7 Mistakes Spouses, Kids or Minority Partners of Car Dealers Make Immediately After the Dealer’s Passing
I have resisted writing about this topic for many reasons.
It is a touchy one…but I have seen one too many bad situations so I am going to finally break my silence.
It was because I recently worked through a situation where a surviving spouse who should’ve never had to worry about money, was suddenly put in exactly that situation because of some very bad advice from those she trusted.
Unfortunately it wasn’t the first time I’d seen this situation. In fact, in my business it is all too common.
Remarkably, a car dealership, run by a surviving spouse, kids or minority owners will lose 25% to 50% of its value very quickly. Overnight it drops.
I’ve observed this and been involved in or very close to many similar transactions and I have never seen a case where this loss didn’t occur.
It is NOT their fault…
The invincible car dealer thinks, nothing will ever happen to me!…and they do little (if any planning) for the day it does. Oh, they probably have life insurance and a will (some don’t) …but they never have the talk with their wife, kids or minority partners.
By the talk …I mean they never sit down and discuss what their wishes are if they pass.
As a result, most survivors of dealers make disastrous decisions that chop the value of the dealership in half within the first 3-12 months.
It is understandable; a genuinely concerned group of those immediately around the survivor rush in to support and help.
After the initial shock and mourning they all start giving advice.
That is when the problems begin…
- Mistake #1 – Thinking That You (The Surviving Spouse, Kids Or Minority Partner) Can Run the Dealership(s).
- Mistake #2 – Thinking That The Advice You Are Getting From Your Accountant Is Good Advice About The Value Of Your Business.
- Mistake #3 – Thinking Those Loyal, Trusted, Long Time Employees Would Never Do Anything That Would Cut The Value Of The Business.
- Mistake #4 – Thinking That The Factory Has Your Best Interest At Heart.
- Mistake #5 – Thinking That If They Dont Take Immediate And Decisive Action, The Value Of Their Dealership Will Remain About The Same.
- Mistake #6 – Thinking That Selling The Dealership Demonstrates That The Widow, Kids Or Minority Partner Are Not Smart Enough To Run The Dealership.
- Mistake #7 – Thinking That The Memory And Good Work Of The Dealer Won’t Be Persevered If You Sell The Dealership.
If you are a dealer, I encourage you to tell your wife, kids, and minority partner that selling your dealership on your passing may be the best way to preserve family wealth and a legacy. You decide now if they have the capacity, knowledge, skills and additional financial resources set aside that are required to carry on what you have gradually built up over the years.
If you are the spouse, kids or minority partner of a car dealer it is imperative that you show this article to your dealer and discuss the importance of preserving value of your family asset.
If you are the widow, kids or minority partner of a recently passed car dealer, you are the most vulnerable. All the things I mentioned earlier are eating away at the value of your business.
Your needs are best served by immediately speaking to a credible consultant/broker who can help you understand how you can develop your transition strategy. Handled properly the passing of a dealer can provide both lifetime wealth for surviving partners or family members and a more appropriate and visible legacy for your departed that will live in perpetuity.
Pat McNulty is the founder and president of McNulty and Associates, LLC. In addition to building several successful dealerships as an owner, he has assisted owners and their family members with over 200 dealership transitions. To learn more about how you can intelligently deal with this sensitive issue, contact Pat at 1-800-800-4728.