Is this A Good Time To Sell Your Body Shop Business?

Have you ever asked yourself the question? "Is this a good time to sell my business?" That is a question every business owner asks himself, everytime he has a bad day. I once received e-mail from the editor of the Auto Body News, asking me that key question. "What is happening in the market today? Is this a good time to sell? " My quick answer was "These are very interesting times."

Of course that answer doesn't tell you anything that you can get your teeth into. So! Let me clarify my answer. Since I have been selling body shops for nearly 5 years, I have seen many changes in the body shop industry. One thing that hasn't changed is that there have always been an abundance of both sellers and buyers. The buyers have always been, and still are picky about what they were looking for.

The perfect shop in the eyes to the buyers is (A) one that has a customer base and a revenue stream that is reliable and isn't dependent on the owner being there to retain each individual customer, and. (B) doing a volume of at least $100,000 per month, but really much more. Large volume sellers think that if they have a DRP (Direct Repair Program. This is where the insurance companies set up a relationship with the body shop to do all their clients business. Much like an HMO in health insurance) contract, they have what the buyers want.

This may be true but the contracts are not automatically transferable, and a buyer will be very unhappy if the DRP leaves after paying money for this "reliable revenue stream." Smaller volume sellers, on the other-hand, not having corporate accounts, dealerships or other contracts still have hopes of getting lot of money for their shops. The average shop I run across is only doing about $300,000-$500,000 annual gross income. So what we have is a situation where a lot of buyers are looking to buy a shop, but there are not a lot of shops available, that fit what they are interested in.

This year, one change has occurred. There are fewer shops available than at any time in my career. Not fewer of the large volume shops for sale, that is fairly stable, but fewer of the small mom and pop repair shops that have not been in heavy demand. The reason, I believe this has happened is because of the booming economy. Low volume shops are doing better than they have in years. They are making money, and do not feel as much pressure to close down. They still would like to get out, but when they find out that their 5,000 sq. foot shop which is making them a $100,000 net profit, is only worth $100,000 on the open market they decide to keep on working.

As always, the shops doing $1 Million to $3 Million per year gross income is still in demand. The price alone still is the main factor, in determining if these shops will sell. A good example of this is what is happening in lower Orange County. There are currently a couple of shops in Lower Orange County that are for sale, by the owners. They appear to be very profitable but the asking price is too high and the buyers all know it. Even the fact that these are the only shops available for sale in this prime area has not changed the fact that buyers just refuse to over pay.

Last year I was marketing a high volume shop, in Ventura County. The buyers refused to pay the asking price, even though the volume was there. Why? The profit wasn't. In this situation, the buyers would not pay for the volume and stability of income unless the net profits were there. They didn't assume that they would make a profit where the current owner was not. It appears that buyers of today are very careful. I believe they do not trust their own ability to get business and are too careful.

To clear up any confusion about what kind of buyers we are talking about, lets break the buyers up into categories. The first category is the consolidators. There are two large ones in Southern California but they are not the whole market. I have talked to out of state consolidators that have inquired about moving in to the So California market. Consolidators want shops that fit their model. That model sometimes changes but basically they will buy a shop if it fits their model.

If it doesn't, they will not touch it. The price by itself doesn't turn their interest on or off. We do not have enough space to discuss what this group will buy, in this article. It is enough to say, " If your shop fits their criteria they would have contacted you and expressed interest. If they haven't contacted you, they are not interested." Period! They know their market place and who is in it.

By the way, if I owned a shop that a consolidator wanted, I would never sell to them. Being a professional negotiator for 20 years, I find the requested seller financing terms totally unacceptable. When I have found out about these sales, after the fact, I am amazed. I had buyers for the same money, or more, without the seller being at risk, but no one asked me.

The second category is the multiple location shop owners. Usually with one or more DRP contracts shop that wants to expand into more areas. They are very interested in the sq. footage of the shop, and its ability to handle over $2. Million Gross Income per year. This buyer only looks in limited areas. The areas being where they have been offered a DRP contract. When they are looking, they need it now, while the window of opportunity is open to them. If they can't find it quick, they will not need it at all. Recently I had a multiple shop buyer who had made an offer and was negotiating a shop in West Los Angeles. By the time we finished the negotiations, the DRP contract was gone and so was the buyer.

The third category is the buyers who have worked in the industry before, but do not currently own a shop. Also in this group are the buyers who have family in the industry, and money is no problem. This buyer believes " If it doesn't have a DRP, forget it. If it has a DRP and isn't making much money, also forget it". If it has a DRP, and it is making money, they are interested but only at what they consider is a fair price (In their eyes). This group I have successfully changed their mind at how they analyze what a good shop looks like and on occasion have bought shops with "a steady reliable income", other than insurance contracts.

