What Factors Make a Dealership a Valuable Acquisition?

October 27, 2022

An automotive dealership group that’s in expansion mode, whether it’s large or small, public or private, is going to shop very carefully. A new dealership location is a very large investment that can either fail or pay off handsomely. Experienced dealer principals know the desirable elements that will produce the best possible acquisitions for their company: Specifically, ones they can close on with no regrets.

If you are preparing to put your dealership on the market, it can be extremely helpful to see things from a potential buyer’s perspective in these matters. The buyer’s point of view differs quite a bit from that of the seller. By understanding what a buyer values most, you can turn your dealership into a more appealing purchase.

Some of these factors are tangible

A buyer can evaluate the performance of many components of your dealership in a fairly straightforward manner. Some of these include:

The size of the overall footprint of your dealership’s real estate: A buyer will have certain expectations for the overall business results that can be produced after your dealership has been acquired. Is your facility the right size for the buyer to accomplish this? Does it offer enough space in the sales, service, and parts departments to support their goals? How close to their projections have you been able to come under your management? This can be seen as an opportunity to increase the efficiency of your entire enterprise – doing more with less is always good optics, as well as making good business sense!

An efficient service department: Fixed operations produce about half of a dealership’s total gross profit. A buyer will definitely want to see the numbers from your service and parts departments that support this. Have you instituted the high-profitability practices that both improve your service department throughput and please post-pandemic customers? These include:

  • Online scheduling so customers can easily set their service appointments
  • Offering vehicle pickup and drop off services
  • Keeping in touch with service customers via text messaging
  • Doing walk-arounds with customers to discover additional items that need servicing
  • Getting every problem fixed on the first try
  • Reviewing the work performed when customer picks up their vehicle
  • Online invoicing and payment to get customers out faster
  • Giving every service customer a smile while thanking them for their business

A sufficient number of service bays: How many bays are enough? This requires an analysis of several complex issues, including:

  • What procedures are you using your bays for?
  • How efficient and productive are your techs?
  • How profitable is each bay?
  • Do you have enough service customers to keep your bays filled?
  • Do you have enough bays for the amount of work you are scheduling?
  • Are your bays being used to store partially-repaired vehicles? (Not recommended)
  • Are your service advisors selling enough work to keep the bays full?
  • Have you considered extending your service hours to boost total output?

Maximizing the use of your service bays means keeping them full of vehicles that need profitable types of work performed on them, while having a team of techs who can easily and efficiently handle that type of work. This is what a potential buyer likes to see!

Experienced senior staff who are willing to stay on with a new owner: A buyer making an acquisition isn’t just buying a building and a vehicle inventory. That buyer knows very well that the performance of your store is largely down to the people in the management roles. They see that the path of least resistance (and highest performance levels) leads directly through the retention of your management staff. This means that after your dealership changes hands, the new owner can let things continue in the capable hands of your senior staff members.

Some of these factors are more difficult to quantify

The process of acquiring a dealership also involves some less tangible considerations that will not show up on a P&L statement. Two notable items of this type include:

Location: Just as with beauty, location is very much in the eye of the beholder – or in this case, the buyer! You can assume that a diligent buyer is well aware of the demographics, population trends, and brand coverage gaps that may exist in your market area. That buyer will be aware of your location’s median income (and therefore the brands and market segments which will perform best), as well as the dominant competitive dealers in your specific market segment. If all of these issues line up with the buyer’s strategic plan, that gives the transaction a big green light!

Community reputation: A large portion of your dealership’s value can be attributed to the reputation that it has earned in the minds of your customers and the community. Your reputation is built upon a variety of factors, but none is more important than customer satisfaction. When it is properly cultivated and carefully managed, the high levels of customer satisfaction that result can propel your business to even greater success in the marketplace.

Your dealership’s reputation is formed by the quality of your existing customers’ experiences. They will then communicate these experiences to their friends, their relatives, and the readers of their online reviews. 

While the vehicle manufacturers may spend millions to attract consumers to consider the purchase of their cars, trucks, and SUVs, it is your dealership’s reputation that brings those buyers to your point to buy them. The better your reputation, the stronger the attraction for potential buyers. The promise of an outstanding sales, service, and ownership experience is very powerful –  and will definitely enhance the value of your store in a buyer’s eyes!

DCG Acquisitions is the perfect partner for both buyers and sellers

Whether you are looking to sell a dealership or acquire one, DCG is here to help you successfully complete a transaction that meets your needs. We understand that whatever side of that agreement you are standing on, you definitely want a good, well-structured deal. 

DCG Acquisitions has an impeccable reputation and a long track record of proven results, because we’re committed to service beyond the sale. The DCG Acquisitions team has personally closed billions in transactions to date. Our experienced team of experts manage efficient, high-return acquisitions.

Contact DCG Acquisitions to speak directly with one of our automotive M&A specialists and learn how our expertise can help you get the most out of your next dealership purchase.