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 Auto Dealerships – The Sales Dept Sells the First Car Nissan Maxima SV Eleva WI 54738 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 Eleva WI 54738 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 Investing in Car Dealerships – How to Value Them Nissan Maxima SV Eleva WI 54738 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 Eleva WI 54738 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 Eleva WI 54738 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 Eleva WI 54738 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 Eleva WI 54738 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 Eleva WI 54738 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.
Business Results 1 - 10 of 1
Eleva 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 ...
Petryk receives WEDA’s 'Champion of Economic Development' award
The Wisconsin Economic Development Association (WEDA) recently presented Rep. Warren Petryk (R-Eleva) with the 2018 “Champion of Economic Development” Award for his support of policies to drive economic growth and prosperity in Wisconsin. The award is ...
Group brings together community for worship with OneFest
The Christian music festival OneFest will kick off its first year in Chippewa Falls on Saturday, July 28, at the Northern Wisconsin State Fairgrounds ... with local artists on his parents’ farm in Eleva since 2015. With plans to expand the festival ...
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 ...
Elizabeth Feil: Help the Wisconsin Broadcasters Association spread, not squelch, democracy
Because our great group of candidates just won’t fit in the box. Elizabeth Feil is an attorney in Eleva, Wisconsin. Share your opinion on this topic by sending a letter to the editor to [email protected] Include your full name, hometown and phone number.
Madison Edgewood takes aim at a repeat state title; Abundant Life/Country Day hopes to move up
Wisconsin Heights; Shane Sonnentag ... 12:27 p.m.: David Bemis, sr., Eleva-Strum; Ty Ready, fr., New Glarus; Jonah Repinski, jr., Stevens Point Pacelli; Andrew Meador, fr., Sheboygan Lutheran. 12:36 p.m.: Andrew Schoen, so., Eleva-Strum; Jacob Krantz ...