You own a small-to mid-sized dealership, your name hangs over the door, and you’re starting to think about retirement. Your transition out of the dealership could be smooth or rocky, depending on the decisions you make now, and how early you started the process of succession planning. Consider, for example, how you would handle an unsolicited approach from a third party buyer — would you know what the right number would be, how you would explain and discuss it with family, how it would impact you personally long term?

Your succession plan will play a significant role in determining what becomes of the dealership — in some cases your life’s work. You have the option to pass the dealership to your children, your employees, or a third-party buyer, and each path has its own pros and cons. If your goal is to transition it within your family, the most important thing to keep in mind is balancing financial issues with non-financial issues. 

Financial considerations

Like any family business, transitioning your dealership to family members (usually your children) will almost always mean you are getting bought out over time. While a third-party purchaser would just cut you a large cheque for the full price tag of your business, your kids would likely acquire it over the course of a decade or more.

The most common means of passing a dealership to children is through a share freeze or estate freeze. As the dealership owner, you can freeze your ownership shares tax-free at their current value, allowing your family members to accrue any future growth in value while they slowly buy you out.

While a third-party buyer will almost always pay more for your dealership than your next-generation family members, your cash flow needs and preferences in retirement are sometimes just as important as the price tag of the business. Do you prefer to receive a large one-time payment and then stretch it out over many years, or do you prefer to get a regular flow of cash through progressive redemption of the shares?

Also worth noting is the risk of not being bought out in full when being bought out over time. Whether through mismanagement or because of external factors like a recession, if the valuation of your dealership declines after your share freeze, you could face a scenario of not being fully paid.

Finally, keep in mind that under the rules of the lifetime capital gains exemption, you could gain certain tax advantages by passing the dealership within your family or leveraging a family trust. 

Non-financial issues

The emotional and relationship side of the transition can be even more important than the financial side. As an over-arching principle, the best way to avoid family conflicts resulting from the family business is to have conversations about succession early, build consensus, and put agreements in writing where needed.

Legacy versus money: Passing your dealership to your kids should ideally be a very proud moment. If the dealership bears your last name, that legacy will continue with you into your retirement. Ask yourself if you trust your children to carry that legacy, and to what degree you want to be involved in decision making after you retire. As important as it is to keep your legacy intact, also acknowledge the dealership industry is evolving, and even if they could, your kids may not run it exactly as you did. 

Multiple roles for multiple children: If your children already work in the dealership prior to your exit, they likely have different roles. Not everyone can hold the title of Dealer Principal or president, both logistically and based on their skillsets. Will you create resentment by giving the role of Dealer Principal or president to one child, while the other(s) have different roles? Do all your children have the management prowess to run the business? Do they even want to inherit it? Taking these questions seriously is crucial; answering them will require honest and transparent conversations, possibly with the help of a third-party facilitator.

Dividing assets fairly: In a hypothetical situation where you have three children, but only one works in the dealership, you need to consider whether it’s fair that each receive a third of ownership after you exit the business. Should the child who has put more into the dealership inherit more of it? What would that do to family dynamics? Is “equalizing” through other assets (cash, vacation property, etc.) a possibility? It’s possible the child who has worked there is more invested in the success of the dealership and would therefore want to pour more money back into it, while the other two would prefer to pocket the money themselves. All are issues that need to be managed early via succession planning.

Succession is a family matter

Because succession impacts both you and your loved ones, many of the decisions about your future should be made as a family. A family office practitioner brings the skills and experience you need to have informed and productive discussions with your family about the future of your dealership. 

To learn more, contact Chris Schaufele, CPA, CA, National Leader, Dealerships at Chris.Schaufele@mnp.ca or 604.542.6768

The post A roadmap for passing the family dealership to the next generation appeared first on Canadian Auto Dealer.

Louis-Yves Cloutier talks about 360.Agency’s newest product DRX 360

Louis-Yves Cloutier’s 360.Agency has been a familiar DMS presence in Canada for a decade now, and counts over 1,000 dealerships in Canada as customers. But now the company is announcing the next step in the evolution of their product, DRX 360. What is it? Why now?

With all the technology available for marketing cars and running a dealership available today, auto dealers have often been on the leading edge of business software adoption. DMS, CRM, digital marketing, F&I programs and many others can help the day-to-day operations of a dealership, but they may not integrate for the customers on the other side of the equation. This can lead to breaks in communication, added effort on the part of the potential buyer, inputting information numerous times, and overall frustration. Smoothing out the customer’s buying journey is the new Holy Grail.

We sat down with Cloutier at the 360.Agency booth at the NADA 2023 Show in Dallas in January and had a great conversation about the direction of the company, as well as a rundown of their newest product, DRX 360. 

So, why are they releasing this product here and now? “360.Agency has been coming to NADA for the last six years,” said Cloutier. “So even though we’re a Canadian company, and we were not that big six years ago, we always felt that NADA is the biggest platform in North America, probably in the world, to showcase technology to car dealers. And I think for us it’s just an exciting opportunity to be in the market that is boiling. It’s just a strategic decision that we’ve made many years ago that NADA would be part of our marketing strategy.”

