Spring 2020 Strategies

ASK THE EXPERT

Business owners are now eager to find answers on how to sell the company for a profit and retire comfortably. What’s Your Succession Plan? Industry Expert Gary Pittsford Provides Starting Points S uccession planning can be a challenging conversation for retailers

S: Why do operators in this industry delay succession planning? GP: Business owners know the hardware industry, retailing and customer service. Many have been working and building their companies for 30 to 40 years. As they start to think about selling or transitioning the business, they are faced with many difficult questions and are entering unfamiliar emotional and financial territories. Some owners are overwhelmed and simply put it off. Some owners are waiting until their businesses have excellent sales and profits in order to get the best sales price. Some have children who want to take over, but the owners are not sure about letting the children have more control or how to develop a transition plan. The reasons for delaying the process vary greatly and are unique to every operator. S: What is the risk to individuals, to businesses and to the industry if retailers delay succession planning or don’t establish a plan at all? GP: This is a very important question. The individual business owners and their companies will always be better off financially by working on an exit or transition plan at least five to 10 years before they sell the company. Developing a plan even three years in advance greatly improves profitability and the value of the business. Having a plan in place also protects your business in the case of unexpected tragedies, such as an owner’s unexpected death or disability. I’ve watched the retail hardware industry change a lot in the last 40 years,

Your Blish-Mize sales representative can be a great resource if you want to start the conversation about who will take over your business when you’re ready to retire. There are also many experts in the industry who can guide you through the details. Castle Wealth Advisors president and CEO Gary Pittsford has guided independent home improvement retailers through the succession planning process for more than 40 years. Read the conversation with Pittsford here to find out what the state of succession planning looks like in the industry and the steps you can take today to prepare. Strategies (S): What’s the current state of succession planning in the independent home improvement industry? who don’t know where to get started or who aren’t ready to talk about the next chapter for their operations.

and the speed of change has picked up over the last five years. The average age in the retail hardware industry is around 60. I meet with business owners every week who are between 60 and 80 years old. As these older business owners transition out, and the next generation transitions in, the industry will change more rapidly, because the 40- and 50-year-old next generation will implement newer processes for retailing and running their companies. The next 10 years in the hardware industry are going to be a significant transition period because so many baby boomers are retiring and selling their businesses to new and younger owners. When the next generation comes into the leadership role, they shouldn’t resist starting their own plan. Young retailers may not know who they will sell their business to in 20 years, but they should manage their business to make it strong financially. From age 40 to age 60, if you watch the financial side of your business and keep it strong, your succession plan will be easier to implement when you are ready to sell.

Gary Pittsford (GP): The pressure has been

building over the last three to five years because most companies have recovered

from the recession in 2008 and 2009. Now that sales and profits are higher, and owners are growing older, people are asking more questions about how to quickly develop a succession or exit plan.

4 Spring 2020 • Hardlines Strategies