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 Benefits of Buying From Used Car Dealerships Ford F-150 XLT Wheeler WI 54772 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 Ford F-150 XLT Wheeler WI 54772 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 Five Reasons to Buy a Vehicle At a Car Dealership Ford F-150 XLT Wheeler WI 54772 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 Ford F-150 XLT Wheeler WI 54772 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 Ford F-150 XLT Wheeler WI 54772 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. Ford F-150 XLT Wheeler WI 54772 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, Ford F-150 XLT Wheeler WI 54772 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, Ford F-150 XLT Wheeler WI 54772 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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ATV accident takes a life
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EPA head approves proposal reversing Obama-era Clean Power Plan
Acting Environmental Protection Agency (EPA) Administrator Andrew Wheeler signed off on a proposal Monday to ... group Second ex-Walker Cabinet member backs his Dem opponent in Wisconsin 15 senators m...
SATURDAY'S PREP ROUNDUP: Wheeler girls shut out Portage
Lyric Green scored twice as Wheeler shut out Portage 4-0 in girls soccer action Saturday. Riley Garcia added a goal and two assists for the Bearcats (3-0). Lauren Putz also scored. Highland 8, Lafayet...
Dell Prairie debates opening up to ATVs
When the board turned to discussing the proposed ATV route and ordinance, actions stopped. McFarlin first called upon Adams County Sheriff’s Deputy Shaun Long and Warden Molly Detjens of the Wisconsin ...
EVO Appoints Three Independent Directors to Its Board
Wheeler has extensive expertise in building and managing high ... CA; Fort Worth, TX; Oak Creek, WI; Tolleson, AZ; and San Antonio, TX that accommodate class 8 trucks and trailers. For more informatio...
Wisconsin warden comes home to work
Wisconsin allows the use of dogs to chase bear for hunting ... The new guy Along his patrols that morning Sanda came across numerous ATV operators, but simply waved as he passed them. Each one appeare...
Explore Wisconsin's great outdoors on ATV
Editor's note: The following sponsored content was provided by the Wisconsin Department of Tourism. Calling all adrenaline junkies – Wisconsin has the perfect heart-pumping fun for you: ATVing. Whethe...
Wisconsin roundup: Several shots fired at Madison radio station, 1 person injured; more state news stories
Wis. Supreme Court to hear arguments in sex assault case The Wisconsin Supreme Court has agreed to hear arguments next month in a sexual assault case involving the former police chief in Wheeler. Gary ...
‘Bittersweet thing:’ Melvin the Wacky Wheeler rides in his last Wisconsin State Fair
He's one-of-a-kind at the fair. If you've been there in the last dozen years, you probably saw him. We're talking about the Melvin the Wacky Wheeler. "Kind of been a staple here for a while," said Mel...
ATV/UTV work session produces no agreement
The proposed ATV routes include Grant County B through the city, from the west city limits on Main Street to the east city limits at Hazel Dell Road; Business 151 from the west city limits to Valley R...