Blue Sky is the intrinsic value of an automobile dealership, over and above the value of its tangible assets. It is sometimes equated to the goodwill of a car dealership.
Most articles regarding the blue sky value of new car dealerships cite a multiple of earnings formula, such as three times earnings, four times earnings, and so forth. The idea that “blue-sky” can be determined by anything times anything is just plain wrong.
Even NADA the Seven Strategies to Evaluate a Car Dealership ARGO Frontier 8×8 Sand Creek WI 54765 National Automobile Dealers Association in its publication entitled “A Dealer Guide to Valuing an Automobile Dealership, NADA June 1995, Revised July 2000 bemuses, in part, with respect to valuing a dealership by using a multiple of earnings: A Rule of Thumb valuation is more properly referred to as a “greater fool theory.” “It is not valuation theory, however.”
In its Update 2004, NADA omitted its reference to “fool”, but referred to the multiple formula as ARGO Frontier 8×8 Sand Creek WI 54765 rarely based upon sound economic or valuation theory, and went on to state: “If you are a seller and the rule of thumb produces a high value, then this is not a matter of great concern. Go for it, and maybe someone will be stupid enough to pay you a very high value.”
A dealership’s blue sky is based upon what a buyer thinks it can produce in net profit. If potential buyers think it Is Now the Right Time to Buy a Car Dealership? ARGO Frontier 8×8 Sand Creek WI 54765 cannot produce a profit, the store will not sell. If it can produce a profit, then variables such as desirability of location, the balance the brand will bring to other existing franchises owned, whether or not the factory will require facility upgrades, and so on and so forth, determine whether or not a buyer will buy that particular brand, in that particular location, at that particular time.
I have been consulting with dealers for nearly ARGO Frontier 8×8 Sand Creek WI 54765 four decades and have participated in over 1,000 automotive transactions ranging from $100,000 to over $100,000,000 and have never seen the price of a dealership sale determined by any multiple of earnings unless and until all of the above factors have been considered and the buyer then decided he, she or it was willing to spend “x” times what the buyer thought the dealership would earn, in order to purchase the business opportunity.
To think ARGO Frontier 8×8 Sand Creek WI 54765 otherwise would be to subscribe to the theories that (1) even though you think a dealership could make a million dollars, the store is worth zero blue sky because it made no money last year; and (2) if a store has been making $5 million per year you should pay say 3 times $5 million as blue sky even though you think you will not produce that kind of profit. Both propositions are absurd. ARGO Frontier 8×8 Sand Creek WI 54765 If a buyer does not think a dealership is worth blue sky, then what he is really saying is that he sees no business opportunity in the purchase and therefore, in my opinion, he should not buy the store.
Each dealership is unique with respect to its potential, location, balance that its brand brings a dealer group, and condition of facility. The sale is also unique with respect to whether it is a forced liquidation, ARGO Frontier 8×8 Sand Creek WI 54765 orderly liquidation, arms length, insider, or a case where an anxious buyer is trying to induce an unwilling seller. There are management factors to consider, length and term of leases, possibilities or non-possibilities of purchasing the facilities and whether or not the factory wants to relocate the store or to open a new store up the street.
In the car business it is impossible to pick a dealership or a franchise out of a hat, ARGO Frontier 8×8 Sand Creek WI 54765 multiply its earnings by some mystical number and predict either what the dealership is worth, or what price it would sell for – and it doesn’t matter if you are talking about a Toyota, Honda, Ford, Chevrolet, Chrysler, Dodge, or any other dealership. At any given time one franchise might be considered more or less desirable than another, but they are all valued in the same manner.
Business Results 1 - 10 of 1
Sand Creek WI - BingNews Search results
Maxx Properties Acquires Cobble Creek Apartments
Cobble Creek was developed in 1974 and is located in the desirable ... equipment and a stand- alone clubhouse featuring a billiards table and common area Wi-Fi. The community also provides residents w...
Will, Cook nature centers host hummingbird events
Birds we spot now are a mix of ones who are making a layover from somewhere in Minnesota or Wisconsin or Michigan ... Environmental Learning Center in Lemont, Sand Ridge Nature Center in South Holland ...
Indian American Supporter of Republican Congressman Attacked in Central California
Surjit Malhi, the owner of Millennium Transport in Turlock, California, was posting placards by the side of the road in Keyes, California, when he was approached by two men, who threw sand in his ... ...
Officials: Mining Red River sand won’t require explosives
McMaster said Red River sand is less desirable than the quality sand traditionally provided to the oil and gas industry from mines in Wisconsin ... the Texarkana Gazette reported. The Hat Creek plant, ...
Sand Creek restoration project underway; Target completion date set July 1
The Wisconsin ClearWaters of Trout Unlimited (WCWTU) and the Wisconsin Department of Natural Resources (WDNR) announced that work has begun on a newly acquired Sand Creek easement. The new easement is ...
At the age of nine months he and his family moved to Barron County, WI, to setup the family farm. Erling graduated from Chetek High School in 1945. He married Colleen Anderson on December 18, 1947, in ...
Search Sand Creek, Wisconsin Obituaries
Search Obituaries from more than 25,000 funeral homes. Updated Daily. View All Funeral Homes in Wisconsin Local Sand Creek Newspapers Search Obituaries from more than 1,500 Newspapers worldwide. Updat...
A small Wisconsin brewery buys 2 others
Two well-established Wisconsin craft brewing companies have been purchased, but not by a macro brewing company looking to expand its portfolio. Sand Creek Brewing Co. in Black River Falls, which in 20...
Contract brewing: The economics of ale
"As soon as we walked in the door to Sand Creek, we said, 'This is silly not to utilize this facility. They're hungry and we're hungry.'" Contract brewing is big business in Wisconsin, home to some of ...