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 Why Car Dealerships Are A Good Thing GMC Sierra K1500 SLE Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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 GMC Sierra K1500 SLE Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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 Z71 Cadott WI 54727 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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  • Summerfield wins re-election to 67th Assembly District

    Local voters handily re-elected Republican Rob Summerfield of Bloomer to Wisconsin's 67th Assembly ... Chippewa Falls, Cadott and New Auburn. In Dunn County, the 67th includes Colfax, Elk Mound ...

  • Hughes, Carl R. "Buck"

    Hughes, Carl R. "Buck" Age 90, of Logan, IA. Passed away on Monday, October 28, 2018, in Cadott, WI. Buck was preceded in death by his parents; is wife Gladys; brothers: Glenn, Lyle, Mike, Clyde and C...

  • Dr. Clifford Bowe

    Dr. Clifford Bowe is a family medicine doctor in Cadott, Wisconsin and is affiliated with Gundersen St. Joseph's Hospital and Clinics. He received his medical degree from Medical College of Wisconsin ...

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    The town of Cadott in northwestern Wisconsin is the home of two annual music festivals: Country Fest and Rock Fest. Each draws entertainers from around the country. Cadott also also draws visitors to ...

  • Hotels near Cadott, WI

    The city of Cadott is halfway between the North Pole and the equator, in east-central Wisconsin. Cadott features local parks such as the historic Riverview Park, which features horse-drawn carriage ri...

  • Doctors around Cadott, WI: Doctors Around Cadott

    AARP offers tools to answer your health care questions, to help manage your health information and to help you learn about medical conditions, symptoms and procedures. Start now by selecting a tool be...

  • Gary W. Schwetz

    His wife, Stephanie Ann (Mellinger) Schwetz, preceded him in death in 2014. Born in Cadott, WI, he was the son of William and Gloria (Lodahl) Schwetz of Cadott, WI. Gary was last employed as a Directo...

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