When selling a dealership, establishing an appropriate valuation for it is a key part of the process. But when buyers are looking at other dealerships that may be on the market at the same time as yours, they may come across a wide variety of different financial structures, taxation rates, and methods of depreciation.
EBITDA provides a clear way for buyers to evaluate all of these potential candidates on an equal footing, so that they can make an apples-to-apples decision about which dealership offers the best return on their investment for the price being asked.
Let’s take an in-depth look at what EBITDA is, how it came about, how EBITDA is used to value a business, its benefits, and its drawbacks. We’ll finish up by answering the question of whether your EBITDA can be too high, and what that means to potential acquirers of your dealership.