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 Dealerships in the Strangest Places Nissan Maxima SV Eau Galle WI 54737 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 Galle WI 54737 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 Seven Strategies to Evaluate a Car Dealership Nissan Maxima SV Eau Galle WI 54737 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 Galle WI 54737 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 Galle WI 54737 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 Galle WI 54737 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 Galle WI 54737 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 Galle WI 54737 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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Gary Grant Gilbertson, age 77, of Beldenville, WI passed away Tuesday ... Beldenville Old Car Club and Eau-Galle Rush River Sportsman's Club. Gary loved to play cribbage and euchre. Enjoyed a good jok...
Western WI man caught with 250+ pounds of pot is going to prison
After that, he will be on extended supervision for four years. It was in February that detectives said they found more than 250 pounds of pot in one-pound bags at two homes in Eau Galle.
Eau Galle Cheese Factory honored for energy efficiency upgrades
Eau Galle Cheese Factory has been honored with an Energy Efficiency Excellence Award from Focus on Energy for the cheesemaker’s commitment to energy efficiency. “It’s my honor to present this Energy E...
On May 20, 1958, Roger married Christie Lou Helmueller at St. Henry’s Catholic Church, in Eau Galle, WI. Roger and Christie farmed with his brothers until 1959 when they purchased a 250 acre dairy far...
On line condolences may be left for the family at www.sturmfh.com. Carl Bates was born September 9, 1923, the fourth of eleven children, to Harry and Rose (Hartung) Bates in Eau Galle, WI. He attended ...
Local cheesemakers gear up for U.S. Championship Cheese Contest
The Eau Galle Cheese Factory is also among the participants and business manager Bob Grundvig says buyers can taste the award winning difference. “If you put it in your mouth and you taste it, and go, ...
Marian M. Weinzirl
Marian M. (Weber) Weinzirl 81 of Eau Galle died Friday, March 6, 2015, peacefully at the Heritage of Elmwood Nursing Home surrounded by family. Marian was born Jan. 19, 1934, daughter of Charles H. an...
NEW INFORMATION: Man identified in deadly St. Croix County standoff
EAU GALLE TOWNSHIP, Wis. (WEAU) -- It has been a weekend of standoffs with law enforcement. The first was on Friday in Eau Claire County, with a man being arrested after a hostage situation. The lates...
Mary Lou Hubbard
Mary's "Special Place in Heaven" was opened up for her on March 5, 2012. Mary Lou Baier was born November 1955 to Jack and Barb Baier in Eau Galle, WI, the second of seven children. She attended St. H...