If a shop owner considers themselves integral to the daily operation of their business, they will have a tough time finding a buyer, warned an industry advisor.
Hunt Demarest, accountant and business valuator with accounting firm Paar Melis, couldn’t stress this point enough while speaking at a recent conference.
“If you have a day-to-day job in the business — you are a service advisor, you are a technician — there is going to be a group of people looking to buy a shop that will no longer be interested in your shop,” he said during the session Transitioning Your Business at the Midwest Auto Care Alliance’s Vision Hi-Tech Training & Expo in Kansas City. “Period, end of story.”
Those looking to buy a shop are looking for an investment. They want a turnkey operation. Otherwise, from their point of view, they’re not buying a business. They’re buying a job.
If the shop’s owner is working the front desk, has built a relationship for decades with customers and has decided to retire and sell, that could greatly alter the dynamic of the shop with that person gone. The success of the shop may be heavily tied to the shop owner being in the shop all the time.
After they leave, buyers will wonder if the shop will maintain the same level of excellence.
“So when you leave and you retire, I have to hire someone else or try and find someone on this, is this [level of success] going to be anything similar?” Demarest said, posing as a prospective buyer in this scenario. “You have 30 years of trust. You are probably the most trustworthy person here because these people have been dealing with you coming back here — am I going to have the same value of trust when you leave? Probably not.”
That’s why the owner removing himself from the day-to-day — and even the business entirely — is so important, he added. By not being there, the owner has put the business in a position to be sold. But that doesn’t mean they have to.
“If you get your business to a state where it’s profitable enough and you’re building this business to sell, it doesn’t mean that you have to sell,” Demarest pointed out. “The magic dream is … get your kids to run it, make them make all your profit, and you can just ride off into the sunset and live in Florida or whatever.”
If the kids aren’t an option, apply that thought process to a general manager, he added.
“If you can work yourself out of the business … then you can truly be in a position where someone comes to you” looking to buy rather than you searching for someone, Demarest said. “You can say, ‘Hey, everything’s for sale for the right price.’”
Image credit: Depositphotos.com
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You nailed it. I was lucky enough to find a like minded (family oriented) buyer, who himself like me is a Licensed Tech. He blended well into my position, buy yes he bought a job, not so much a stand alone business.
Wish I did read your story 5 years ago. Water under the bridge now. Tnx Again -
Recently I was at the Lindertech conference and walked up to Patty Kettles from AARO to get my
name tag. She said, “Rob?” I replied “yep, everyone knows me I’m the bad ass in this industry”. Bruce Eccles was sitting beside her and said no your not a bad ass, you just have your own way of doing things. I said “yes and I am making money at it.” He then said “then who are we to tell you your doing it wrong.” That’s right, but every time I open up an email or read an article I am continually reminded how I have failed at this career choice, because I refuse to remove myself from the bays. Now I am being told that I will have a hard time finding some one to purchase my business. Do you know how demoralizing it is to constantly having this crap shoved in my face, while I continually prove these critics wrong. No wonder we have a technician shortage issue. Honestly I am not counting on a investor to relieve me from my burden. I strongly believe I will pass on my business to a hard working technician that wants to better their lifestyle. I understand that companies like AutoCanada are buying up dealerships, and insurance companies are buying up body shops. Good for them. At the end of the day aftermarket shops are just small businesses, just like accounting firms. I do not believe that wall street bankers are flooding into our industry to gobble up shops for investments. So please stop pretending we are something we are not! -
“The magic dream is … get your kids to run it, make them make all your profit, and you can just ride off into the sunset and live in Florida or whatever.” Yea lets make our children take over our burden while we sit back and prey they don’t mess it up. This guy is just another idiot in our industry we need to get rid of.
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Lets face it. Most of us in urban / suburban locations will be bought out by land developers unfortunately. I would estimate 70% of my “competition” (I don’t believe in local competition. We all gotta eat and I want to see everyone succeed as an industry) have disappeared and been turned into condo buildings. I don’t want to see it happen here, but at the end of the day, its whoever offers the best deal. And developers have the deeper pockets, and facilitate the cleanest transfer.
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Touche Geoff. Your land developers are not looking to purchase aftermarket shops to operate them as an investment as Hunt Demarest is suggesting. Multi million dollar dealerships are being leveled to make room for condos. In todays economy land is more valuable for a residence complex than a business. How are the next generation going to afford to purchase and operate an aftermarket shop? How are the shops that have been manipulated to believe bigger is better hoping investors are waiting to purchase their shops as an investment be able to get those same investors to pay more than the land developers are willing to pay? How are the investors going to be able to operate our shops with no automotive knowledge? If your anticipating selling your shop to an investor to keep your team employed good luck with that pipe dream.
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Not just that Rob, but with the land values greatly exceeding the business value, how can we expect to help a tech move in to our chairs like we did? Even if it could happen, a commercial mortgage at todays rates would torpedo any chance of being financially feasible. The alternative of a vendor take back mortgage is also out of the question unfortunately, with the uncertainty of our business model with the EV mandates looming. I don’t want to take this place back long after I retire and its been bled dry!
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There is much work to be done besides misleading and manipulating the next generation into an early bankruptcy. I believe my shop is worth more money as a business then just a piece of land. We need government incentives for young technicians to take the leap of fate and purchase our shops. We need lending institutions to provide affordable funding to these individuals. We need tooling companies to support the next generation. We as an industry have to support and show the next generation that hard work can and will provide financial stability. This illusionary fantasy of shop ownership that our industry is constantly promoting is scaring everyone right out of our industry and has to STOP! Just imagine a world with no dealerships or aftermarket shops. Imagine a world of just purchasing throw away car online.
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