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 5 Perks of Buying From a Car Dealership Chevrolet Silverado LTZ Durand WI 54736 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 LTZ Durand WI 54736 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? Chevrolet Silverado LTZ Durand WI 54736 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 LTZ Durand WI 54736 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 LTZ Durand WI 54736 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 LTZ Durand WI 54736 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 LTZ Durand WI 54736 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 LTZ Durand WI 54736 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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Durand WI - BingNews Search results

  • Frances M. Johnson

    She was born April 2, 1931, to the late Evalyn (Parke) and Raymond Eickstead in Janesville, WI, later growing up in Belvidere, IL, and Durand, IL. A 1950 Durand High School graduate, Frances graduated ...

  • Every Wisconsin City Ranked By Home Value: New Report

    WAUKESHA COUNTY, WI -- When it comes to real estate and home values ... $108,000 Nichols village -- $107,800 Rosholt village -- $107,500 Argonne CDP -- $107,400 Durand city -- $107,200 Bancroft CDP -- ...

  • Wisconsin roundup: Student brings 2 unloaded guns to Durand middle-high school; more state news stories

    Investigators with the Durand Police Department say a student in the Durand-Arkansaw School District apparently didn't intend to cause harm when he brought two guns to school. Another student told the ...

  • Dr. Enoch Arhinful

    Dr. Enoch Arhinful is an internist in Durand, Wisconsin and is affiliated with Chippewa Valley Hospital. He received his medical degree from Saba University School of Medicine and has been in practice ...

  • Doctors around Durand, WI: Doctors Around Durand

    AARP offers tools to answer your health care questions, to help manage your health information and to help you learn about medical conditions, symptoms and procedures. Start now by selecting a tool be...

  • Virgil Raymond Dietmeier

    Virgil Raymond Dietmeier 1925—2018 Virgil Raymond Dietmeier, 92, of Durand, IL died at 9:41 a.m., Thursday, August 9, 2018 at Monroe Clinic Hospital, Monroe, WI after a sudden illness. A Celebration o...

  • Club Calendar for the week of Dec. 17

    Southern Wisconsin Landlords Association ... 6 p.m., Buona Vita Pizzeria Restaurant at Elmwood Plaza, 3701 Durand Ave. For more information, call Dan Hechel at 262-886-3006 or Rich Sorensen ...

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