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 Auto Dealerships – The Sales Dept Sells the First Car Chevrolet Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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 Car Dealerships: The Difference Between Pre-Owned and a Clunker Chevrolet Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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 Traverse LS Eleva WI 54738 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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  • The race for Tremplo Co. sheriff

    He was an Eleva-Strum School Board member from 2007-2013 ... For more information, visit myvote.wi.gov, or contact the Trempealeau County Clerk, or local city, town, or village clerk.

  • Police Say Man With Handgun Shot by Police in Strum

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  • Notice Of Public SaleNotice is hereby given that on October

    ... Muniz 321 John St. Arcadia WI 54612BoxesAt 36261 Kopp St. Whitehall WI 54773Wayne Minneker W20791 US Hwy 10 Lot 17 Eleva WI 54738Totes, children's toysE7530 Cty SS Viroqua, WI 54665David ...

  • Lee Loomis

    Lee went to Fort Lewis, WA, for training. Lee married Judy A. Edison on September 28th, 1963, at East Bennett Valley Church, rural Eleva, WI. The first year of marriage Lee worked for the Federal Rese...

  • Eleva-Strum grinds out win over Chequamegon

    This option gives you access to read as many articles as you wish for one full day (24 hours) on apg-wi.com. Access to e-editions is not included. Does not renew. Gives you full access to APG-WI.com e...

  • UPDATE: 3rd student involved in crash dies

    Gable (age 14) of Strum, WI, was traveling in the 6500 Block of Walnut Road. The vehicle left the roadway and struck a grouping of trees. McKenna K. Johnson (age 13) of Eleva, WI, was a passenger in t...

  • Buckshot Run: 2-mile finishers

    Vestnes M 13 Eleva WI 15:47; 45, Adam Hetrick M 32 Eleva WI 15:47; 46, Helge Vestnes M 56 Eleva WI 15:48; 47, Halle Aumann F 13 Loyal WI 15:52; 48, Mason Smith M 13 Altoona WI 15:53; 49, Fred Hable M ...

  • WI dairy farmers return from NY with possible industry solutions

    Chippewa Falls (WQOW) - An Eleva farmer, and more than two dozen others, from Wisconsin are back home with some new solutions for a struggling dairy industry. They were at a meeting in New York to tal...

  • Eleva dairy farmer to fight for fair prices in New York

    Eleva (WQOW) - An Eleva dairy farmer will wake up Sunday morning ... Now Adams is taking a stand, but he's not alone. More than 25 Wisconsin dairy farmers will follow him to Albany, New York, for the ...

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