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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Two sentenced in town of Tainter shooting
A Minnesota man and a Wisconsin woman have been sentenced in the May shooting of a rural Colfax man. Shawn H. Goplen, 35, of 1101 Linden Lane, Faribault, Minn., was convicted Nov. 6 of shooting a ...
11/12: Support Local Businesses with Something Special from Wisconsin
The Wisconsin Christmas Tree Producers Association ... Soda Fountain Malted Milk Powder from CTL Foods in Colfax gives the dip a rich flavor. In 2016, the powder took first place at the 2016 ...
Women’s cross-country wins Midwest Regionals, men finish third
The Bears kept their total to just 58 points, beating out second-place University of Wisconsin-Eau Claire by 35 ... yet he performed well in Colfax, finishing 20th in a field of 253 men. Graduate stud...
No. 2 WashU XC Claims 1st & 3rd at Midwest Regional
Colfax, Wis., Nov. 10, 2018 – The No. 2-ranked Washington ... The Bears totaled 58 points while No. 9-ranked Wisconsin-Eau Claire placed second with 93. No. 22-ranked Wisconsin-La Crosse totaled 101 p...
Election 2018: Evers takes the election, but Dunn County voters chose Walker
Democratic Wisconsin Sen. Tammy Baldwin cruised to a ... She carried the villages of Colfax, Downing, Elk Mound, Knapp, Ridgeland and Wheeler and handily took the city of Menomonie with 3,769 ...
Wisconsin Volleyball Coaches Association honors state's best players with all-state team
Wisconsin Lutheran*; Elise Goetzinger ... Cuba City; Alyssa Dachel, sr., Colfax; Jadyn Dahlke, sr., Stratford; Chloe Gruszynski, jr., Crivitz; Rachael Heittola, sr., Belleville; Sidney Hoverman, jr., ...
Prep girls volleyball: Waunakee's Kiana Schmitt makes coaches' Division 1 all-state first team
Wisconsin Lutheran (unanimous); Elise Goetzinger ... Cuba City; Alyssa Dachel, sr., Colfax; Jadyn Dahlke, sr., Stratford; Chloe Gruszynski, jr., Crivitz; Rachael Heittola, sr., Belleville. Sidney Hove...
UW-Eau Claire Wins Second Straight Women’s Cross Country Title
COLFAX, Wis. (WIAC) COLFAX, Wis.--University of Wisconsin-Eau Claire won its second straight title at the 2018 Wisconsin Intercollegiate Athletic Conference (WIAC) Women’s Cross Country Championship ( ...
James Riefe Peterson
James Riefe Peterson, 98, passed away on October 12, 2018 at the Colfax Health & Rehabilitation Center in Colfax, Wisconsin. He was born on April 28, 1920 in Vinton, Iowa along with his twin brother D...
Colfax, WI Area Hotels
no preference Less than 5,000 sq. ft. 5,000 or more sq. ft. 10,000 or more sq. ft. 20,000 or more sq. ft. Meeting Space Sq. Ft. no preference Less than 10,000 sq. ft. 10,000 or more sq. ft. 30,000 or ...