Succession planning—much like life insurance, wills, and other future-oriented activities—can be hard to prioritize. As a business owner with a to-do list a mile long, it can be hard to find time to do what needs to be done now, let alone carve out time to plan for the future.
But if there’s one thing that every longstanding business has in common it’s this: they’re all the result of a successful transition (or sometimes multiple transitions) of ownership. Such transitions require a solid, strategic plan that can take years to build and execute—which is why it’s never too early to start the planning process for what will come next. And even the best-laid plans hardly ever play out exactly as anticipated, as Kathy Mello—owner of TGIF Body Shop in Fremont, California—learned firsthand.
Life is unpredictable, and succession is a long, complicated process.
Before COVID entered the scene in 2020, Mello was well on her way to passing leadership responsibilities over to her son, Jason Cocco, who is staged to take over the business upon her retirement. But the past several years have presented unforeseen challenges for Mello, as they have for many shop owners throughout the country.
“Our progress has been stunted by several circumstances,” explained Mello. “First it was the cancer journey of my husband, which required my presence and care. Then, it was all the uncertainty presented by COVID and the shutdown, which we have managed through. My life was put on hold by a life-threatening hospital stay after contracting COVID early in the pandemic as well, and that required an extended recovery. Now, COVID-related regrowth is stunted by the technician crisis. I know that we are not alone in having to schedule out as a result.”
But, despite the hardships she’s faced both personally and professionally, Mello continues to look to the future with hope and determination. The succession plan will continue to move forward, albeit more slowly than initially anticipated.
Start earlier than you think you need to, and get help putting a strategic plan in place.
No matter what stage your business is in, it’s important to consider what will come next. For Mello and her husband, that meant evaluating the interest—or disinterest—of each of their four children in taking over the shop.
“Whether you’re selling a business or succeeding to others it requires a great deal of focus and a lot of crossing of t’s and dotting of i’s,” says Mello. “I recommend that the sooner you start the process the better, because, as we have found, life can get in the way of progress. I believe that attention needs to be given to both the personal/family side of things as well as seeking the guidance of professionals who have vast experience with such transactions.”
From the start, Mello has utilized the expertise of professionals well-versed in succession planning, and she recommends other shop owners do the same. Having someone to guide you through the process is invaluable. Accountants, lawyers, and other owners who have completed their own successions can all be hugely helpful resources.
As a first step, Mello hired an independent party to interview each of her and her husband’s four children to explore whether any of them had an interest in succession … and if so, how they wanted to be involved. From there, they were able to start formulating a plan.
“Only one of them—aside from Jason, who has been running the day-to-day—is still in the industry and works and lives several hours away,” says Mello. “They have all expressed autonomy yet support for the family-founded business, and the opportunity for more involvement in the future will remain a possibility at the discretion of Jason, once the torch is passed.”
Prepare to be flexible and make adjustments as needed.
For the time being, Mello’s succession plan has been placed on the back burner while more urgent matters are addressed … namely, the technician shortage.
“The focus at the moment is to launch a technician training program sanctioned by the department of apprenticeship in California,” says Mello. “It’s an earn-while-you-learn program and should open up a pipeline of talent. Once that is rolling, we will return to the focus of business succession.”
In the meantime, Jason holds sweat equity shares in the business until the “full-blown” plan for financial succession is complete. When the time comes to financially complete succession, Mello says she will once again seek professional guidance on how to best proceed.
Don’t let the future sneak up on you…start planning NOW!
As business author Alan Lakein once said, “Planning is bringing the future into the present so that you can do something about it now.” Succession planning is the ultimate example of that!
Even if you’re years away from wanting to retire, it’s important to start thinking about that next chapter now, well ahead of time. Planning for succession involves extensive legal, financial, and operational considerations that require a great deal of forethought and counsel, regardless of whether you’re planning to sell your business or pass it on to someone. Life will happen and priorities will shift, but a solid foundational plan is essential for your business to thrive for years to come.