Sometimes letting go is easier said than done
Column by TOM BISSONNETTE
It took 10 years of persistent consistent work to get the shop to an acceptable level of profitability. Having decent sales volume over the $3 million mark was probably the biggest reason for the increase. Our gross profit numbers were not in the top 25 percent, but sales volume allowed a reasonable profit to slide to the bottom line.
You must realize that once you have met the cost of your overhead to operate the business the Gross Profit going forward becomes Net Profit. It is much more lucrative if you can hit your breakeven point on the 15th working day of the month rather than the 19th day. Volume solves a lot of problems—but as Mike Anderson says it hides a lot of sins. It is easy to take your foot off the gas or get sloppy in the way you run your business when you are winning on the income sheet. I have always maintained that if you are not growing your business you are falling behind. When you are building your business you are living in a creative state, when you are simply maintaining your business you can lose focus and start cascading backwards. I recognized this in myself: I had accomplished what I set out to do and at age 55 I knew that I did not want to grow my business to multiple locations and continue to pump up the volume. I have always been a future planner, usually in five-year increments, so I set a goal to step back from the business at age 60. Why 60? I figure the years between 60 to 70 are “young old” where I could still do some neat stuff, travel, build a lake home, and enjoy my grandchildren. Nothing is guaranteed, who knows when we are going to check out? We all have friends that were gone too soon.
As I mentioned in my last article, I set up five key employees with a total of 30 percent of the company’s shares and my plan was to sell the remainder at age 60—but they surprised me, they requested that I keep 10 percent as they wanted my input going forward and I’m glad I did, it is heard to totally walk away from your dream.
With the timeline set I had to get to work on setting the stage for the young partners. Previously to selling the 30 percent of share to them I removed the real estate portion of the business into another holding company for two reasons:
1. To make the business more affordable
2. To provide an income stream for my wife and I when I retired.
Some advice for you, if you have not already done so: pull the real estate out of your bodyshop company. As Donald Cooper has said many times, your business should pay you in three separate ways:
1. A wage for your work commensurate with what you would pay an employee.
2. Dividends paid quarterly based on the profitability of the company.
3. Rent for your building and real estate holdings.
Your goal should be to develop a business that can do numbers one and three while generating a reasonable net profit. You must understand that you are building your business to sell it at some point in time. If the business requires you to be there 100 percent of the time or it doesn’t make any money, your business is not salable. People and consolidators are looking to buy businesses that can generate a decent profit whether you are there or not. So, how did I do this?
Simple—I found key people that were motivated, and I let go. I did not micromanage every little detail even when I could see challenges ahead. As long as they were not making a fatal mistake I simply coached them but let them decide what course to take. In addition now that I had partners I couldn’t simply go out and blow cash out the door. In fact, we became very disciplined in making sure there was plenty of money in the bank account, who knew that a pandemic would come along and put a major dent in cash flow? We paid out dividends every three months—if there was enough profit and cash on hand to do so—otherwise we hoarded our cash. When I hit age 60 and decided to sell the additional shares our balance sheet looked pretty darn good and we had multiple banks wanting to finance the young partners.
We held a big farewell/welcome to the new owners party at the shop, and away I went out the door. I did some home renovations, took an extended golf holiday down to Palm Springs, came back and built a new lake home, it was like being a 15-year-old again, only this time I had some money!
The summer after I left Chelsea mentioned that things were slowing down and she was thinking about downsizing our employee payroll. I had seen this scenario many times in the last 30 years and I told her to hang tight, things always pick up and sure enough, pick up they did. A massive hailstorm hit Saskatoon and it literally passed right over top of Parr Auto Body. I have never heard Chelsea mention that things were slowing down since.
A year to the day that I left Parr I took the job of the Executive Director of our provincial auto body association – the Saskatchewan Association of Automotive Repairers (SAAR). You might think “Why?” Quite frankly I was bored and I really do enjoy the auto body business. Being the Executive Director of SAAR allows me to work at my own pace, wherever I am, whenever I want. My wife says that I work harder at SAAR than I did in my own business but for me it’s not work, I enjoy being able to give back to the industry that has been so good to me the past 30 plus years. The last six years has been interesting for me.
Up until this point all I knew was Parr Auto Body, but I have had an opportunity to meet shops of all sizes, in various locations with diverse ways of operating. Some of them have been way beyond where Parr was currently at and some of them are still very much small local businesses run by great tradespeople. I have worked hard to provide our SAAR members with the opportunity to develop and grow their businesses–some have jumped on board and are making great strides; some have decided they like things the way they were and refuse to make changes.
In addition, about the time I stepped back from the day-to-day operation of a body shop things had begun to change like I have never seen before. In my next article I will share my observations with you and what I think needs to be done to address these changes.