For a business to succeed, strategic planning is critical. As an owner begins to consider exiting the business, succession planning is equally as critical. With recent market uncertainties, owners may not know what resources are available or how to begin creating a concrete plan for exiting their business. Even those with family members ready to take over the day-to-day operations often don’t realize the many key decisions ahead.
“It’s crucial to understand all your options beyond the initial succession discussions,” said J.D. Beck, Senior Manager of Business Development at Valvoline Inc. “That’s why it’s important to work with a reputable business and trusted brand to ensure the best outcome for your family, employees, and financial security when the time comes to exit the business.”
Valvoline Inc. recognizes that succession planning can be stressful and daunting. To guide operators on their journey, here is a list of five essential steps to consider when planning for the future.
1. Build a strong team.
Beginning to craft an exit strategy can be overwhelming. Operators should build a team of advisors to help them reach their personal and business goals.
To help with the succession planning process, Valvoline Inc. has a team of business development managers across the United States and Canada who are available to discuss the operator’s business and their desired outcome. These managers have extensive quick lube knowledge and assist operators throughout the process.
“Valvoline Inc. understands the sensitivity for all parties involved. These are life-changing decisions; that’s one of the reasons why we work directly with operators,” Beck said. “Working directly with Valvoline Inc., there are no fees you’d experience with hiring a broker to sell your business or receive a business evaluation.”
2. Find a reputable buyer.
Whether operators are looking to sell their business to a family member, friend, or other entity, it is important to find a buyer who is dependable and transparent throughout the process.
When searching for a buyer, operators should make sure the business models align and that the company culture will provide a stable future for their current employees. “Valvoline Inc. has opportunities for growth,” Beck said. “Across our organization, we have managers, directors, and even VPs that all began working in a Valvoline Instant Oil Change.”
Other indicators of a reputable buyer include a dedicated team working with you one-on-one and constant communication throughout the process. Additionally, information about the company should be easily accessible.
“With Valvoline Inc. as a publicly traded company, there’s a lot of data that sellers can find,” said Lance Gray, Senior Manager of Corporate Development at Valvoline Inc. “Our business model is familiar to operators. Business owners may want their legacy to be continued by a national brand.”
3. Make business preparations.
To get ahead of the game, operators must know what business documents to prepare and expect.
Documents that every operator should investigate include:
•Non-Disclosure Agreement (NDA) — An NDA protects any and all communication and information that an operator shares with the buyer. This means the buyer will not disclose their performance, the number of oil changes per day, or the revenue generated from the business to any other parties.
•Point of Sale (POS) Reports —The point of sale system that a location utilizes for day-to-day operations can provide reports to a potential buyer. Reports give sales insight into how the business is performing from a top-line perspective.
•Profit and Loss (P&L) Statement — The easiest way to evaluate a business is to look at the revenue, labor expenses, and earnings before interest, tax, depreciation, and amortization.
•Signed Letter of Intent (LOI) — Outlines the agreement between the operator and buyer. It outlines the terms of the deal and indicates that both parties intend to complete the sale.
With these documents readily available, operators can transition and begin conversations efficiently.
4. Determine the value of your business.
After reviewing the necessary documents, the operator and buyer will enter into formal discussions to begin the business valuation process.
“When evaluating a business, we first look at recent top-line performance, including oil changes performed and additional services offered, to get an idea of average invoice,” Gray said. “Then, we look at how a business manages cost of goods, labor, staff, and store expenses. This all shows cash flow that will be used to evaluate the business.”
A well-managed store and organized documents make the process easier for everyone involved.
5. Ensure a smooth exit.
As mentioned earlier, Valvoline Inc. has a team of business development managers to help quick lube operators through the succession planning processes. This ensures the operator gains a deeper understanding of their business and financials so that nothing gets lost in translation.
“Operators are making a life-changing decision, and we treat it as such with in-person discussions,” Beck said. “At Valvoline Inc., you’re working with reputable experts who respond quickly, one-on-one.”
Transparent communication is imperative when making a business decision, especially when it involves employees, family, and the greater community.
“The goal is to develop trust,” Beck said. “Maybe the seller is not ready to make a business change at that time. If they’re looking to continue growing their business, we can help there, too! We also have an independent operator program called Valvoline Express Care. This program provides vibrant brand imaging, marketing solutions, and training to help operators grow their business.”
For more information on the business solutions that Valvoline Inc. has for independent operators, visit www.valvolinequicklubes.com or call 859-357-7303.
