When you begin to even think about selling your dealership there is an “army” of experts ready to advise you on every aspect of your sale.
Everyone from the business broker that button-holed you at the last convention to your accountant who has given you good reliable advice for 20 years…and lawyers…and appraisers and your insurance person…and your brother-in-law…the list goes on.
Some dealers I know even consider their accountant…or their attorney…part of the family…they’ve been through so much together.
But…if they’ve never owned a dealership or two, and sold many…this is totally uncharted territory for them…and to preserve the value of your store you have to recognize that fact (many don’t)…or the consequences for you could be severe.
For most dealers this sale of your dealership is a unique opportunity to recover your investment for your years of hard work and risk…different from any other sale you have ever made (and if you don’t understand that you may leave money on the table!)
Unfortunately your trusted and well intentioned adviser may have helped close a transaction on a dealership…but…hasn’t creatively maximized the profit for the seller.
In fact it may be much worse…
Because your adviser is trying to relate this deal to some other transaction they were involved in…without a vast frame of reference with many dealerships!
You will need your accountants and attorneys and, you’ll find some who know how to protect their client and move the deal to a sale. But is your a “Salesman”?
Because that is what you need.
Especially when it comes to selling your dealership.
I worked with a dealer who had started from scratch and built up a great store…It was at its peak in terms of value…but at that time there weren’t a lot of buyers looking for deals in his area.
We managed to find and develop a buyer…
But the accountant insisted on a stock sale. After almost losing the deal we were able to present a contract to more than compensate for any additional tax liability.
But no matter how strong your relationships with your attorney, your CPA, or your accountant, it’s important to realize that they’re not experts in selling dealerships. You will need them to protect your interest…but you also need a salesman.
They know how to protect your legal and financial positions and McNulty knows how to: recast your statements, price your dealership to your satisfaction, find and qualify a buyer, present your dealership highlighting its strengths, negotiating an acceptable agreement, obtaining factory approval and following through until you get paid. There is more to a successful sale than setting a price, picking a buyer and structuring a deal. Much more.
Unless they’ve sat in the seat you’re in now, many business brokers favor deal quantity over deal quality.
There are essentially two kinds of business brokers. Those who do a high volume of transactions and those that maximize value for the seller.
When you decide to sell, the instinctive reaction may be to call the volume guy because they advertise many listings in Automotive News. Listing are not sales. Do you want your store Listed or Sold? Do you want your transaction done as soon as possible? Do you want your dealership shopped around the country? Do you want personal attention to your sale? You make that decision.
But a careful understanding of how to best position your business to optimize the value to you and your family takes time…no two ways about it. The high volume guy may not have that time…they’re already working on many deals instead of figuring out how to put more money in your pocket where it belongs.
Conclusion: There are a lot of well-intentioned business brokers, CPA’s and attorneys. But selling a new car store is different, in many ways, from selling any other business. Because you don’t want to send the wrong message and because there’s more to the best overall value equation, it can translate into less money in your pocket at the end of the deal. You will get personal attention from an experienced expert when you choose McNulty.
Selling a business of this size is a complex transaction.
Many questions have to be answered, details collected, calls returned, etc.
It is not uncommon to talk to 10 “nosey dealers” just to get to one buyer.
The one thing that most dealers don’t understand…the day they decide to do a “For Sale By Owner” is that they now have two full-time jobs…one is running the business and the other one is selling their business.
First of all they are immediately confronted with a dizzying cluster of complex decisions that will make a big difference in the price they get.
Questions like:
One dealer recently said to us, “Hey, my family lives out of the store, what are we going to do, my health insurance, my cars, the gas, everything comes out of the store?…How am I going to present a deal if I take a lot of money on the expense side and don’t show much profit?”
Most sellers are thinking from their viewpoint rather than the prospects’. A big mistake in this situation. We will work with you and include those non-productive expenses in your cash flow. Show the real cash flow.
One of the first things that a “For Sale by Owner” generally does is go to his buddies, or his competitors. This accounts for most of the “For-Sale-By-Owner” prospecting.
Those 2 groups know far more about the “negative aspects” of your business and as a result they start by discounting the value.
A buyer from out of town, who wants a certain market, is looking at a bigger picture and is willing to pay more to get what he wants.
In this day and age another factor can be critical. Not only do you have to find a buyer…you have to make sure that buyer can get approved by the factory…not an easy task at times.
Often, when a buyer is not carefully screened and qualified, a lot of hard work goes right down the drain when the factory doesn’t approve the new buyer.
