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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  • Underdogs Brown, LoPiccolo lose in second round at Junior Masters

    Shawhan is already looking forward to his next tournament, a Wisconsin Junior Tour event on July 25 at the ... was defeated by No. 17 Drew Severson of Eleva after a two-hole playoff in the second roun...

  • 30631007.pdf

    Condensed Listing COMPLETE GREENHOUSE LIQUIDATION Located: (25837 E Mondovi St, Eleva, WI, 54738) At 4-way stop in Eleva, go East on US Hwy 10 approx. 1 block, site is on right. Watch for NIC auction ...

  • Dale Klevgard

    Dale was born in Mondovi, WI on March 18, 1948 to Leslie and Delores Klevgard. He graduated from Eleva-Strum Central in 1966 and began farming on the family farm in Chimney Rock. Dale married the love ...

  • 60th annual 'Broiler Fest' in Eleva brings in UW Marching Band

    Eleva (WQOW) - An annual festival in Eleva had an extra special ... Of course, local marching bands were a part of the 80 parade entrees, but the University of Wisconsin Marching Band traveled a littl...

  • Martin Sandberg

    Martin (Marty) Lyle Sandberg, 72, of Eleva, WI, went to his eternal home on April 25, 2018. Martin was a resident at the Homeplace in Mondovi, WI, at the time of his death. Martin was born July 4, 194...

  • 2 Wisconsin dogs become Senior Dog Prom finalists

    ELEVA, Wis. (WEAU) -- Life can be ruff sometimes. But when you have fur and have a chance to go to prom, life cannot be any sweeter or rather cuter. A homeless shelter for senior dogs called the Grey ...

  • doris severson

    Doris was a resident of Wisconsin. Funeral service will take place 12 pm noon ... Private burial will be in Lakewood Memorial... Doris Severson passed away in Lincoln, Nebraska. The obituary was featu...

  • Area man builds car in memory of friend

    Eleva, WI (WEAU) --An area man is remembering a friend in an unusual way, all while contributing to a good cause. Broiler Fest in Eleva is a time to let loose and have some fun, but for Steve Kummer, ...

  • 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...

  • Tragedy on Walnut Road: 3rd teen crash victim 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 ... were driving on Walnu...

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