Is the time right?

Uncertain times are having dealers wondering about their exit timing 

Many of us are looking forward to watching 2024 ride into the sunset. 

With eager anticipation, we are hoping to see a red sky followed by a year of dealer delight. While we wonder in anticipation what the dawn of 2025 will bring, auto dealers find that they have more questions than answers. 

In my ongoing conversations with dealers of all shapes and sizes, there is the usual contagious and engaging dealer optimism of brighter days ahead. More than in past years, however, there are undertones of deep concern. 

Reducing interest rates should bode well for both consumer demand and the cost of acquisition funding. 

Many dealers have lived through major world events, only to survive and thrive: the dot com crisis of 2000, September 11 terrorist attacks, the aftermath of the global financial crisis of 2007 to 2009, the COVID pandemic etc. 

Yes, there were some dealership casualties along the way, but dealers as a whole, with great intestinal fortitude, successfully weathered these events. 

But somehow, I get the sense that today’s domestic and global situation is causing greater concern and in some ways causing our historically strong Canadian foundation to feel more like quicksand. 

Events like politics, divisiveness, the war in Ukraine, the escalating tensions in the Middle East, major climate events, erosion of faith in governments and institutions, high cost of living, housing affordability, homelessness, off-again-on-again vehicle brand electrification initiatives, the swift move to AI, cybercrime, and a host of other factors are percolating just under the surface causing dealers to feel uneasy.

Dealers are facing tough decisions. Some would say they always have. But at this moment, things feel a little different. Perhaps it’s our age and reduced risk tolerance, which I am sure is part of it, but it’s also the major concern about what we will leave behind.

Dealership valuations are down from their highs of a few years ago, causing dealers to reconsider their buy/sell/hold decisions. Of note is that many dealers have developed succession plans, be they formal or informal. Dealers are now wondering whether their heirs will be able to experience the rise in wealth that they have enjoyed. Many doubt it.

That being said, 2025 could be a critical year to establish a foundation for years to come. 2025 should see some uplifting dealership activity that has the potential to create a positive spin on dealership transaction interest. Values may be down, but they are still strong. 

Reducing interest rates should bode well for both consumer demand and the cost of acquisition funding. Then, the longer term should begin to look brighter, making the industry attractive to investors and potential employees. Those family members at the head of the succession line should begin to feel more confident about their future leadership opportunities.

Never forget that new cars are only a portion of the business. Dealerships that master more profitable adjacent business opportunities in the communities they serve can benefit from attractive, profitable growth opportunities by holistically increasing their share of the driveway of drivers’ automotive spending. 

Preparing the next generation to assume control and giving them the freedom and resources to use their creativity and imagination to expand business reach is an important role of current dealers. Dealership culture is all important, staying ahead of the curve and attracting the next generation into an amazing industry. It’s really not all about cars. That’s simply what we sell and service at the moment. It’s about building a business environment that can adapt and grow to meet the societal shifts of the next generation. Technology, and protecting the environment are just two examples of what appeals to the next generation. 

It’s not easy to hand over the reins, but this is what we must do. This transition will take time. In the meantime, you must provide the mentorship they need. OEM, customer, employee and supplier relationships have been your foundation. You must teach and encourage them to build these bridges in their new world. This takes time.

One of the challenges is adapting your style from being a parent to being a mentor. You have a lifelong relationship with your children as a parent. The challenge is to shift away from your historic relationship as a parent and develop a new one with the business as a foundation. This is not easy and will take time and constant communication, but it will pay huge dividends in the future for all concerned.

Many dealerships and dealer groups have already transitioned to the second generation. For many, the third generation is knocking at the door. They are smart and well-educated. 

Out of the full range of opportunities and directions that their personality, education and capability provide, they are choosing to work and learn the family business. 

That is a real testament to your parenthood but, at the same time, a real responsibility. Successful succession is much more common in automobile dealerships than any other business I know. It has so many aspects. As businesses grow, the opportunities are endless. So are the challenges. 

Dealership culture is all important, staying ahead of the curve and attracting the next generation into an amazing industry.

Dealerships and dealership groups touch so many challenging opportunities: people business, sales, service, franchise, real estate, finance, distribution, HR, advertising, information technology, legal, community support, etc. and offer tremendous leadership opportunities.

2025 could be the year that you pull the trigger on whatever you have been waiting to do. We all have ideas and plans in the back of our minds. Perhaps 2025 is the year to bring them to the front of your mind and begin to execute on making the future happen your way. 

There is no reason why 2025 cannot be the right time. It could be the right time if you choose to make it so. It’s up to you. 

Happy Holidays and see you next year!

About Chuck Seguin

Charles (Chuck) Seguin is a chartered accountant and president of Seguin Advisory Services (www.seguinadvisory.ca). He can be contacted at cs@seguinadvisory.ca.

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