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 Dealers’ Sales Tricks Lexus IS 250 Strum WI 54770 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 Lexus IS 250 Strum WI 54770 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 Your Best Choice in Car Dealerships Lexus IS 250 Strum WI 54770 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 Lexus IS 250 Strum WI 54770 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 Lexus IS 250 Strum WI 54770 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. Lexus IS 250 Strum WI 54770 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, Lexus IS 250 Strum WI 54770 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, Lexus IS 250 Strum WI 54770 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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Strum WI - BingNews Search results

  • WBCA All-Star Games

    Wisconsin Rapids Assumption; Drew Haffner, Gresham; Jonah Kahl, Turtle Lake; Ryan Mahoney, Suring; Nicholas Malovrh, Columbus Catholic; Drew Severson, Eleva Strum Central; Connor Sorenson, South Shore; Alex VanCrete, Green Lake; Alec VandeCastle ...

  • Tatum Everson: Quit blaming victims of sexual assault

    Tatum Everson, a recent graduate of Eleva-Strum High School and an incoming University of Wisconsin-La Crosse student, won the New Horizons Shelter and Outreach Centers Denim Day essay competition with the writing that follows. Denim Day is designed to ...

  • Strum, WI 10-day Weather

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  • Golf team finishes in 10th place

    Eleva-Strum and Luck/Frederic teams advanced to state. The Screaming Eagle golfers battled warm weather and a 90-minute rain delay to shoot a team score of 382, which was their best round of the year away from their home course. Senior Zachary Carper shot ...

  • mark strum

    Strum, Mark R. Passed away at age 69 on June 2, 2018 in Lac du Flambeau, Wisconsin. Mark served in the Army Reserve. Mark is survived by his loving wife, Christine Strum. He is also survived by his children, Brian (Carin) Strum, Carrie (Kane)...

  • 30624216.pdf

    COMMERCIAL PROPERTY ONLINE ONLY AUCTION AUCTION ENDS: Thursday - June 7th OPEN HOUSE: Thursday - May 31st Time: 4 to 6 PM TO BID/BUY VISIT: www.bid-2-buy.com LOCATION: 104 North 5th Avenue Strum, WI which is in downtown Strum. Watch for the ProCountry ...

  • Check out the 2018 Wisconsin Dairy Breakfasts

    Contact 715-858-0614 for more information. June 9: Trempealeau County On the Farm Dairy Breakfast The breakfast will be held from 6 to 11 a.m. at Hamlin Valley Farms, N49128 County Road V, Strum, Wisconsin. Cost is $5 for adults, $3 for ages 6-12 ...

  • UPDATE: 3rd student involved in crash dies

    Two occupants died as a result of the crash. Investigation revealed a vehicle driven by Austin E. Gable (age 14) of Strum, WI, was traveling in the 6500 Block of Walnut Road. The vehicle left the roadway and struck a grouping of trees. McKenna K.

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