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

  • WBCA All-Star Games

    Coaches: Kim Weber, Cameron; Lionel Jones, Durand; Troy LaVallie, Cameron. Division 4 South – Karlee Adler, Wisconsin Heights; Kristen Barman, Wisconsin Heights; Joriann Clary, Cambridge; Madessa Collins, La Crosse Aquinas High; Alicia Hartmann ...

  • Durand business awarded energy efficiency award

    DURAND, Wis. (WEAU) --A local business is being honored for ... Because of these upgrades, the company has earned an incentive of more than $9,000. Focus on Energy is a Wisconsin utilities statewide energy efficiency and renewable resource program.

  • Check out the 2018 Wisconsin Dairy Breakfasts

    Auburndale, Wisconsin. Cost is $6 for adults and $3 for children. Contact 715-652-3367 for more information. June 23: Pepin County Town and Country Breakfast The breakfast will be held from 7 to 11 a.m. at Four C Dairy, W4034 State Highway 85, Durand ...

  • Thalice Marie Angela Nicklas

    Thalice was born on December 24, 1915 and passed away on Tuesday, March 27, 2018. Thalice was a resident of Durand, Wisconsin at the time of passing. Thalice lived in Durand her entire life, graduated from St. Mary's School in 1929 and graduated from ...

  • Norman Smith

    Norman Leroy Smith (91) of Durand, WI died Saturday, March 10, 2018 at the Plum City Care Center. He was born September 17, 1926 in Waterville Township, Pepin County, WI; son of Arthur and Susan (Clark) Smith. Norman was the ninth of twelve children ...

  • Robert Goodrich

    Robert Henry Goodrich (60) of Durand, WI died Saturday, November 18, 2017 at Sacred Heart Hospital in Eau Claire, WI. He was born January 4, 1957 in Durand, WI; son of Robert and Denise (Nicklas) Goodrich. He graduated from Durand High School in 1975.

  • darlene durand

    Durand, Darlene Darlene A. Durand, 82, passed away Thursday, June 22, 2017, at the House of the Dove in Marshfield, WI. There will be no public services per Darlene's request. Interment will be at Forest Hill Mausoleum. Herman-Taylor Funeral...

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