Is this A Good Time To Sell Your Body Shop Business?
Have you ever asked yourself the question? "Is this a good time to sell my business?" That is a question every business owner asks himself, everytime he has a bad day. I once received e-mail from the editor of the Auto Body News, asking me that key question. "What is happening in the market today? Is this a good time to sell? " My quick answer was "These are very interesting times." Of course that answer doesn't tell you anything that you can get your teeth into. So! Let me clarify my answer. Since I have been selling body shops for nearly 5 years, I have seen many changes in the body shop industry. One thing that hasn't changed is that there have always been an abundance of both sellers and buyers. The buyers have always been, and still are picky about what they were looking for. The perfect shop in the eyes to the buyers is (A) one that has a customer base and a revenue stream that is reliable and isn't dependent on the owner being there to retain each individual customer, and. (B) doing a volume of at least $100,000 per month, but really much more. Large volume sellers think that if they have a DRP (Direct Repair Program. This is where the insurance companies set up a relationship with the body shop to do all their clients business. Much like an HMO in health insurance) contract, they have what the buyers want. This may be true but the contracts are not automatically transferable, and a buyer will be very unhappy if the DRP leaves after paying money for this "reliable revenue stream." Smaller volume sellers, on the other-hand, not having corporate accounts, dealerships or other contracts still have hopes of getting lot of money for their shops. The average shop I run across is only doing about $300,000-$500,000 annual gross income. So what we have is a situation where a lot of buyers are looking to buy a shop, but there are not a lot of shops available, that fit what they are interested in. This year, one change has occurred. There are fewer shops available than at any time in my career. Not fewer of the large volume shops for sale, that is fairly stable, but fewer of the small mom and pop repair shops that have not been in heavy demand. The reason, I believe this has happened is because of the booming economy. Low volume shops are doing better than they have in years. They are making money, and do not feel as much pressure to close down. They still would like to get out, but when they find out that their 5,000 sq. foot shop which is making them a $100,000 net profit, is only worth $100,000 on the open market they decide to keep on working. As always, the shops doing $1 Million to $3 Million per year gross income is still in demand. The price alone still is the main factor, in determining if these shops will sell. A good example of this is what is happening in lower Orange County. There are currently a couple of shops in Lower Orange County that are for sale, by the owners. They appear to be very profitable but the asking price is too high and the buyers all know it. Even the fact that these are the only shops available for sale in this prime area has not changed the fact that buyers just refuse to over pay. Last year I was marketing a high volume shop, in Ventura County. The buyers refused to pay the asking price, even though the volume was there. Why? The profit wasn't. In this situation, the buyers would not pay for the volume and stability of income unless the net profits were there. They didn't assume that they would make a profit where the current owner was not. It appears that buyers of today are very careful. I believe they do not trust their own ability to get business and are too careful. To clear up any confusion about what kind of buyers we are talking about, lets break the buyers up into categories. The first category is the consolidators. There are two large ones in Southern California but they are not the whole market. I have talked to out of state consolidators that have inquired about moving in to the So California market. Consolidators want shops that fit their model. That model sometimes changes but basically they will buy a shop if it fits their model. If it doesn't, they will not touch it. The price by itself doesn't turn their interest on or off. We do not have enough space to discuss what this group will buy, in this article. It is enough to say, " If your shop fits their criteria they would have contacted you and expressed interest. If they haven't contacted you, they are not interested." Period! They know their market place and who is in it. By the way, if I owned a shop that a consolidator wanted, I would never sell to them. Being a professional negotiator for 20 years, I find the requested seller financing terms totally unacceptable. When I have found out about these sales, after the fact, I am amazed. I had buyers for the same money, or more, without the seller being at risk, but no one asked me. The second category is the multiple location shop owners. Usually with one or more DRP contracts shop that wants to expand into more areas. They are very interested in the sq. footage of the shop, and its ability to handle over $2. Million Gross Income per year. This buyer only looks in limited areas. The areas being where they have been offered a DRP contract. When they are looking, they need it now, while the window of opportunity is open to them. If they can't find it quick, they will not need it at all. Recently I had a multiple shop buyer who had made an offer and was negotiating a shop in West Los Angeles. By the time we finished the negotiations, the DRP contract was gone and so was the buyer. The third category is the buyers who have worked in the industry before, but do not currently own a shop. Also in this group are the buyers who have family in the industry, and money is no problem. This buyer believes " If it doesn't have a DRP, forget it. If it has a DRP and isn't making much money, also forget it". If it has a DRP, and it is making money, they are interested but only at what they consider is a fair price (In their eyes). This group I have successfully changed their mind at how they analyze what a good shop looks like and on occasion have bought shops with "a steady reliable income", other than insurance contracts. The fourth category is the person that just wants a shop. They will do what they have to, to afford a shop that will work for them. This group is the working body man or auto repair shop mechanic. Because of their limited funds, this buyer will only pay what he or she feels the equipment is worth. They will pay nothing for goodwill because they believe that the seller's customers are not stable and will leave when the ownership changes. Are they wrong? In Conclusion: There are a lot of buyers out there. My database has over 250 current names of body shop buyers. There is currently a shortage of shops for sale but mostly in the properly priced category. Most days I feel like a marriage broker with a lot of plain brides and a few beauties. The dowry for the beauties is more than most good-looking boys will pay. The balance of the girls may not be pretty, but some of them can sure cook. . Anyone want to get married? "Have I got a girl for you" About The Author Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetgroup.com; kismetrei@earthlink.net
Related News
|
 |
|
|
RELATED ARTICLES
A Leadership Screw Driver: The 90 Day Improvement Plan
I was talking with first-line supervisors in a utility company about how to deal with poor performing employees.
