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 Is Now the Right Time to Buy a Car Dealership? Nissan Maxima SV Eau Claire WI 54701 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 Nissan Maxima SV Eau Claire WI 54701 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 Automobile Dealerships – Valuing Blue Sky Nissan Maxima SV Eau Claire WI 54701 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 Nissan Maxima SV Eau Claire WI 54701 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 Nissan Maxima SV Eau Claire WI 54701 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. Nissan Maxima SV Eau Claire WI 54701 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, Nissan Maxima SV Eau Claire WI 54701 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, Nissan Maxima SV Eau Claire WI 54701 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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All aboard: Plan calls for passenger rail between St. Paul and Eau Claire
The bold idea may seem far-fetched given the travails of public transit projects in the Twin Cities. But the West Central Wisconsin Rail Coalition has been working on the idea for nearly two decades.
Eau Claire native talks on run for State Treasurer
EAU CLAIRE, Wis. (WEAU) --An Eau Claire native is back in her hometown as she campaigns for the Wisconsin State Treasurer position. Sarah Godlewski held a community-focused roundtable discussion this afternoon at the K Point Brewery. Godlewski says the ...
Gander Outdoors Prepares for Grand Opening in Eau Claire, Wisconsin
ST. PAUL, Minn.--(BUSINESS WIRE)--Gander Outdoors, formerly known as Gander Mountain, is now open in Eau Claire, Wisconsin. A special grand opening event is planned for Saturday, June 23, 2018 at 6440 Scully Drive, exit 70 off Interstate 94. The 65,000 ...
Johnny's Italian Steakhouse eyes expansion in Wisconsin, including Milwaukee
A Des Moines, Iowa-born restaurant company is seeking to grow its footprint in Wisconsin through franchising in markets ... which currently boasts a dozen locations including Middleton and Eau Claire, said Tuesday that it's planning to bring five new ...
Wisconsin neighbors discover they are long-lost sisters
When Dawn Johnson and her partner, Kurt Casperson, bought a house in Eau Claire, Wisconsin, they did so having no idea that their new neighbor was family. Johnson, 50, and Casperson moved in last June, and they quickly met their neighbors — Hillary and ...
St. Paul Man Arrested in Wisconsin for Suspicion of OWI with 2-Year-Old in Car
The Wisconsin State Patrol reports a 26-year-old St. Paul resident ... A release states Daniel Gustav Siglin was taken to the Eau Claire County jail after a state trooper stopped to assist a motorist whose vehicle was stopped on Interstate 94 West around ...
Hip Eau Claire, the new Austin?
We arrived right in the thick of it.” But over the past quarter century, Eau Claire, population 68,000, has rebounded and it’s now the second-fastest-growing city in Wisconsin behind Madison. It’s become a regional cultural hub and has developed a ...
Wisconsin woman discovers neighbor is family
But few small-world tales can match the serendipity experienced by Eau Claire residents Hillary Harris and Dawn Johnson, who were next-door neighbors - literally sharing the same driveway in a hometown they both adopted - when they discovered they are long ...