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.

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Gilberts Of Sand Creek



  • Women's Fund grants awarded at Impact Porter County membership dinner

    Members of Impact Porter County met at Sand Creek Country Club in Chesterton to award their annual grants from the Women’s Fund of Porter County. Impact Porter County is a giving circle associated with the Porter County Community Foundation whose goal is ...

  • Proposed sand mine raises alarm among Jefferson County residents

    Misgivings also extend to the effect runoff from the site could have downstream, throughout the Sandy Creek ... sand and gravel increased by more than 30 percent, “owing primarily to increased activity in the oil and gas sector.” Trailing only ...

  • Colfax youth remembered with tractor parade

    The following story is reprinted with permission of Wisconsin State Farmer ... he enjoyed listening to Johnny Cash and morning coffee at the Sand Creek Cenex. "Braden was one of those salt-of-the-earth kind of guys," said Colfax High School Principal ...

  • Teen rolls pickup in western Wisconsin, is thrown to his death

    A teenage driver rolled his pickup truck in western Wisconsin and was thrown to his death ... The driver was identified as Braden Lemler, 16, of nearby Sand Creek. Lemler did not have on his seat belt, the Sheriff’s Office added. Lemler was driving ...

  • 16-Year-Old Killed in Crash in Dunn County

    Authorities say one person was killed in a Dunn County, Wisconsin, crash Friday afternoon ... The driver, 16-year-old Braden Lemler, from Sand Creek, had been ejected from the vehicle. The driver was later pronounced dead at the scene.

  • Wisconsin DNR gives OK for Jackson County frac facility

    State environmental officials have given a Colorado logistics company the green light to build a Jackson County frac sand rail terminal that neighbors have sued to block. The Wisconsin Department ... along the banks of Halls Creek, a Class II trout stream ...

  • Raymond Gilberts

    Raymond H. Gilberts, age 97, passed away surrounded by his family on Wednesday, February 28, 2018 at Lake Hallie Memory Care in Chippewa Falls WI. He was born December 9, 1920 in Sand Creek WI to George and Ida (Harstad) Gilberts. He married Ardith ...

  • STATE OF WISCONSIN CIRCUIT COURT JACKSON COUNTY NOTICE OF SHERIFF'S SALE

    Wisconsin, lying West of the Township Road and South of the South Beef River Creek. PROPERTY ADDRESS: N12927 S. Sand Ln., Osseo WI 54758 TERMS OF SALE: CASH. Ten percent (10%) cash or certified check at time of sale and balance upon confirmation of sale.

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