Fleet owners can decide to turn over the keys to their company for any number of reasons. Some begin to think about exit strategies after reaching a particular age or experiencing a life- changing event such as a health scare. Others simply come up with the idea after taking time to think about what they want to do with the rest of their lives.
There is always the option of selling assets such as trucks and trailers and winding everything down, but a fleet tends to be worth more than the sum of its equipment. Value can be found in customer relationships, the goodwill in the company name and the employees who perform the work.
If a decision is made to sell the company as a whole, potential suitors could also come from a number of areas. Children who grew up around the business may be interested in carrying on the family legacy. Members of the existing management team may have their own entrepreneurial spirit. Even today’s competitors could become tomorrow’s buyer.
Every option presents its own challenges. A family member or management team, for example, may require help with the financing of the sale. “If you don’t get all your money upfront, you’re relying on someone’s good management skills to finance your retirement,” notes Peter Spratt, vice-president of Toronto East for ROCG, a consulting firm that specializes in business transitions. If the new management efforts do not work as planned, retired owners may be pulled back into the business to save their financial worth.
A formal succession plan will help to identify issues like these before they emerge, and ensure that a transition goes as smoothly as possible.
Spratt divides an initial transition strategy into four steps: An analysis of the existing business situation, with information such as a tax review, an understanding of the owner’s personal financial situation, and a review of the business itself. A focus on personal objectives, such as family needs, the amount of money that would be needed for a desired lifestyle change, and the ultimate business legacy that the company founder wants to leave behind.
Identifying all of the different transition options, including all potential purchasers.
In addition to determining a price for the company and identifying the date of an ultimate changeover, the formal transition plan will identify the attributes that a potential purchaser will need to have. “Do we care if they take it in a different direction and sell assets?” Spratt asks as an example, referring to an important question for an entrepreneur who is concerned about their legacy.
Before any sale is considered, company owners also need to consider steps that will help to maximize the value of the business.
“Lots of times the knowledge, the business acumen, the success of the business is directly tied to the owner. The business may not be perceived to be as valuable as if the owner was there,” Spratt explains. It is a challenge that can be overcome by delegating authority, formalizing business systems, developing existing managers, and recruiting people who can address any existing gaps in skills.
A decision to sell the business to family members can present some unique emotional challenges as well. One sibling, for example, may have the skills needed to run the business while a second does not. What then? “We’ve seen families divide as a result of poor planning and poor communication,” Spratt says. This is why he promotes using a professional facilitator to ensure honest discussions about the sale. “Start to have some dialogue with family members about what their goals and aspirations are,” he adds. After all, they might not be interested in running the business in the first place.
In the case of a management buyout, an initial offer might need to be restricted to a couple of key managers, giving them the opportunity to decide who else should be included. A formal one-year timeline in a transition like this will also give them the chance to complete their due diligence and arrange for any financing.
Meanwhile, formal confidentiality agreements will be vital for anyone involved, to ensure that a fleet’s ongoing work is not disrupted.
“That circle has to be fairly close because there are just too many things that can go awry,” Spratt notes.
Luckily, a formal succession strategy will help to identify those risks before they emerge.
The Canadian Trucking Human Resources Council (CTHRC) is an incorporated not-for-profit organization that helps attract, train and retain workers for Canada’s trucking industry. For more information, visit www.cthrc.com.
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