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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
Latest News:Site: Yahoo! News Search Results for news UAL shares walloped by new posting of old news (Reuters via Yahoo! News) A nearly 6-year-old news story on the 2002 bankruptcy filing of UAL Corp resurfaced on the Internet on Monday, clobbering the airline's shares as some traders mistook the report as current and plausible news. ABC News hammering out Palin interview plans (Reuters via Yahoo! News) ABC News is spending more time trying to assemble the logistics of its exclusive interview with Republican vice presidential candidate Sarah Palin than it did negotiating with the McCain campaign itself. ABC News campaigning in all 50 states (Reuters via Yahoo! News) ABC News will be hitting the road -- and the rails -- for a whirlwind tour of all 50 states before the November election. Game news: 'GTA IV' hits 10 million, EA meets ESPN (AP via Yahoo! News) Real news from the virtual world: Google News snafu leads to airline stock plunge (CNET) After an investor news wire service mistakenly highlights a 6-year-old news story (allegedly sans time stamp) about United Airlines filing for bankruptcy, shares of the carrier tank. Tacoma's News Tribune offers buyouts to 189 staff (AP via Yahoo! Finance) The News Tribune on Monday offered voluntary buyout deals to 189 of its 350 full-time staffers although the publisher said the newspaper doesn't intend to accept anywhere near that number as it works to bring its expenses in line with reduced advertising income. 2002's News, Yesterday's Sell-Off (Washington Post) A six-year-old article mistakenly seen by Bloomberg financial news users yesterday reported the bankruptcy of United Airlines and triggered a massive sell-off that nearly obliterated the company's stock in a matter of minutes. Kenyans React to American Political News (NPR) The United States and much of the world have been transfixed by the current presidential race. Farai Chideya crosses to Barack Obama's father's homeland, Kenya, to get insight into how political news is being received. She's joined by radio reporter Michael Kaloki. United Airlines shares nosedive on old news (BBC News) United Airlines shares nosedive after an old news story about its 2002 bankruptcy battle resurfaces. Column: 'Daily Show' Is One Of Few Fair And Balanced TV News Shows (CBS News) I have this silly little habit of watching the Fox News Channel when I'm bored or in some weird self-loathing state of mind. So for the Republican National Convention, I thought it appropriate to bathe in their conservative credibility instead of the CNN/Barack Obama PDA I witnessed the week before. Site: news - Google News Palm Shares Soar As New Smartphone Wins Wall Street Praise - CNNMoney.com
MORE RESOURCES: Site: Yahoo! News Search Results for management Unisys Wins Email-Management Deal From UK Police Force (Computer Business Online via Yahoo! UK & Ireland News) Unisys' UK subsidiary has been awarded a three-year outsourcing contract from North Wales Police to provide email management services. CA Offers Compliance-Management for Utilities Sector (Computer Business Online via Yahoo! UK & Ireland News) CA has launched a risk and compliance management offering for power and utility providers. Vodafone Restructures and Shuffles Management (Computer Business Online via Yahoo! UK & Ireland News) UK mobile network operator Vodafone has announced a series of changes to its management and organization including the split of its emerging markets business into two divisions. Enterprise Asset Management Market to Grow 6.5% Over Next 5 Years (Industry Week) Sept. 12, 2008 -- The worldwide market for Enterprise Asset Management (EAM/CMMS) is expected to grow at a compounded annual growth rate (CAGR) of 6.5% over the next five years, according to a new ARC Advisory Group study. Selfridges rolls out complaint management software (Computing.co.uk) Angelica Mari, Computing , Thursday 11 September 2008 at 16:11:00 Feedback system aims to help maintain service levels Retail chain Selfridges is using feedback management software to build customer loyalty and maintain service standards. The company hopes that the new system will help it identify the root cause... Industry releases content-management interop spec (ZDNet Asia) Microsoft, IBM, Oracle, SAP, EMC, Alfresco and OpenText have released the first draft of their Content Management Interoperability Services specification. Compare your salary Use the IT salary benchmark wizard and know the average salary differences between different job functions. Join activeTechPros. http://www.activetechpros.com Compli And Environmental And Occupational Risk Management (EORM) Announce Partnership To Provide EH&S Compliance ... (SafetyOnline) As part of Compli's continuing effort to provide compliance protection to auto dealerships, Compli and EORM (Environmental and Occupational Risk Management) of San Jose, California, have formed an alliance to provide top-tier Environmental, Health and Safety (EH&S) information and content to dealers through Compli's Dealership Compliance Management System (DCMS) POWER: Lighting management IC drives up to eight LEDs in series (Embedded Systems Programming Magazine) Phoenix, Ariz. ? ON Semiconductor has introduced the NCP5890, a lighting management device that integrates LCD backlighting, fun light controls and ambient light sensing in a 3 x 3 x 0.55-mm uQFN-16 package. The NCP5890 targets compact smart phone and portable media player applications. Union Bank - Edelweiss JV for wealth management service (Business Standard India) Union Bank of India (UBI) in tie up with Edelweiss Securities has launched wealth management services ti tits high networth clients in Mumbai. RedPrairie Enhances Internationalized Shipment Capabilities In Transportation Management System (TMS) (Logistics) RedPrairie Corporation, a world leading consumer driven optimization company, announced today a host of new features in its updated transportation management (TMS) release - built especially for international users. Site: management - Google News PRACTICE MANAGEMENT: What Brokers Should Know Before They Go - CNNMoney.com
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