Preparing your business and your children for your departure takes planning, patience and practice
Despite the growth of industry consolidators and multi-shop operations, the collision repair industry remains largely made up of family-owned businesses. A recent Automotive Service Association (ASA) survey, for example, found that 87 percent of collision repair businesses were family-owned.
While running such a business can offer many challenges, perhaps the biggest challenge is succession planning. More than 50 percent of family-business owners expect one day to pass the business on to the “next generation,” according to the Small Business Administration (SBA). The reality? Only 15 percent of such businesses are successfully passed on to a second generation. And of those, only 5 percent are eventually owned by a third generation.
For collision repair shop owners hoping to beat those odds, here’s a glimpse inside some first-, second- and third-generation family businesses that have either been successfully passed on to that next generation or are preparing to do so.
Planning is key
Jerry Burns keeps the SBA statistics in mind as he and his wife, Liz, prepare their four sons to one day take over ownership of their first generation collision repair business, Automotive Impressions, Inc., in Rio Rancho, N.M. Perhaps not surprisingly, Burns isn’t surprised the SBA found the biggest reason family businesses fail to make it from one generation to the next is the lack of a market for the business’ product or service. The second biggest reason—the simple lack of adequate succession planning—is something Burns is determined to avoid.
“There could be a lot more second- and third-generation businesses if the founders just planned better,” he says.
His succession planning began almost immediately when he opened his shop in 1994, because all of his sons have worked in the business in one capacity or another.
“I‘ve always made it real clear to my employees that my kids have no special privileges,” he says. “I make it real clear to them—treat them like any other employee. If my son is out there goofing off, or he’s not doing what he should be doing, let’s talk about it; let’s take care of that problem.”
Liz Burns says making sure her sons spent time working in the shop—not just in the office—has been an important part of their preparation to one day run the business.
“You have to make sure they understand the whole business, all aspects,” she says. “All four of our sons have spent at least some time working in the paint shop, in the metal shop. In order to get up front, we think it’s very important that they understand what goes on in the back. They can’t write a good estimate if they don’t understand how to repair or paint a vehicle properly.”
That process also helps the next generation determine where their skills and interests lie, the Burns say.
“We all probably think or want our kids to manage the business, but realistically speaking, they may rather be in the paint shop or the body shop,” Liz Burns says.
Or they might decide being involved in this industry isn’t something they want at all. That’s part of the reason the Burns have encouraged all of their sons to get at least four-year college degrees.
“It’s a lot easier for them to do that now when they’re young and single,” Liz Burns adds. “You want them to be successful whether they stay in the family business or go outside the family business. The college education will help ensure that.”
Families like the Burns need to make sure succession plans are discussed with everyone in the family. Too often assumptions are made but not discussed, they say, and different family members may have different expectations. How well family members are able to get along and separate family issues from business issues needs to be considered.
“Again, you also have to ask: Are your dreams your children’s desires?” Jerry Burns cautions. “I want my sons to continue the business, but is that what they want?”
Taking the reins
While the Burns family jokes about working on the third generation of their family business—their toddler granddaughter spends some time at the shop—the Sulkala family is already there.
Chuck Sulkala has expanded the Boston-area shop his father started in the 1940s—and made a name for himself in the industry through his extensive involvement in industry organizations.
He’s also started the process of turning the reins of the business over to his son Chad. It’s a three-fold process. First, Chad has worked in the business to learn about the day-to-day operation.
Second, Chad is following in his father’s footsteps by taking an active role in the industry: attending Collision Industry Conference (CIC) meetings and getting involved in CIC committees, accepting national leadership roles in the Society of Collision Repair Specialists (SCRS), etc. This is helping him learn from other successful shop owners, and helping him develop his own network of peers in the industry—something his father has found invaluable.
And third, Chuck Sulkala has actually gifted a small percentage of ownership to Chad.
“Essentially, you determine how many shares there are in the business, and the current value of the business determines the value of each of those shares,” Chad Sulkala says. “He’s given me a small number of shares, which helps motivate me because as the value of the business improves, the value of those shares improve. It’s also made the succession plan more defined and definite.”
Chad and other “next generation” shop owners say getting relationships defined within the shop is a crucial part of making transitions successful. Each member of each generation needs to know their responsibilities and understand that part of what makes a family business successful is having all family members contribute—and be rewarded for their contributions.
