Selling your shop today can be somewhat of a daunting task. Your potential buyers include consolidators, medium shops looking to expand or maybe a technician who’s looking to go on his own.
I can tell you that the trend over the last five years is that more shops are closing. Consider the following: in 2009, there were approximately 39,500 collision repair locations in the U.S. There were approximately 2,000 dealership and independent collision repairers that left the industry through business failure or exit strategy, dealership closings, mergers or acquisitions. From 2006 through 2009, there was an estimated reduction of 12 percent or 5,500 independent and dealership collision repair facilities in the U.S. These are real numbers, and this data is not the most recent.
The reason I bring this up is that all these store closings present a unique opportunity for the savvy body shop entrepreneur. They also present a great opportunity for you to sell your book of business and multiple locations. The only problem with that is that most purchases nowadays are not done for the book of business.
I can tell you firsthand from my experience here at Collision Care that we are not interested in any other shop’s book of business. It’s meaningless to us. What is meaningful to us is location, location, location. The second most important thing is demographics. That is, how much is your collision market worth? Can we come in there and be successful with our brand? These are just a few of the considerations we ponder when making a move into a market. However, our considerations are not the only ones as they are exclusive to our purchasing model.
Who’s Your Buyer?
The most important thing a seller of an existing body shop can do is understand who their buyer is. The second thing they need to do is to have a correct valuation on the business and real estate.
You need to understand your buyer because your business value will differ amongst potential buyers. For example, if Collision Care wants to come in and buy your business, we may not necessarily place a monetary value on your existing book of business, whereas a technician looking to start out on his own might find that valuable.
When selling anything – and this is universal no matter the product – something is only worth what someone is willing to pay. If you have no takers, than what’s your property worth? Of course, as time goes on, that parameter changes, but nevertheless, be prepared to be surprised when putting your business up for sale. The offers you get can be downright insulting. All of your hard work over the years, the endless hours of tooling and re-tooling the business, employees, processes, procedures, customers, etc., and then someone comes in and offers you pennies on the dollar.
Another important consideration is cause! If you’re experiencing financial difficulty and that becomes known, it can drive down the value of your business as most businesspeople with expansion on the brain are sharp and will most certainly want to take advantage of your dire straits.
Confidentiality is most important when selling anything you might have. You always want to maximize your value, never the other way around. Car salesmen are great at this technique. Ever notice when you go into a dealership that Mrs. Jones is interested in the same car as you? When buying or selling, you can never outwardly display – until the deal is done – your true feelings related to the transaction. All of that is fuel for the negotiation.
The negotiation is the most important part of the sale as it dictates price! Many business owners are poor negotiators when it comes to their own business and receiving the best value, yet when it comes to the product or service they’re experts! This is because selling a business is much different than running a business.
The first thing a potential business seller should do is seek the help and consultation of a business buying and selling professional. Do your homework! Seek the help of an experienced attorney who has multiple business transactions to their credit. Often, a representative can obtain a greater value for you in negotiation than you could on your own. To most business owners, their business represents years of hard work and dedication. And when negotiation time comes, you can find yourself behind the eight-ball when trying to negotiate with a seasoned professional.
Lastly, I will cover what really goes without saying: that your business and what you’re selling should have curb appeal. By curb appeal, I mean that the shop should be clean and organized.
Cleanliness is next to godliness, and you could have potential buyers that do not want to operate your place as a body shop. A clean, organized shop will allow any visionary to come into your place and picture what they have in mind. There may be an extraordinary amount of value in that for them. Your job, if you’re looking to sell, is to identify the “trigger points” of any potential buyer and hone in on them.
Maybe your shop is in a swanky part of town. Here in Philadelphia, there’s a real estate boom going on. Industrial areas, former ghettos, and deserted and isolated areas represent the crème de la crème of real estate here. Garages that were large in size have been converted to multi-unit residential apartments and are renting for premium prices. Knowing your buyer is key.
There is still great opportunity in the collision repair business if you’re on top of the trends. Your success will depend on your business acumen: how you drive business to your door, and can you maximize the value of the business you have? Buying or selling, your own expertise, and the expertise of those in your circle will have a great influence on your ultimate outcome.