Improving the Value of Your Dealership Sale
8 Items on A Buyer’s Wish List that Can Help Increase Your Sales Price
When you’re getting ready to put your dealership on the market, it’s helpful to see things from a potential buyer’s point of view. A buyer has a much different perspective on the transaction, compared to the way that the seller sees it.
By understanding what items are at the top of a buyer’s “wish list,” you can make your dealership a more attractive purchase. By addressing these issues upfront, you can create a win-win — with a higher sales price for your dealership and a store that’s set up for success when the new owner begins operations.
Dealerships have traditionally been plagued by high rates of employee turnover, particularly among the sales staff. Buyers want to see a stable, satisfied workforce that can continue in place after the sale. Here are three questions to ask yourself when looking to improve the stability of your staff:
- Have you built a culture that values and rewards your staff and management appropriately?
- Have you invested in ongoing training that shows you care about your employees’ long term growth?
- Does your dealership have an outstanding reputation that regularly attracts high-performing people from your competition?
If this is not the case, buyers will see it as a big red flag. Having to start fresh and hire new staff and managers is a huge headache for a buyer, who would much rather hit the ground running with a cohesive group of top-notch employees who already care about the business.
Sale Of Real Estate Along With The Dealership
Many buyers would prefer to buy the land that the dealership sits on, as well as the dealership itself. This provides the buyer with the opportunity to benefit from any appreciation of the real estate over time. It also allows for additional financing arrangements that use the land as security or collateral. In connection with this, DCG Acquisitions always recommends that dealers get certified MAI appraisals of their property on an annual basis.
A Facility with the Latest Factory-Compliant Design
Factory-compliant facility upgrades can be very expensive, particularly for luxury brands. If a buyer sees that you have made the most recent upgrades to your dealership, that puts you way ahead of other similar dealerships that have not done so. In addition to saving the buyer a considerable amount of money, having the upgrades completed eliminates any uncertainties in the buyer’s mind about the exact time and costs required to do the work. Depending on the manufacturer, there can also be a significant amount of ongoing financial subsidies tied to the process. Bottom line, this will help you to get the full market value for your dealership.
How good is your dealership at satisfying customers, earning their loyalty, and retaining them for the long term? How are your CSI and SSI scores? Are they as good or better than your direct competitors? A potential buyer wants to be able to “inherit” a happy and loyal customer base. If you have been treating your customers right on the sales floor, fixing their cars correctly the first time, and providing excellent customer service, you should have nothing to worry about on this front. If you are not, the cost of your failure to do so will be deducted from the final purchase price.
Room to Grow Sales
Buyers would ideally prefer to buy a dealership that has great potential for growth through sales efficiency. This can include factors such as:
- Is your market area growing in population and/or income?
- How much local competition is there in your brand’s vehicle segments?
- Are your online marketing strategies providing good quality leads?
- Is your sales process effective, both in the showroom and online?
- Is your website optimized to turn visitors into buyers?
Strong Profits from Used Cars, Fixed Ops, and F&I
While the new car department is your dealership’s main showcase and usually responsible for over 50% of sales revenue, it’s important to recognize that, according to NADA, total profits roughly break down to 25% in new cars, 25% in used cars, and 50% in service & parts.
So, attend to the teams and infrastructure in all three departments. If your dealership can show profitability across the board, a buyer can have confidence that the business has its act together. You want all three departments working in harmony, with a sales experience that encourages buyers to choose the dealership as their service & parts provider and vice versa.
As such, the entire dealership should continue to prosper when the new owner steps in.
Clean and Clear Books
If you haven’t already cleaned up your books, now is the time to do it. Buyers want to be able to get a clear financial picture of your dealership’s operations. They will scrutinize everything and check the numbers for accuracy. Anything that looks fishy will send a buyer out the door. So best practice is to present detailed books upfront.
This means a meeting with your accountant to review your finances. You should have at least four years’ worth of profit and loss statements to show a buyer. Your most recent balance sheet should show accurate numbers for the net worth of the dealership, including assets and liabilities. Your inventory of used cars should be properly valued, while your parts inventory should show only currently-used items that are in saleable condition.
While you, as the dealer principal, may be very excited at the prospect of selling your dealership, it is best to keep the entire buy-sell process to yourself until the deal is completed. Don’t tell your friends, don’t tell any local dealers you may know, and don’t tell the factory. If the word gets out, it could trigger employees to head for the exits, fearful of the consequences of such a change. This could affect the sale price and even kill the transaction. Your staff is a very valuable and desirable part of the deal, so it is best to keep them calm and in place until everything is signed on the dotted line. Then you can explain to them what is happening and help the new owner make the transition.
DCG Acquisitions is Committed to Maximizing Your Dealership’s Value
DCG is here to help you get the most value out of your dealership when you decide to sell it. DCG is one of the country’s leading, and fastest-growing, automotive M&A firms. We pride ourselves on our network of connections — with automotive manufacturers, financial lenders, dealership buyers and sellers, and more — that help us create a qualified, competitive environment on both sides of the sale.
Contact DCG Acquisitions to speak directly with an Automotive M&A specialist and learn how our expertise can help you get the most out of your next dealership purchase or sale.