What Makes a Dealership Valuable?

Internal Factors

  • Consistently Strong Cash Flow
  • Market Share and Volume Growth
  • High-Performing Management Team
  • Clean Financials and Audited Records
  • Established Owner Loyalty and CSI Performance
  • Market Longevity / Tenure
  • Name Recognition & Brand Equity
  • Customer Relationship Management Database
  • Diversified Revenue Streams
  • Image Complaint Facility
  • Competitive, Market-Driven Rent Factor
  • Strong Social Media Report Card/Community Service

External Factors

  • Under-Representation – Dealer Count or Performance
  • Metro Markets / Larger Single Point Markets
  • Rapid Growth Markets
  • Affordable Real Estate Costs
  • Favorable Government Policies – Income, Property and Sales Taxes
  • Geography Suited to the Franchise (Trucks in Texas)
  • Attractive Labor Pool / Non-Union Shops
  • Manufacturer Brand Image and Market Classification (Luxury, Volume, or Specialty)
  • Attractive Living Locations

Value Consideration

The key elements in the sale of the dealership are:

1. Goodwill / Blue Sky
The value of blue sky is one of the most highly negotiated components of the sale due to the multitude of influencing factors and its subjective nature. Based on both external and internal factors, a multiple of the weighted average adjusted cash flow comprises the blue sky calculation. Adjusted cash flow is the net operating income of the business after “adding back” lender-recognized items such as depreciation, interest expense (non-floor plan), and discretionary or one-time items. The weighting references a cash flow look over a period of time (say 3 years) with more weight being placed on more current performance.

2. Parts Inventory
The appraised or market value of the current OEM parts catalog inventory. Some buyers will specific those part numbers which have sold in the last 12 months. An independent appraisal will determine this value.

3. Furniture, Fixtures, and Equipment (FFE)
The market value of the FFE which is generally about 50% of the original acquisition cost. An independent appraisal will determine this value.

4. Real Estate
If a loan is involved, the bank will require a professional real estate appraisal from a company familiar valuing special use properties such as an automotive dealership. A Phase 1 environmental assessment is also required.

5. Used Vehicles
Generally this asset is excluded from the offering but the buyer is able to purchase the used vehicles at their own election using one of the industry recognized pricing guidelines to determine valuation.

6. New Vehicles
New vehicle inventory is floor-planned and is transferred from the seller’s banking source to the buyer’s source at dealer cost … therefore not included in the sales price.

Are you interested in our Businesses for Sale?

Begin your search for the ideal business opportunity viewing our latest listing or browse the whole collection from link bellow.