Better Management Performance - The Easy 3-Step Way
Managers make three mistakes when they try to run businesses. They do too much,
they don't trust their people and they don't have enough skills. Here we
explore an easy 3-step process to get your business back on track and get a life.
Finding Common Ground Through Consensus Decision-Making
It's clear to me that a workplace is a better place when employees truly work in teams, but the most familiar team models we have are those that are created to win wars and games. We have a commander or a coach who gives orders, and the soldiers or the players use those instructions to defeat the opponent. Mediator Bill Ury says, "People are realizing that adversarial, win?lose attitudes in an increasingly interdependent world, where I depend on you and you depend on me, just don't work anymore. Using those tactics is like asking, 'Who's winning this marriage?'"
Keeping Meetings On Track
We all have been in meetings with certain people who get our blood pressure to rise or just make us feel what a waste of time. Here are some of those people and hints on how you can maintain keep the meeting on track without coming across as a dictator or inept leader.
Change Management
"It is not the strongest species that survives, nor the most intelligent, but the most responsive to change". -Charles Darwin
Are Your Marketing Pieces Up to Date?
The other day someone asked me for one of my informational brochures. As I was giving her the piece I stated that if I were printing these today it would be a little different. The piece was only about two months old and already the way I wanted to communicate things had changed slightly. Then I got to thinking. If I were to print informational brochures six months from now, they would probably be a little different too. Don't get me wrong. I am a big believer in consistency of marketing. However, in today's business environment especially as fast a pace as our business develops, things change...sometimes minutely and sometimes in a big way. What do you do?
Workplace Security Plan: Does Your Company Have One?
Consultant's Perspective...
What Every Manager Should Know About How to Conduct Successful Training Activities
Whether you are training preschoolers in the classroom or executives in the board room, here are 15 premises you might want to keep in mind the next time you're designing training activities.
A Sense of Humor in the Workplace ... Is it Me? Or, was that not funny?
When I was first initiated into Corporate America, I had a sense of humor that went unmatched by any mortal soul. I was quick-witted, smart, sharp, and knew every gag and joke available to humanity. Most of it, I learned in college. But, college never really did teach the fact that having a sense of humor in the workplace is different than 'jocularity.' After a few brushes with career-chaos, I realized that the definition of 'corporate humor' deals with how one handles oneself and not how one can elicit laughter.
Conquering the Number One Problem in Business--Poor Communication
The Number One problem in business is poor communication: between coworkers, with clients, across functional areas, up the food chain. When I ask anyone I meet "What's the one thing that causes problems in your company?" the answer is always Communication: poor communication in relaying instructions, miscommunication because of irresponsible delivery, too little information when conveying changes in policies or procedures, not enough exchange of information when relaying new concepts or ideas.
How To Learn Great Management from Our Kids
Learning comes from many places. And one of the most wondrous opportunities is right in front of us. At dinner, at play and at bedtime, every evening. It is there on the sports field, on vacation and during homework. Our children have clues we can use in our business and organisation, right away..
How to Manage Your People Well: Tips for Managers of Training
As a training manager, there are two important aspects to managing your people well: hiring, supervising, and motivating (managing with your people) and building up corporate support for your department (managing for your people). Unfortunately, training is not well understood by some executives, and its benefits can be hard to assess. Even a good training manager's department risks cuts by cost-conscious administrators convinced that training is an unnecessary expense. In The Secret of My Success, a cinematic fairy tale about life in corporate America, Michael J. Fox gets scolded his first day on the job for speaking to a senior executive: "Never consort with a suit unless the suit consorts with you first." As a training manager, however, you had better be prepared to consort with "the suits" from Day One. Managing for your people is a pro-active strategy that constantly demands selling your department's services and widening the base of organizational support for the training function.
Building A Stellar Business One Employee At A Time
Top businesses that continually lead their industry clearly understand a simple fact:
Management Development - Micromanagement Works!
Getting into the detail of everything each of your people does, will really damage your relationships with them. Sure, there are times where their hand needs to be held, and then there are times when you have to be sensitive enough to their needs to back off and let them learn for themselves.
Satisfied Employees, A Powerful Marketing Strategy
Even in today's still uncertain economic times, there are companies who are doing extraordinarily well. Why is it that some companies are thriving while others are barely making it? You can always blame the economy, but is that the only reason? The answer could be as simple as how respected and appreciated your staff feels.
Minimising Conflict With Effective Communication
Let's look at them...
Definition of 'Conflict'
Align The Enterprise & Make Beautiful Music Together
Q: Why is a great business like a great marching band?
When Business Becomes A Battlefield
"We have to be careful it's like a minefield out there"
"I like to lob the odd grenade into the meeting to shake things up"
"You have to watch your back all the time with her"
"We need to attack whilst they are in a weak position"
"There was blood all over the carpet after he had finished with them"
Five Principles of Effective Communication
The problem with communication is the illusion that it has occurred. George Bernard Shaw
Downsizing in Organisations - The Real Truth
I've met and worked with many people in all sectors of the business world and found that the majority of managers and team leaders are spending too much of their time on basic administrative tasks. Tasks for which they have had no training in. In many instances people are stressed out with too many responsibilities due to ongoing restructuring and downsizing in their organisation.
|