You’re faced with starting over again at (or near) the beginning with the added “cloud” that your last deal “fell through” and this has a powerful lowering effect on the price you can command.
This word on the street will affect your value.
Conclusion: For sale by owner usually means less value for you in your sale. On the surface it sounds like it may make sense, but think about all that needs to be done you’ll realize the benefits of calling Pat McNulty.
A lot of car dealers in similar markets are good friends.
They compete with each other, and some see each other socially.
Most of them have local and state associations. Many cities have a new car dealers association that meets regularly.
Each dealer gets to see his neighboring competitors’ registrations…knows exactly where unit volume is…sees his facility…and even drive the lot occasionally.
And each dealer gets to learn even more misleading details and rumors about his buddies from the wholesalers…especially when it’s bad information.
So, all in all, dealers have a pretty good feel for what’s going on in their neighboring competitors’ businesses.
The tendency is for the seller to think that this man is his friend because they’ve known each other for 25 or 30 years. And, he is his friend.
Over the time, the friend will always say, “If you’re ever thinking about selling, I want you to promise that you’ll call me first.”
And, while it seems like that would be reasonable, and no matter what the friendship is, they are still business people and they are still competitors.
And, not surprisingly, the seller is in a serious frame of mind, but they buyer may not be in that same frame of mind and he wants to buy as cheaply as he can.
It shouldn’t be a problem. After all, they are both businesspeople. And they are still competitors.
And when a would-be buyer-friend asks for first dibs on a dealership, not surprisingly, the seller is in a serious frame of mind. But the buyer is not in a serious frame of mind.
The buyer wants to buy as cheaply as he can…buddy or not. The buyer is thinking about all the negatives related to the dealership.
He’s not trying to rook the seller–his buddy. He’s just like the rest of us. He wants to get the best deal that he can.
Was working with a dealer for about six years helping him position his business for sale.
The seller and his competitor…a buddy of 25 years…had a friendly lunch a couple of times each year.
Sure enough, while having lunch one day, the friend says, “If you ever think about selling that thing, I hope you’ll always remember to give me a shot at it.”
And the seller says, “Well, in fact, I am thinking about selling it.
They finish lunch and return to their dealerships. Upon entering the store the seller is met by his sales manager who says he heard he was selling and his friend he just left ways buying. Seems after lunch his friend called his manager and shared the information. (confidentially of course) with him and his manger called the sellers manager before he got back from lunch. That is the car business.
The simple conversation creates unnecessary stress…
Unless your buddy is competing with somebody out of town…out of the local loop…the price you get will usually not be as good as it should be. In most cases, locals tend not to pay full value unless they’re faced with competition from an out-of-town, would-be buyer.
It’s not that your buddy-buyer is trying to pull the wool over your eyes. You’ve got to remember that where a local buyer sees an opportunity to get bigger…an out-of-town buyer wants to move into a new market.
All he sees and remembers are all the negative aspects of your market, your reputation, your location…everything.
And he uses that against you to reduce the value. Generally speaking, a local dealer will pay less for the deal than someone from out of town.
And, if a buddy does decide to step up and pay fair market value, it’s only because they believe that somebody outside the territory is going to come in and steal their customers.
Conclusion: Even though the dealer down the street is your friend, their offers and subsequent conversations could undermine your plans to get full value for your dealership. We know how to protect your confidentiality and still negotiate with the local dealer.
Want to keep it all in the family?
Lots of dealers think their kids will eventually want to take over the business.
It seems reasonable. After all, most dealers have put everything they’ve ever had into it.
Many times, they’ve worked for 20 or 30 years. You start by selling one used car for a profit…and build it up into something great over the years…you’re proud of it. You don’t want to see it end.
Most dealers with children probably have had the dream at one time or another that their kids will come into the business, take it over and end up with generations of family involved in the business.
Trouble is, the characteristics of a successful car dealer are so different today that generally, I’d say there are more unhappy second generation car dealers than there are happy ones…they’re doing it because you wanted them to…not because it’s their dream.
They are the proverbial round peg in the square hole.
When a guy has built up a business and turns it over to his son or daughter, it’s always still his business. The dealership never belongs to the children, never. Never ever. It’s always their dad’s.
Think about it…how many kids are going to be happy telling daddy’s story 30 years after he’s gone?
Surprisingly, if the kids want to be “in the business”…there are some strategies you can employ to help make that happen so everybody wins.
