Jerry was a 63-year-old auto body shop owner who contacted me regarding putting together an exit strategy. Like most shop owners, he had become tired of the day-to-day grind of dealing with the back-and-forth fights with the insurance carriers, yet he still loved the idea of being a part of a business he built from the ground up. Ideally, he would have liked his production manager, Evan, to become his heir apparent, yet he had no idea if Evan was interested in owning the shop or if he was even capable of doing so. His shop was a prime candidate for a consolidator, and he had received an offer from one, yet he cared about his employees and wanted to make sure they were taken care of. Also, he was unsure what he would do with himself if he did not have a place to go. He did not know where to turn.
A clear personal vision forms the bedrock of a successful exit strategy.
This example is one of many I run across. Most business owners, especially in the collision industry, spend so much time in the day-to-day grind of the business and then one day “look up from under the hood” and wonder if there is more to their life. Sometimes it can seem like the easiest solution is to just sell the business and move on.
I am not opposed to selling to a third-party, be it a consolidator or large multi-shop operator (MSO). I work with several merger and acquisition (M&A) people in the industry, and there are many cases where this may be the best or only option for a shop owner. Yet, a recent study reiterated the findings of previous studies that showed 75% of business owners who sold their businesses regretted their decision after a year. That seems strange, since the cash and income streams they received allowed them to live a very comfortable lifestyle. So, why is this? It often stems from factors such as inadequate preparation; emotional attachment; unmet expectations regarding post-sale outcomes; unforeseen challenges in adjusting to a new lifestyle or loss of purpose; and, sometimes, undervaluing the emotional connection tied to the businesses they’ve built. This is why the most critical first step in an exit or transition plan is to develop a personal vision of what your life will look like post-business and a financial plan — or, as I like to call it, a roadmap — to chart the course toward achieving that vision.
Personal Vision
A clear personal vision forms the bedrock of a successful exit strategy. As collision repair facility owners, envisioning your life post-exit is not just an exercise in wishful thinking: It’s a strategic imperative. Your personal aspirations, lifestyle goals and long-term vision should seamlessly intertwine with the future trajectory of your business.
75% of business owners who sold their business regretted their decision after a year.
Consider this: What do you envision beyond your business ownership? Is it a tranquil retirement spent pursuing passions and hobbies, or is it perhaps an entrepreneurial pursuit in another field? Maybe it involves still working on cars, or doing some teaching or consulting (you can take the person out of the shop, but you can’t take the shop out of the person). Defining these personal aspirations holds the key to sculpting an exit strategy that aligns with your desires.
Your personal vision acts as a guiding beacon, illuminating the path toward a fulfilling post-transition life. Whether it’s ensuring financial security for your family, supporting charitable causes or embarking on new adventures, this vision not only fuels your motivation but also directs the decisions made during the exit planning process.
Jerry’s Life
The first step we did with Jerry is help him define what this post-business life would look like. He and his wife had a place on the Gulf Coast, and he stated that he wanted to spend more time there. Yet they liked the change of seasons and wanted to spend time with their grandchildren too, so they had no desire to live there permanently. Jerry also liked to golf and fish. They had some desire to travel yet could only envision doing that three or four weeks per year. Also, Jerry had spent his whole life working on cars, so he decided that he would like to have a place to work on some personal projects.
So, after we determined what he desired to do, we figured out how many hours he wanted to use each week in these activities. After that, there was additional time, so we began to think of other things he and his wife wanted to do. It turns out that they had some charitable causes they were interested in, so we added that time in.
Every move you make in your shop should always have your transition in mind.
at was most important to them in transferring their business: security for the employees or business-active family members, maintaining their business culture, maintaining the name or brand of the shop, assuring continued value to their customers or entrepreneurial opportunities for employees or family.
Finally, we had to determine what their objective was to realize the equity value of the business. Was it to squeeze out every possible dollar? To meet their post-transition objectives but not be very concerned about value above that? To get as much or as little as necessary to make their objectives work?
Financial Planning
Once you’ve determined your personal vision, an astute financial plan is the linchpin of a successful exit strategy. Financial planning encompasses a spectrum of elements, including the valuation of your business, setting realistic financial goals, devising tax-efficient strategies, diversifying assets and laying out a comprehensive estate plan.
Valuation serves as the compass guiding your financial decisions during the exit process. Understanding the true worth of your body shop is pivotal in determining your financial objectives. It allows you to set achievable goals, strategize on maximizing business value pre-exit and prepare for potential tax implications.
Moreover, a robust financial plan encompasses more than just the business itself. It encapsulates personal wealth management, ensuring a smooth transition of assets and safeguarding your financial future beyond the business. It allows you to provide solutions for non-business active family members to maintain family harmony, create financial streams for causes you’re passionate about and align your business and family for generational wealth.
After doing an initial valuation and looking at the personal assets and other income streams Jerry and his wife had, we found that there was still going to be a gap between the value of the business and their personal assets and income streams to support their personal vision. This then allowed us to develop a roadmap to build the value of the shop and action steps for building their personal assets.
Creating Synergy
The synergy between your personal vision and financial plan is where the magic truly happens. A harmonious blend of the two ensures a holistic and comprehensive exit strategy. Your personal vision should be intricately woven into your financial goals, each reinforcing and complementing the other. Imagine this synergy as the engine driving your exit plan forward. Your personal vision fuels the passion and purpose behind the exit, while the financial plan serves as the roadmap, charting the course toward achieving those aspirations.
As a result of our work, Jerry and his wife knew what they wanted their life to look like, yet they also wanted to make sure their key employees were taken care of. They could now take action with this clarity. We created a plan to increase the value of the business and utilize the increased cash flow to bonus their employees, either in stock or cash. We also knew that there was a possibility that the key employees might decide that they did not want to fully purchase the shop or might not be capable of running it on their own. So, we determined what the third-party market would be for their shop and, should the initial plan not work, they could sell for the value we determined they needed and also allow their key employees to reap some benefits — which perfectly fit into their personal vision.
Every move you make in your shop should always have your transition in mind. As collision shop owners, the earlier you begin the process, the more time you afford yourself to take the necessary actions toward your ideal personal vision. As shop owners, integrating these elements ensures a smoother transition, minimizes uncertainties and paves the way for a fulfilling post-exit life that resonates with your deepest desires.
Summary
We strive to help business owners identify and prioritize their objectives with respect to their businesses, employees and families. If you’re ready to talk about your goals for the future and get insights into how you might achieve them, we would be happy to sit down and talk with you. Please feel free to contact us at your convenience.
