Pub. 4 2015-2016 Issue 2

12 San Diego Dealer I n 2005, the U.S. had about 22,000 dealerships. The Great Recession was hard on business, though, and in 2015, the number is a little less than 18,000. Many dealerships are family businesses but they are going through a period of profound change. Go to a dealership today, and the person helping you find a car is more of a product specialist than someone to haggle about prices. The Internet has been a substantial reason behind this change, and the change has definitely been good for business. Over a three-year period ending in 2014, the number of dealerships that had upwards of $1 billion in revenue was 21 in 2011 and 43 in 2014. The number of larger franchises is increasing for a simple reason: they offer economies of scale that are not available for smaller franchises. Multiple dealers can save thousands or millions of dollars just by using the same back-office staff in accounting, financing, inventory, and human resources. Throw in the complications of running a family business, though, and the entire process becomes even more complicated. As one generation steps away, the next generation has to slip into place as easily as possible while still absorbing all the changes involved in selling cars. U.S. family owned businesses are important to the economy. According to Family Enterprise USA, there were 5.5 million family businesses in 2011. These businesses make a lot of money: $8.3 trillionof the U.S. GDP, which is 57 percent. Approximately 63 percent of all jobs are in family businesses, and 78 percent of all new jobs are. It’s important to understand that fully 35 percent of the Fortune 500 companies are controlled by a family, so saying that a business is run by a family does not necessarily mean it is a small business. Most family businesses last about 24 years, but 40 percent make it to a second generation, 13 percent are handed on to a third generation, and three percent go four generations or more. That’s a dismal showing. If you own a family business and you want your business to outlast you then it’s important to do some succession planning. E N T E R P R I S E S F A M I L Y By Susan Morgan, The newsLINK group, LLC