Editor's Note: Here's an excerpt from Succession Planning: Step-by-Step. Go here to read more. 

A sound dealership succession plan addresses a long list of issues, including retirement income, transferring wealth to the dealer’s heirs, transferring ownership, dealing with the income and estate tax consequences associated with an ownership transfer, and addressing other issues key to the ongoing success of the business; not the least of which (and often forgotten) is transitioning management.

Step 1: Identify and prioritize goals for the transition.

Step 2: Identify & Prepare New Management 

Leadership transition should be addressed very early in the succession planning process. In addition to a long-term management succession plan, a contingency plan should address a death, disability or other event or circumstance that would prematurely prevent the owner from running the business. 

The steps to identifying and preparing new management involve: 

1. Assess the situation. Assess the current and future needs of the dealership and ensure the skill set of the successor matches the needs of the dealership. A comprehensive assessment program needs to be in place even when a family member will succeed. This may be even more critical in a family member succession, as often the owner and manager will not be the same person and conflicts are inevitable.
2. Perform a formal assessment of prospective managers’ skills and character. Owners might want a particular child to take over or the children might lack interest or the necessary skills. A formalized assessment brings objectivity to help the dealer with what can be a troubling decision.
3. Consider recruiting an active board of directors or forming an advisory board to review or conduct the selection process. Non-family board members can: validate the owner’s decision; expand the owner’s pool of candidates; increase available resources (more people, more hours); and, ultimately, serve as mentors for the chosen leader. 
4. Design a plan for developing the successor’s skills and experience. This is particularly helpful in a case where a family member will take over, one with the right skills but who is not quite ready to run the business effectively. 
5. Pave the way with the dealer’s key relationships. For instance, first and foremost, is the manufacturer, whose approval of new management may be required. Other key relationships include bankers; key employees, including those not chosen as successors and how they react to new ownership and management; vendors; and important customers. 

The successful transition of management responsibilities is a critical part of a succession plan and even more critical to the ongoing survival of the dealership. Succession planning includes preparing a competent successor to assume the role of decision maker. Without one, an owner’s retirement, death or a disability will cause the dealership to falter, maybe even fail.