The fourth category is the person that just wants a shop. They will do what they have to, to afford a shop that will work for them. This group is the working body man or auto repair shop mechanic. Because of their limited funds, this buyer will only pay what he or she feels the equipment is worth. They will pay nothing for goodwill because they believe that the seller's customers are not stable and will leave when the ownership changes. Are they wrong?

In Conclusion: There are a lot of buyers out there. My database has over 250 current names of body shop buyers. There is currently a shortage of shops for sale but mostly in the properly priced category. Most days I feel like a marriage broker with a lot of plain brides and a few beauties. The dowry for the beauties is more than most good-looking boys will pay. The balance of the girls may not be pretty, but some of them can sure cook. . Anyone want to get married? "Have I got a girl for you"

About The Author

Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetgroup.com; kismetrei@earthlink.net

---

Shrinkage Control

What has been your store's shrinkage experience for the last... Read More

What Every Manager Should Know About How to Overcome Boredom

Do you find yourself easily becoming bored or tired at... Read More

10 Ways To Work Through A Business Slowdown

In running any kind of business, it's inevitable that sometimes... Read More

The 5 Obsessions of a Passionate Employee

A recent report entitled "How Google Grows?and Grows?and Grows" stated... Read More

Diversity Training: The Worst Possible Reasons to Request Executive Funding

You're on your organization's diversity committee. You have the best... Read More

Dont Let Your Measurements Mislead You

Don't Let Your Measurements Mislead You ... Read More

Jewelry Use by Employees

Many companies have dress codes, which include jewelry. Some companies... Read More

What 80% of Businesses Don?t Know: Tips for Improving Your Working Capital Management

What is the number one way to prevent failure in... Read More

More Computer Consulting 101 Hiring Tips (Part 2 of 2)

Does your company need to retain the services of a... Read More

Management & Leadership - Doing it right in the 21st Century

The Old Way ? Command and ControlAlthough workplaces and management... Read More

Hiring a Book Keeping Service

Whether you choose to do your own books and accounting... Read More

Avoid Outsourcing Pitfalls in the Injection Molds and Stamping Dies Markets

When looking to outsource overseas for Plastic Injection Molds or... Read More

Managing People - No One Shows You What To Do

Imagine the following scenario - you pay a visit to... Read More

Quick Tips On Bringing Out The Best In People

Want to bring out the best in people?Edward W. Smith,... Read More

5 Tips For Creating Great Jobs

1) Create A Powerful "Mission Statement"-When your business mission is... Read More

Top Ten Tips for Outstanding Customer Service

Remember the 80:20 rule? You may not get everything perfectly... Read More

Creativity and Innovation Management ? Money Doesnt Do It

Creativity can be defined as problem identification and idea generation... Read More

Train Me -- But Follow Through

My mechanic has me trained. When I take my car... Read More

Are You Managing to Lead?

For many people, the terms "manager" and "leader" are synonymous.... Read More

The Best Way to Keep Track of Meetings

How should you keep track of meetings?Have you ever wanted... Read More

How to Delegate Effectively

ACCOUNTABILITY: Delegation is not complete unless subordinates are held accountable... Read More

Eliminate Performance Anxiety Forever

You've had many years of training in your craft as... Read More

CEO: The Key To Fix ingThe Marketing/Sales Collaboration Problem

We all know that achieving better alignment, synergy and cooperation... Read More

Motivating Employees - Ten Ways to Start You Off

Yet there is a place for those external 'raft-build's', 'away... Read More

Does Your State Like To Keep Your Workers Compensation Secrets Hidden?

Workers compensation secrets are hidden deep within piles and piles... Read More

Management - Mary Poppins Style!

Mary Poppins describes a style of management which has for... Read More

Conflict Resolution Training- When Personal Safety is an Issue

Conflict generally arises by having your needs, desires, perceptions and... Read More

Build Your Business (On A Shoestring): Hire a College Intern

Starting up a new venture or business can be one... Read More

Summertime Blues

It's hard to believe the year will be half over... Read More

The Power of ?Ask?

For Call Center managers, it is not a pipe dream... Read More

Controlling Your Cash Flow

IntroductionAre you looking for a way to gain control of... Read More

Why Would Anyone Do That in My Meeting?

Imagine that you open a meeting by saying, "We need... Read More

Innovation Management: The Power of Emotional Attachment

Creativity can be defined as problem identification and idea generation... Read More