I recently agreed to be the wingman for Dr. Merlot who was calling on a succession planning prospect, Victor. Doc described this gentleman as a 65-year-old, second-generation owner of 17 dealerships with a son and a daughter employed by the dealerships and another daughter who was not actively employed in the business. 

I had met this gentleman 20 or so years previously by invitation from his son whom I had met at the NADA Dealer Academy graduation program.  Victor was and still is a great prospect but unfortunately we never hooked up for succession planning. Among other reasons, one of the causes for our lack of engagement with each other was his accountant and best friend who was a “control freak” and didn’t approve of any new advisor who might threaten his primary advisor position. As I recall, the accountant specifically took exception to me because I had the audacity to challenge some of the business structures that he and the attorney had developed for Victor.  

More important, I never tried overcoming the objections of this insecure accountant because Victor demonstrated beyond a doubt that he suffered from KIAD; the dreaded “Know It All Disorder”.  If I remember correctly, Victor took credit for designing the financial statement for Motors Holding; inventing the tent sale; and developing the first reinsurance company. At the conclusion of our original meeting many moons ago, Victor expressed that he and his accountant had everything in the realm of succession planning buttoned down and in shipshape. Notably, he would be transferring stock in the near future to his two children involved in the business as well as locking in some key managers who were important to operations.  

Despite our less-than-impressive first visit, I tagged along with Dr. Merlot because not only did Victor appear to still be a good prospect, but I was also curious as to how this KIAD victim and his equally insecure accountant had followed through with their succession plan.

When we arrived, a receptionist showed us into a swanky conference room. Nothing was lacking; we had the big screen, big leather armchairs, accent lighting, a fully stocked wine cooler, and all the high tech controls appropriately in front of the big chair at the end of the table. The Doc said, “Don’t know if they sell any cars here but it looks like they can really party!” Then Victor joined us, overstuffed in an impressive three -piece suit, gold cufflinks and a tie that no doubt cost more than both of our Men’s Wearhouse buy-one-get-one-free special. 

“Gentlemen,” he greeted as he took his seat in the big chair. “So pleased you could visit; what can I do for you?” 

At that point I could see Dr. Merlot’s eyes widen because he was so pleased that he had scored a prospect meeting with a well known mega dealer.  On paper this was a perfect prospect. But there was no doubt the air had been let out of Doc’s balloon when Victor asked what could he do for us. With the Doc searching for words that no doubt were going to lead to a brief meeting, I stepped up in relief. “Thank you for having us. This is a lovely conference room. I think we were introduced many years ago, and I subsequently visited you and your accountant for the same reason we are here today: to discuss succession planning. I forget his name. Is he still practicing?”

“Oh, my apology,” responded Victor. “I don’t remember meeting, but yes, my accountant Jimmy continues to be my main man. I rely on him for so much.” Then he got down to business. “I want to ask you if you have any clients that want to sell their dealerships.” And looking at us with a big toothy smile, trying to be cute, Victor said, “That’s my idea of succession planning; buying more dealerships!”  

“That’s a big screaming no!” responded Doc sarcastically. “We are not business brokers; we are succession planners. I am surprised you did not ask me this when we arranged to meet over the phone.  I could have saved your time and our plane tickets. I guess there is no reason for us to disrupt your day any further,” he concluded. Noticeably perturbed, Doc started pushing his chair back. 

 Victor was not used to being shut down and looked somewhat shocked as Dr. Merlot stood up. We had gone to considerable effort to make this meeting, and I still wanted to find out if the poster child for KIAD had followed up with his succession plan. Thinking the worst thing he could say to me was that it’s none of my business, I waved at Doc, “Sit down, let’s chat a moment.”

Leaning back in my chair I started my inquisition. “So as I recall, prior to me making your accountant angry at our meeting many years ago, you said you were going to begin the deployment of your succession plan. How did that work out?”

“Well, we started my son as a used cars manager in one of our small stores with the challenge that when he achieved a ratio of one to one, we would move him to new cars in the big store. He progressed along nicely and served as the GM of this store for many years.” 

I nodded approvingly and continued to inquire. “And your daughter, did you include her in your plan?” 

“Oh yes,” Victor responded enthusiastically. “As you may recall, she had just finished her MBA. We told her that when she got her CPA, then we would make her office manager. We also informed my son that when he hit 3% net to sales we would make him a shareholder and he would become Dealer Principal.”  

“I see. You had some impressive plans for your kids. You own 17 stores now?” 

“Oh no,” countered Victor quickly. “We have 19; just added two more,” looking proudly back at us with a big smile. 

“Congrats!” I responded with a nod. “Looks like you are a genuine mega dealer. So with all this growth over the last 20 years, how have you dispersed the stock between your son and daughter? My guess is that you are making these acquisitions in their names so as to avoid gift and estate tax?” 

“Well, not exactly,” replied Victor. “As you may know, we started buying stores and I had to guarantee the notes. And I followed Jimmy’s advice who felt very strongly that when I got relieved of the personal guarantees, then I should transfer stock to my son and daughter.” 

Now I was getting the drift of what had happened. “Oh, I see.  So let me guess. You still are the guarantor on your notes and you still own the stock. And let me guess again, you bought a boatload of life insurance to cover your estate taxes; $10 million, $15 million?” 

“Yes, I haven’t been released from personal guarantees so I still own the stock,” Victor responded with a less noticeable smile. “And, Jimmy just told me that I have been approved for insurance; we’re planning to buy $18 million. When we finalize the capital loans on these last two deals, then I’m planning to buy the life insurance to cover estate taxes.”

“I sincerely doubt that!” blurted Dr. Merlot who evidently could no longer restrain himself. “All you’re doing is playing the ‘When and Then’ game, a favorite of control freaks. You just want to placate family and advisors with a soft lie, a contrived performance contingency that keeps you in total control. Now it is apparent why you have tolerated your accountant, you are kindred spirits. Let me ask you, how’s your ‘When and Then’ plan working for your son and daughter?” 

At that point Victor was no longer smiling. “Oh, let me guess,” continued the Doc. “They don’t work here any longer?” 

Now Victor was irritated. “No they do not. Five years ago my son said he wanted to do his own thing for a while and is now managing a reinsurance company. Our daughter had a second child and decided to stay home with her kids. She said when the youngest starts school, then she’ll come back. In the next couple of years both of them will be back in the business and our succession plan will be top notch.”  

“Don’t count on it,” the Doc responded curtly, standing with his briefcase in hand and preparing to depart for the airport. “Evidently your daughter is a quick study because it looks like she has just put a ‘When and Then’ back on you.  She’s no more planning to come back to work than you were planning to give her stock when she returns. The “when and then” is a game played by those who need an excuse not do what those around are pressuring them to do. The real truth is that you are no more prepared for succession than you were twenty years ago.”

The Doc’s assessment, while a little harsh, was spot on. Extending our hands for farewell handshakes, I thanked Victor for his time and told him to give me a call when the “when-ing and then-ing” doesn’t get him where he wants to go and he decides to face succession planning challenges head-on. 

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