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 Seven Strategies to Evaluate a Car Dealership GMC Sierra K1500 SLE Z71 Menomonie WI 54751 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 Menomonie WI 54751 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 An Introduction To Used Car Dealers GMC Sierra K1500 SLE Z71 Menomonie WI 54751 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 Menomonie WI 54751 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 Menomonie WI 54751 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 Menomonie WI 54751 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 Menomonie WI 54751 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 Menomonie WI 54751 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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HATCH startup contest expanding to southeastern Wisconsin
Chippewa Falls and Menomonie, this year. HATCH events were held in four central Wisconsin cities, including Marshfield, Stevens Point, Wausau and Wisconsin Rapids, during the program’s inaugural year. “There are entrepreneurs, creators and creatives in ...
WI: Dunn County Board Backs Rail Service Proposal
March 22--MENOMONIE -- The Dunn County Board voted in favor of a potential rail service that would connect west-central Wisconsin to the Twin Cities. Supervisor Thomas Quinn said the resolution shows a general support for the concept of a rail service.
STATE OF WISCONSIN CIRCUIT COURT DUNN COUNTY NOTICE OF SHERIFF'S SALE CASE NO.: 17-CV-258 FORECLOSURE CASE CODE-30404 WELLS FARGO BANK, N.A.
By virtue of a Judgment of Foreclosure made in the above entitled action on 01/30/2018, in the amount of $117,601.78, I will sell at public auction at the South main entrance of the Dunn County Judicial Center, 615 Stokke Parkway, Menomonie, WI 54751 ...
Wisconsin Stabbing Suspect On the Run, Possibly in Minnesota
Police say a suspect accused of stabbing a man in the throat in Menomonie, Wisconsin, may be in Minnesota. Authorities say the stabbing happened Tuesday about 9 p.m. during a fight at a residence. Authorities say the 37-year-old suspect fled the scene ...
Eleven Menomonie youth wrestlers advance to compete at state
Menomonie Youth Wrestling is sending 11 young wrestlers to the Alliant Energy Center in Madison this Friday and Saturday to wrestle for a Wisconsin Wrestling Federation Folkstyle State Championship title. The Wisconsin Wrestling Federation Regionals were ...
Craft brew pub planned near downtown
More of a gathering spot with some live music sometimes." Jim, from Menomonie, Wisconsin, and Lauren, from Madelia, have all of the scientific wherewithal to understand the chemistry and process of fermentation and brewing. Both have doctorates in ...
Construction begins on parts of I-94 in Dunn Co. Monday
Dunn County (WQOW) -- As winter winds down here in Wisconsin, we're creeping closer to another mess-making season: construction season. Crews will be out in Dunn County next week, improving parts of I-94 west of Menomonie. Some of their work will include ...
WISCONSIN FOREVER! Hotels.com reports surge in searches to Wakanda Park, Wisconsin following film fever
DALLAS, March 14, 2018 /PRNewswire/ -- A little town in Wisconsin is earning superhero status, as Hotels.com ® reveals that searches for Wakanda Park in Menomonie have surged by 55% year-on-year in the last two months*, with film fans seeking out the ...
PREP BOYS BASKETBALL: Wisconsin Dells can't cap second comeback attempt in sectional final loss
MENOMONIE — Wisconsin Dells coach Brad Rohling put it best when he said basketball is a game of runs, and the Chiefs just didn’t have a final one in them during Saturday’s WIAA Division 3 boys basketball sectional final against Prescott. After ...