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Career, Job, Employment InformationBody Shop - Is This The Right Time To Sell One?
by:
Willard Michlin
Have you ever asked yourself the question? “Is this a nice time to sell my business?” That is a question every business owner asks himself, every time he has a bad day. I once received e-mail from the editor of the Automobile Body News, asking me that key question. “What is happening in the market today? Is this a nice time to sell? ” My quick answer was “These are really engrossing times.”
Of course that answer doesn’t tell you thing
that you can get your teeth into. So! Let me clarify my answer. Since I have been commerce body shops for 10 years, I have seen many a changes in the body shop industry. One thing that hasn’t changed is that there have always been an abundance of several sellers and buyers. The buyers have always been, and still are fastidious
simply about what they were looking for.
The perfect shop in the eyes to the buyers is (A) one that has a consumer
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 actually more more. Large volume sellers think that if they have a DRP (Direct Repair Program,) they have what body shop buyers’ want. A DRP is wherever
the insurance companies set up a relationship with the body shop to do all insured’s body shop business, more like an HMO in the health insurance field.
This may be what buyers want, but the DRP contracts are not mechanically
transferable, and a client wish be really unhappy if the DRP leaves, the buyer, after they have paid a lot money for this “reliable revenue stream.” Smaller volume sellers, on the other-hand, not having corporate accounts, dealerships or different contracts still have hope for deed lots of money for their shops. The average shop I run across is only doing simply about $300,000-$500,000 annual gross income. So what we have is a situation wherever
a lot of buyers are looking to buy a shop, but there are not a lot of shops available, which fit what they are, interested in-$1,500,000 annual gross financial gain
or more.
This year, one change has occurred. There are fewer shops accessible 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 fashioning money, and do not feel as more pressure to close down. They still would-be like to get out, but once
they find out that their 5,000 sq. foot shop which is fashioning them a $100,000 net profit, is only worth $100,000 on the open market they decide to support on working.
As always, the shops doing $1 Million to $3 Million per year gross financial gain
is still in demand. The cost alone still is the main factor, in deciding if these shops wish sell. A nice example of this is what is happening in lower Orange County. There are presently
a couple of shops in Lower Orange County that are for sale, by the owners. They appear to be really profitable but the asking cost is too high and the buyers all cognize it. Even as the fact that these are the only shops accessible for sale in this prime area has not changed the fact that buyers simply 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 as tho'
the volume was there. Why? The profit wasn’t. In this situation, the buyers would-be not pay for the volume and stability of financial gain
unless the net profits were there. They didn’t assume that they would-be do a profit wherever
the current owner was not. It appears that the buyers of now are really careful. I believe they do not trust their own ability to get new business and therefore are too careful.
To clean up any confusion simply about what kind of buyers we are talking about, lets break the buyers up into categories. The 1st category is the consolidators. There are two large ones in Southern Ca but they are not the whole market. I have talked to out of state consolidators that have inquired simply about moving in to the So Ca market. Consolidators want shops that fit their model. That model sometimes changes but au fond they wish buy a shop if it fits their model.
If it doesn’t, they wish not touch it. The cost by itself doesn’t turn their interest on or off. We do not have enough space to discuss what this group wish buy, in this article. It is enough to say, “ If your shop fits their criteria they would-be have contacted you and expressed interest. If they haven’t contacted you, they are not interested.” Period! They cognize their market place and who is in it.
By the way, if I in hand
a shop that a consolidator wanted, I would-be ne'er
sell to them. Being a professional communicator for 20 years, I find the requested merchandiser finance
terms all unacceptable. Once
I have discovered what the terms of the sale are, after the fact, astonished me. I had buyers for the same money, or more, without the merchandiser being at risk, but no one asked me.
The second category is the multiple location shop owners. Commonly with one or more DRP contracts shop that wants to expand into more areas. They are really interested in the sq. footage of the shop, and its ability to handle over $2 Million Gross Financial gain
per year. This client only looks in limited areas. The areas being wherever
they have been offered a DRP contract. Once
they are looking, they need it now, patch the window of possibility is open to them. If they can’t find it quick, they wish not need it at all. Recently I had a multiple shop client who had ready-made an offer and was negotiating on a shop in West Los Angeles. By the time we finished the negotiations, the DRP contract was gone and consequentially, so was the buyer.
The third category is the buyers who have worked in the industry before, but do not presently
own a shop. As well in this group are the buyers who have family in the industry; money is no problem. This client believes “ If it doesn’t have a DRP, forget it. If it has a DRP and isn’t fashioning more money, as well forget it”. If it has a DRP, and it is fashioning money, they are interested but only at what they consider is a fair cost (In their eyes). This group I have with success
changed their mind as to how they analyze what a nice shop looks like and on occasion they have bought shops with “a steady reliable income”, instead of trying to find a shop with only a DRP insurance contract.
The fourth category is the person that simply wants a shop. They wish do what they have to, to afford a shop-that wish activity for them. This group is the working body man or automobile repair shop mechanic. Because of their limited funds, this client wish only pay what he or she feels the instrumentation
is worth. They wish pay nothing for goodwill because they believe that the seller’s customers are not stable and wish leave once
the ownership changes. Are they wrong?
In Conclusion: There are a lot of buyers out there. My info
has over 250 current names of body shop buyers. There is presently
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 dower for the beauties is more than most good-looking boys wish pay. The balance of the girls may not be pretty, but several of them can sure cook. Anyone want to get married? “Have I got a girl for you”
Just simply about the author:
Willard Michlin is a Business Broker, Ca Real Estate Broker, Accountant, Well best-known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, Ca office by business 805-529-9854 or by e-mail at kismetrei@earthlink.net See different articles by Willard at http://www.kismetbusinessbrokers.com
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