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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Wisconsin prep football preview: Spartans out to make new memories
After a 49-28 defeat to Menomonie, Superior fell to River Falls 32-30 and then ... Ruffi, who is ranked among the top 12 running backs in Wisconsin, set Northwestern’s single-season rushing record las...
NextGen Wisconsin aims to mobilize area’s young voters
NextGen Wisconsin, an affiliate of NextGen America, has a budget of $2.5 million and is aiming to have organizers across 35 college campuses, including UW-Eau Claire, Chippewa Valley Technical College ...
Prep football: Lake Mills struggles on offense in 33-7 loss at Menomonie
Zach Demarce wrapped up Menomonie’s scoring with TD runs of 2 and 4 yards in the third quarter. Lake Mills drove for a 4-yard scoring run by Moen with less than 2 minutes remaining. Wisconsin Dells 42 ...
Local students receive University of Wisconsin, Stout Chancellor’s Award
MENOMONIE — The following local students have received the University of Wisconsin, Stout Chancellor’s Award for the spring 2018 semester: Patrick Marquardt of Dodge Center. Ashley Gilbertson of Medfo...
L-Cats open with big stage, foe in Mustangs
I’m sure Menomonie will be disciplined and ready.” Ferkovich was pleased with what he saw in last weekend’s scrimmage at University School of Milwaukee, which has FieldTurf just as Williams Stadium do...
Royal Credit Union announces new Branch Manager in New Richmond
EAU CLAIRE, WI (August 14, 2018) — Royal Credit Union (Royal ... Statistics from Metropolitan State University in St. Paul, MN. Peterson resides in Menomonie served as a board member for the Chamber o...
New bike and pedestrian bridge opens in Menomonie
So five years later, now we have a trail going across I-94 to service the north town residents of Menomonie." The year-long project cost more than $800,000, and the Wisconsin Department of Transportat...
Wisconsin Hmong leader emphasizes cultural understanding
He later went to University of Wisconsin-Stout in Menomonie to study mental health counseling. "After that conversation I had with (my professor), I struggled to identify who I was," Xiong told The Le...
Menomonie Singers announce new conductor, upcoming auditions
Dr. Jerry Hui, conductor of the Menomonie Singers for the past three years, has resigned, to pursue other professional activities. Vogt has a bachelor of music in choral conducting from University of ...
In the Museum: The telephone comes to Menomonie
D. Hills and Sanford Heafield to build a telephone exchange to compete with the Wisconsin Telephone Company. Competition was soon established and in January 1899, the property of the new company was t...