Conclusion: Rarely does it make sense for your kids (or other family members) to take over your business. Historical data show that these dealerships don’t work out as planned. We can help you consider your option and allow you to make the best decision for you and your family.
Remember that horror story I told you about? Where the sellerwas serious and his friend was fishing for information? Now the seller had been preparing for this sale for years. It took him six years to set the stage and get all his ducks in a row. But he kept quiet about it for the entire time.
The seller and his competitor…a buddy of 25 years…had a friendly lunch a couple of times each year.
Sure enough, while having lunch one day, the friend says, “If you ever think about selling that thing, I hope you’ll always remember to give me a shot at it.”
And the seller says, “Well, in fact, I am thinking about selling it.
Well, as soon as the dealers part ways after lunch, they drive back to their respective dealerships.
Before the seller gets back to his, the wanna-be-buyer calls his manager and says “What do you think about me buying the sellers store?” The manager says “Oh man…that would be great.”
They hang up the phone and the would-be buyer’s manager calls the seller’s manager and says, “Hey, we’re buying your dealership.” The seller’s manager says, “Well, I didn’t know that”
The seller walks in the front door after lunch and his manager comes up and says, “Hey, I hear you’re selling out to so and so.”
That is the car business…
Could be an innocent mistake…but the buyer could be thinking that if he can get the rumor mill going…if he can create instability there…he’ll get a better deal.
And it does happen!
If long-time employees start fretting about the sale, they could jump ship or at a minimum lose their edge due to the uncertainty they might face in a change.
Conclusion: If the rumor mill starts before you’re well on your way to a successful deal, the price you realize can erode substantially. We know how to sell a store and keep it quiet.
Selling a dealership can be a stressful situation…if you don’t mentally prepare yourself for the process.
You may have planned and prepared for it and caught the best time to sell…and have a few good offers in the works. Or, you might be wanting to sell…but you’re not getting even one decent nibble.
Or, you may be selling for reasons out of your control…(it happens over 40% of the time)…like if your health takes a sudden downturn, or if you’re faced with a long-term family crisis.
Or maybe you’re ready to enjoy the fruits of your labor after working for 10, 20, 30, 40, or 50 years.
Of course health and family concerns make the transition even more stressful, but even a planned sales can take a toll…here’s why…
You’re faced with making all these decisions about the sale…while you’ve still got the full-time job of running your business…and bringing your family through the process as well…
You’ve got a lot on your mind…
And there’s always at least one crossroad in the deal…a point where the wrong decision could cost you a few dollars…or the entire sale…and if you haven’t taken the proper precautions…you might stumble…or run into a wall…and make the wrong choice.
My best advice to dealers getting ready to sell…in any situation…good or bad…is to do whatever you normally do for relaxation…or get away from it all like you normally would…but do it MORE OFTEN during the sale.
Do it for your wife and family. Do it for yourself.
So when that major decision is staring you in the face…when that crossroad comes in a deal…when some unforeseen event blows in like a storm and tries to knock you down flat…you’re ready or you’re in good shape to handle the decision and move on to the close.
Conclusion: The sale of a dealership is stressful. If that stress interferes with your normal good judgement you might zig when you should be zagging…and that could reduce your dealership’s value. Pat McNulty will help you know your options and guide you through the complete process.
Want to get the most out of your dealership when you finally sell?
Park your attitude at the negotiations door.
A major mistake many dealers make is in trying to say, “This is the way this deal is going to be done. Or I ain’t going to do it.”
The profit on the sale just took a nosedive.
When dealers let their emotions get involved in the process, it will cost them value in the deal.
But what they often don’t realize is that they can get much more value out of a deal…and much more money…if they do it the way the buyer wants to do it.
Fact is dealers have been getting the job done for all of their business careers.
They get it done for the factory. They get it done for their employees. They get it done for their customers. So, it’s only natural to want to get it done for a buyer.
But, it’s not the best way to get what you want.
I remember a seller that had the attitude like this:
“I’ve got to do this…I’ve got to do that, and if I can’t do those things, then the hell with them…I’m not going to do the deal”…
Sadly, that approach can reduce your value in your deal…sometimes by 50% or more (if you don’t blow it altogether).
And if a dealer says it right to the buyer’s face…look out…it could cause the deal to blow-up completely.
The more serious the buyer is; the more qualified he is; the closer to the buying decision he is–the more sensitive he is to this kind of talk.
Conclusion: The same drive and skills that made you successful owning a store could work against you during the transition. Pat McNulty can help you know when to push…and when to pull.
