It takes someone with goals and structure.
-
Get your finances in order. This is a big one and one of the most common mistakes that Stephenson sees. Make sure that your financials are well-documented and bankable, not stashed in a shoe box. He also advises that shop owners get realistic about what the shop is worth. Just because a shop does $1 million per year does not mean that it’s worth $1 million. This creates false hope as well as an attachment to an emotional price. Speak with someone who knows what they’re talking about and find out the real value of your business.
Aftermath:
So, how do you know if you have a good succession plan in place? Take a vacation. Leave for 30 days and don’t come back until that time is up. Stephenson says taking a step like this will let you know if you have the right leadership in place and if there are solid operating procedures in place. If the shop produces the same amount, customers are happy, and no employees leave, you can rest assured that when the time comes, the shop will be ready. If, however, you notice that there are cracks, it’s better to know now while you have time to work on improving it.
Takeaway:
The biggest piece of advice Stephenson offers to shop owners about succession planning is to start thinking about an exit strategy on day one, which he doesn’t think the majority of people do.
“Always start with the end in mind.”
He adds that shop owners should get a coach and a good accountant right away, too. He says that a good boss finds talented people that can help with issues and then gets out of their way. Rest assured—it pays off down the line.
