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 Car Dealerships: The Difference Between Pre-Owned and a Clunker Chevrolet Colorado Z71 Cadott WI 54727 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 Chevrolet Colorado Z71 Cadott WI 54727 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 Used Car Dealerships Chevrolet Colorado Z71 Cadott WI 54727 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 Chevrolet Colorado Z71 Cadott WI 54727 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 Chevrolet Colorado Z71 Cadott WI 54727 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. Chevrolet Colorado Z71 Cadott WI 54727 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, Chevrolet Colorado Z71 Cadott WI 54727 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, Chevrolet Colorado Z71 Cadott WI 54727 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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    00A.M. FOR DEALERS SATURDAY GROUND FLOOR UNLOADING For More Information Call Al Burish 715-289-5333 • Ken Packer 715-828-2867 INdIaNHead FIrearMS aSSOCIaTION 9545 County Hwy EE • Cadott, WI ...

  • Chippewa Valley boasts busy weekend with Nabor Days, OneFest and Watermelon Fest

    Cadott and Stanley. The youngest of the three, OneFest will fill the Northern Wisconsin State Fairgrounds with Christians, while traditions continue in Cadott and Stanley parks, as two community group...

  • 5 P.M. INTERVIEW: Yellowstone Art Trail

    The art trail includes Cadott, Boyd and the eastern Lake Wissota area of Chippewa Falls, Wisconsin and is set for Friday & Saturday, September 7th & 8th, 2018 from 9-5 both days. Many dedicated artist...

  • Sen. Baldwin discusses Senate Farm Bill in Cadott

    Cadott (WQOW) -- Senator Tammy Baldwin (D-WI) was in Cadott on Friday to discuss the recently passed Senate Farm Bill, and what it means for Wisconsin farmers and families. House and Senate lawmakers ...

  • A. Pat Mrotek

    A. Pat Mrotek, 78, of Cadott, Wisconsin, passed away on June 21, 2018, from stomach cancer, surrounded by the love of his family. Pat was born in Loyal, Wisconsin, to Alex and May (Stevens) Mrotek on ...

  • Bruce J. 'Zono' Simonson

    Simonson, Bruce "Zono" J. 64, of Cadott, WI formerly of Eau Claire, WI passed away Sunday, May 13, 2018 at Hopes & Dream Adult Family Home in Cadott, WI. No services will be held at this time. Smith F...

  • Zachary Evanson

    Zachary John Evanson, 23, of Cadott, WI beloved son, brother, grandson, uncle, nephew, cousin and friend to everyone he met, passed away May 13th, 2018. Zach was born on October 26th, 1994 to Linda Ev...

  • Donald Driver crashes wedding reception in Cadott while on fan tour

    Cadott (WQOW) -- A Wisconsin couple got the surprise of a lifetime at their wedding Saturday when Green Bay Packers Hall of Famer Donald Driver crashed their reception. Jenna Schier and Nathan Ulness ...

  • Gene Matott

    Gene was born on December 20, 1930 and passed away on Sunday, November 20, 2016. Gene was a resident of Cadott, Wisconsin at the time of his passing. He was married to Shirley. A Mass of Christian Bur...

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