The best time to sell something is when somebody wants to buy it.
Generally speaking, when it comes to car dealers-when things are good, they don’t want to sell.
But when things are bad, it’s hard to sell.
So instead of looking at the decision to sell over a few months, broaden that to maybe a five year period of time. Make a plan for your sale.
What happens then is that you can catch the crest of the wave for your particular business cycle…your franchise…your area of the country…your market.
And then you find that you’re able to sell it when somebody wants to buy it instead of selling it when it is less popular.
Too many people sell during a poor cycle, rather than during their best business cycle. And they lose more value and money…without even knowing they’re losing it.
Look at it this way. There are many reasons dealers get in the business–but when it comes time for selling…optimizing your gain should be one of your top priorities when you decide to sell.
Conclusion: The sooner you get your plan together, the more flexibility you’ll have for realizing the biggest gain from the sale of your dealership…whenever that comes. When you decide it is time, we can help you maximize the value of your store, quietly.
What should a dealer do even if he has no intention of selling in the foreseeable future?
I liken it to finding a dentist when you move to a new town.
If you don’t find one when you don’t need one, you’re going to have to find one in a hurry some Saturday when your tooth is throbbing and when all the good dentists are either on the golf course…or booked.
For example, I know a guy who called me up when he was thinking about putting up a highline store that his son could eventually take over. Well, they had been in the domestic business, and I knew that area and market.
So for him to go and open up a highline store in a bad place, in a bad location…he’d just be stacking the cards against his son.
Well, we with Father and Son, and he asks me again…”What do you think?”
“I think it’s a bad idea,” I told him again.
“Well, what should I do?” he asks.
We talked about it some more, and he told me he talked to a guy at Chrysler who said, “Well you know, sometime we are going to do one over there.”
“So, go after that one,” I suggested.
We sold his store, he got his $20 million, and the son has his store.
Trouble is, sometimes it takes time to work through those peripheral issues. Just think about where you want to go down the road, and make plans now so when you arrive at that spot, you’re ready for it.
Many of my clients call me regularly to keep up on the trends and discuss their options. We have talked so much we feel like family…and some of us have never met in person and yet know each other.
Buying and selling a dealership is not like appraising a car. Walk around it, sit down in it, crank it up, and may even drive it around the block, you put a number on it.
You will need your Attorney and Your Accountant, in time. They will protect your interest and help you maximize your pocket money. Let Pat McNulty sell the dealership – that is his expertise.
Conclusion: Your salesman sells cars. It doesn’t cost, it pays to work with Pat McNulty.
What’s one of the first things you think a potential buyer (and his advisers) wants to look at when they’re considering your dealership?
Sure, they look at the lot…at your equipment…at your inventory…your market.
But they will look at your financial statements.
After all, buyers are always looking for a warning sign that a deal is bad.
Re-cast your statements in a more realistic light (on a go-forward/cash flow basis)..
Some dealers are a little concerned about the way their financial statements look…they may have a bottom-line that is much greater than what shows on their statement.
For example in the past we’ve had dealers with boats, airplanes, condos, racehorses, farm machinery, a boat captain, a farm, a family-member demonstrators, family-member cell phones, unrelated insurance cost, off statement income, unnecessary employees and additional non-productive expenses.
All that might be ok when you are running your business, but when it comes time to sell it artificially depresses the true picture of your store on a go forward basis.
We had a client with less than $800,000 profit on his statement. After our thorough preparation of a “go forward/cash flow” recast his bottom-line ended up at over $2 million profit.
The key to getting the greatest value for your dealership is working with Pat McNulty who the experience and expertise to understand all the questions to ask that will expose the hidden profitability for a new owner.
Explain the past…sell the future…
Conclusion: Your raw financial statement can send the wrong message to a prospective buyer. Uncovering your hidden profits can make your dealership worth a lot more than you might think. Pat McNulty has a proprietary process that highlights your dealerships strengths.
Unfortunately, there are a lot more than 10 fatal mistakes you can make today!
Instead of putting your energy, effort and money into fixing any fatal mistake after the fact, it may be time to take a more careful look at how you can protect yourself with a transition plan that will increase the value of your business.
Take advantage of the tools offered.
Learn and understand the latest approaches to preserving your wealth, making smooth transitions, and maintaining your sanity (it’s easier than you might think)…
The business climate will continue to be dynamic…but with a little investment of your time you can reap big rewards for you and your family.
Pat McNulty
1-800-800-4728