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 Investing in Car Dealerships – How to Value Them Chevrolet Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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 Seven Strategies to Evaluate a Car Dealership Chevrolet Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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 Silverado K1500 LT Colfax WI 54730 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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Turtle crossing sightings wanted: DNR asks for citizen reports for conservation
In Colfax, Patti Stangel, founder and operator of Wildlife Rehabilitation ... More rehabilitation centers can be found by searching on the DNR’s website at www.dnr.wi.gov. To report to the Wisconsin Turtle Conservation Program, visit http://wiatri.net ...
Colfax youth remembered with tractor parade
The following story is reprinted with permission of Wisconsin State Farmer: COLFAX - Braden Lemler loved tractors, mostly red tractors. His proudest accomplishment was restoring a 1947 Farmall H tractor with his Grandpa Jerry. So it seemed only fitting to ...
Harry Halvorson Obituary
Halvorson, Harry E. Passed away on December 17, 2013 at his home in Colfax, WI. Harry was born in North Menomonie, WI on November 2, 1923 to George Halvorson and Katherine (Dietsche) Halvorson. He joined the U.S. Navy in 1942 & served on the USS Otis & USS ...
Two transgender residents sue Wisconsin over discriminatory Medicaid rule
They are represented by the National Health Law Program, the civil rights law firm Relman, Dane & Colfax PLLC, and the Wisconsin law firm McNally Peterson, S.C. In 1995, Wisconsin definitively said it wouldn’t cover “[d]rugs, including hormone therapy ...
Age 96, of Colfax, WI Died on March 26, 2018 LaVonne Meredith Souther, age 96, died peacefully on Monday, March 26, 2018, at Morning Song Villa in Menomonie, WI. Born December 2, 1921, daughter of Willard E. and Frances C. (Lytzen) Lorenz in Osseo ...
Avis Kragness, 97, passed away on Wednesday, March 7, 2018, at Colfax Health & Rehab. She was born on March 28, 1920, to Enoch and Carrie (Rogde) Hoover, and was raised on a farm near Rock Falls, WI. Avis was united in marriage to R. Lloyd Kragness on ...
Phyllis J. (Olson) Williams, 88, of Colfax, WI, passed away peacefully surrounded by family on Friday, February 2, 2018, at Mayo Clinic Health System Hospital in Eau Claire, WI. Phyllis was born in Colfax, WI, on September 17, 1929, to parents Ole and ...