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 Car Dealerships: The Difference Between Pre-Owned and a Clunker GMC Sierra K1500 SLE Chippewa Falls WI 54729 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 GMC Sierra K1500 SLE Chippewa Falls WI 54729 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 Seven Strategies to Evaluate a Car Dealership GMC Sierra K1500 SLE Chippewa Falls WI 54729 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 GMC Sierra K1500 SLE Chippewa Falls WI 54729 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 GMC Sierra K1500 SLE Chippewa Falls WI 54729 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. GMC Sierra K1500 SLE Chippewa Falls WI 54729 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, GMC Sierra K1500 SLE Chippewa Falls WI 54729 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, GMC Sierra K1500 SLE Chippewa Falls WI 54729 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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Local Sports Notebook: New generation carries Tilden back to Wisconsin Baseball Association State Finals
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AN ORDINANCE AMENDING THE ZONING CODE OF THE CITY OF CHIPPEWA FALLS THE COMMON COUNCIL OF THE CITY OF CHIPPEWA FALLS, WISCONSIN, DO ORDAIN AS FOLLOWS:
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STATE OF WISCONSIN CIRCUIT COURT CHIPPEWA COUNTY
Chippewa Falls, Wisconsin, Room 203. /s/ Jessica L. Hermann Probate Registrar Dated: 08/14/2018 Form completed by: Randi L. Osberg Ruder Ware L.L.S.C. PO Box 187 Eau Claire, WI 54702 Ph: 715-834-3425 ...
STATE OF WISCONSIN CIRCUIT COURT CHIPPEWA COUNTY PROBATE
State of Wisconsin, with a mailing address of 320 Colome Street Apt. 323, Chippewa Falls, WI 54729. 3. The deadline for filing a claim against the decedent's estate is 09/11/2018. 4. A claim may be fi...
UPDATE: Highway 29 crash cleared near Chippewa Falls
(WEAU) -- A lane of traffic is closed due to a crash on Highway 29 near Chippewa Falls due to a crash. According to an alert by the Wisconsin DOT, the crash happened near mile marker 73, eastbound aro...
Community leaders address foster care needs in Chippewa Co.
Chippewa Falls (WQOW) -- A side effect of the drug crisis in Wisconsin is the growing number of children being put into foster care, and there's not always enough homes to house them. Chippewa County ...
A bus tour brings Wisconsin's head of state to the area
LA CROSSE, Wis. (WKBT) - Governor Scott Walker is on a trip through Wisconsin he calls the ‘Summer Bus Tour’, which made stops in La Crosse and Chippewa Falls Sunday. Governor Walker spoke to voters a...
Family Getaways: Chippewa Falls
Summer may be winding down, but there are plenty of family friendly vacation options for you and your family. Look no further than Chippewa Falls, Wisconsin. John Mercure is joined by Jackie Boos, the ...