Part I
The Six Things You Must Have to Respond to an Offer to Buy Your Dealership

Skip to Part II

The Wall Street Journal says that, “2014 will go down as the year U.S. [auto] sales fully recovered from the recession.” A Morgan Stanley analyst predicts that sales will reach 18 million by 2017.

Generally, when it’s a good time to sell cars, it’s also a good time to sell car dealerships – just ask Warren Buffett. The forces of consolidation and outside capital are stronger than ever. Prospective buyers see an excellent business climate to obtain the best ROI from their purchase. Dealers who had made plans to sell in 2007-12, but were delayed by the recession are putting their stores in play. Another generation is ready to retire or investigate a near-term exit strategy. Dealers of every age are recognize that this is the best time to cash out and are looking at the multiple standing offers for their store.

Often, when a dealer does decide to sell, he or she can’t respond quickly with enough of the information a serious buyer needs. A dealership transaction is a complex process, requiring in-depth, up-to-date financial and market data. Generating these reports on short notice creates confusion in an already complex sales matrix. If the reports can’t be produced within a reasonable time, the franchise-sale opportunity could be lost. Even worse, hastily-prepared or messy data can make a good deal go bad.

Whether a dealer has been contemplating selling or not, today every branded dealer should be prepared to respond to offers or updating his or her future strategy with current, reliable valuation information that will put their store in the best light. There is a minimum of six reports that are imperative to the process of valuing a dealership, and which a dealer should be able to produce with a high degree of accuracy in a reasonable amount of time. I call them the “Data of the Deal:” 

1. Market Penetration Data,
2. Market Registration Data, with sales area description
3. Cross-sell Data,
4. Business Management and Financial Composite Data,
5. Facility Requirements Reports, and
6. Right of First Refusal Structure Analysis.

These aren’t obscure figures, and can be compiled from the manufacturer’s dealer website. So why does it take sometimes weeks or even months for a prospective buyer or agent to get them? For one thing, they are complex reports. But the most common reason for delay is the very reason that they are so suddenly needed: they scream, “WE’RE FOR SALE!” among the dealership staff. Since few dealer principals have the personal technical skills to produce these data as qualified reports, they must request their preparation by the staff, usually the comptroller or office manager. If, like most dealerships, your store has a strong sense of “family,” then morale, productivity, and turnover rate could be affected, which could hurt sales and reduce the valuation.

Read Part II: How to Get the Reports You Need Without Disrupting Your Dealership

 New England’s Most Experienced Auto Dealership Broker

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