Make the business appealing
With a company name like GW & Son Auto Body, the multi-generational aspect of the shop Gary Wano Sr. and Gary Wano Jr. opened in Oklahoma City in 1985 was clear. What perhaps came as more of a surprise was that it could have eventually been called “GW & Son—& Daughters—Auto Body.”
“Now both my sisters are involved,” company vice president Gary Wano Jr. says. “My dad never ever thought about the girls ever having a great deal to do with the body shop. One of them came in about seven years ago as a service writer. The other came in three years ago as an administrative assistant after my dad’s sister retired from that job. Fortunately, the industry is turning, getting to the point where women are a more active part of the family business as well.”
While Wano’s children are all under age 10, he’s already worked on bringing a third generation of the family into the business. While in business school, a nephew “interned” at the shop, working as a metal technician for six months, working in the paint shop for six months, working with the estimators for six months, and then job-shadowing Wano for six months to learn the management aspects of the business.
Wano says all the insurance and financial planning for succession are important, but he thinks too many shop owners neglect to think about something just as important: Making the business something the next generation wants to be involved in.
“I think too often we get used to beating our brains out to try to make a living,” Wano explains. “We’re used to staying late to try to get the payroll done. We’re used to working extra days to get bills paid. We just accepted that as being part of it. But what we don’t look at is: How does little Johnny and little Suzy see that? Do they see it as okay that they go to bed at night when mom or dad isn’t home from the shop yet? Do they see it as okay that you’re never able to get to their dance recitals or baseball games? I’m not saying there aren’t times that you need to stay a little late to get some paperwork done or come in a little early or make up a Saturday, but is a 60-hour work week your average? What do those kids see in that?”
Wano has talked to some shop owners who say long hours and heartburn are just givens in this industry. But he disagrees.
“There are lots of very successful repairers who don’t work that way,” he argues. “It’s just a matter of getting your business to a place where it can function without you, a place your children will see as something they want to be a part of. Making your business appealing has to be part of your succession planning.”
One key, Wano believes, is getting your goals and plans—whether about succession or other aspects of the business—down in writing. For example, a recent physical expansion of his shop was in the planning stages for a long time, and he’s now looking at owning multiple locations.
“It’s not something I just lay in bed at night, thinking, ‘Oh boy, that’d be great,’” Wano says. “The plan has to be in writing. It doesn’t matter if you don’t make it. Maybe it’s a three-year plan and you don’t make it to where you thought you’d be in three years. That’s okay. But the odds of you making it are much stronger if it’s in writing.”
Different styles OK
As another “next generation” shop owner, Matt Thornton has a somewhat unusual situation: His father is now working for him.
Back in 1976, Ted Thornton and a partner bought the body shop business in Boise, Idaho, where Ted had worked for a decade. Years later, Ted’s son Matt worked part-time at the shop while in school, then full-time as a painter, before leaving to work for local paint jobbers for several years. Matt eventually returned to the shop, becoming partners in the business with his dad in 1998, and buying out his dad’s stake in the business in 2002.
Ted Thornton has continued to work part-time for his son at Park’s Royal Body Works, writing estimates and conducting outside sales calls. And the relationship has worked pretty smoothly, Matt says, although he sees himself as having a very different management style than his father.
“For example, I’m much more open with employees about the shop’s financial information,” Matt says. “I want to make all the employees feel a part of what’s going on.”
Both Ted and Matt Thornton believe the differences in their management styles are fine as long as employees see that certain things—such as a commitment to quality and integrity—aren’t changing.
A frequent issue for many “next generation” shop owners is earning or maintaining the respect of long-term employees—many of whom may have known their new boss since he or she was a kid. Having work experience as a technician and with companies other than the shop can help with this, Matt believes. And when it’s clear other family members involved in the business also trust and respect the new owner, other employees tend to come to share that view.
Don’t put it off
Whether your business is in its first, second or third generation—and whether the next succession is fast approaching or a decade or more away—it’s never too early to start putting some ink to paper for a plan. Don’t fall into the trap of assuming succession will happen successfully without some careful thought and planning.
“If you’re running a successful business, you’ve beat the odds because so many small businesses fail,” says shop owner Jerry Burns. “Now if you’re going to beat the odds again and continue that business to a second generation, I think you need to keep your eyes open and work at it just as you work at making the business a success.”