360.Agency dropped the big news on the first day of the NADA Show on Facebook Live about DRX 360 being the next evolution in the company’s technology. “DRX stands for Dealer Retailing Experience,” said Cloutier. “So it is an omnichannel retailing platform that will help dealers that want to modernize their activity and absorb the digital transformation that is underway”.

DRX 360 is a tool for creating an experience, not only for consumers, but for staff members, to streamline all the processes that are included in a transaction, from online to offline, offline to online, and vice versa. “It’s a very unique platform that takes all the big components that a retailer uses today: a website, digital retailing, for CRM and another vendor for your desking tool, and we put it together.”

Integration is the key to DRX 360 . “That is actually the platform of choice for omnichannel selling,” he said. “Consumers today, especially through the pandemic, are more online than ever, but there are still customers showing up in dealerships. The problem with today’s ecosystem for a retailer is that there’s no link between what’s happening online and what’s happening offline.”

The problem that DRX 360 is solving is quite simple. Customers can start their journey online, start a quoting process, go into the digital retailing module, and at some point, may need to talk to some people, and go into the store. DRX 360 goes wherever the customer wants to interact, seamlessly. 

“So DRX 360 is the answer for modern dealers that are looking to get into omnichannel, and they want to make sure that the customer experience is seamless, and that their staff is also equipped with the proper tools to interact with the customers without breaking the experience altogether,” said Cloutier.

DRX 360 is the evolution of the 360.Agency concept that has been in the works for over 13 years, Said Cloutier. “The DRX 360 is a unique user experience and a unique platform that will integrate everything and basically take all the friction that is in between all the products out of the way.”

The future is bright for 360.Agency. “We’ve been working on this for so long. It’s the beginning of something, because we are the leader of the industry in omnichannel selling.” NADA was a success for Cloutier and 360.Agency, with a lot of interest from dealers from Canada, as well as the U.S. “We did many demos at NADA for American dealers, and dealers actually said to us, ‘This does not even exist here in the United States’”. Cloutier is rightly proud of being a Quebec-based company, a Canadian vendor, with about 1000 dealerships doing business in Canada. But the company has greater ambitions as well. ”I would be lying if I said 360.Agency doesn’t have the power to be exported. I think we have a solution that is leading edge even in the United States, and that’s something we’re looking for for the next months and years to come. We’d like to go south of the border, but at the same time, we are never going to forget where we come from”.

The post Omnichannel retailing platform DRX 360 takes centre stage at the NADA Show appeared first on Canadian Auto Dealer.

CARFAX Canada, the country’s leader in vehicle history, announces the launch of a new vehicle valuation offering for dealers, History-Based Value.

What has happened in a vehicle’s past—including any damage, how well it’s been maintained, how many owners it had, the mileage, and what it’s been used for—can have a significant impact on its value today. With access to the most robust vehicle history data network in North America, CARFAX Canada is uniquely positioned to deliver vehicle values with unparalleled accuracy. 

CARFAX Canada History-Based Value is the first and only valuation model in Canada that automatically adjusts for each vehicle’s unique history when determining how much it’s worth. 

Made available to Canadian dealers in February, History-Based Value allows users to determine a vehicle’s value without the guesswork of manually adjusting for its past. The valuation engine objectively factors a vehicle’s history into the equation to generate VIN-specific values, easing tough negotiations and maximizing profits.

World events have caused chip shortages that have made the auto market fluctuate a lot lately. Most valuation models can’t keep up with the volatility of the market, but with History-Based Value, new data is added weekly, so valuations are always in tune with rapidly changing market trends.

“We’re thrilled to finally launch History-Based Value to our dealers,” shares Mark Rousseau, president and GM of CARFAX Canada. “Our customers have been asking for it and we’ve been hard at work perfecting the model.” 

How does History-Based Value generate vehicle values? It begins by looking at millions of data records, starting with actual sold data from similar vehicles. It then factors in the vehicle’s unique history, such as odometer reading, prior damage, use-type, and ownership and service history. Plus, it adjusts for market factors such as geographic location and seasonality to produce a VIN-specific value. The end result is an extraordinarily powerful, highly intelligent valuation engine.

“History-Based Value was a natural extension of our valuation capabilities,” said Rousseau. “We all know that a vehicle’s history, especially damage history, is one of the biggest factors influencing its value. By combining the most comprehensive vehicle history network in Canada with our extensive valuation technology, we’re able to provide the smartest approach to valuing vehicles in Canada. No other valuation tool in Canada can automatically adjust for vehicle history like History-Based Value.”

Right now, most dealerships across Canada are still facing issues with low inventory and used car prices are beginning to cool off, so reliable valuations are becoming increasingly essential. Dealers interested in a free trial of History-Based Value can contact their CARFAX Canada rep or visit carfax.ca/accuracy to learn more.

The post Vehicle history and vehicle valuation come together appeared first on Canadian Auto Dealer.