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

---

Why You Should Hold One More Meeting

If you are completely happy with where you and your business currently are then you can stop here. If growth and change aren't something you have any interest in, there is no need... Read More

Key Control ? Who Has the Keys to Your Kingdom?

Key control, or more accurately the lack of key control is one of the biggest risks that businesses face.What is the risk?Imagine, you have fired a trusted employee, unknown to you that person... Read More

Work Environment Tidbits

Color is a big factor effecting all indoor environments. Since most of us spend many hours each day at work, the coloring of the space has a big impact on us.... Read More

Think Before You Talk

What you say to other people can make or break you and it can happen without you even knowing about it. That old saying "loose lips sink ships" is oh so true in... Read More

No Time to Focus on the Big Picture? Try Focus Management

E-mail, voicemail, "got a minute?" interruptions, multiple projects and competing priorities. Whether it is in work or in life, we all understand the importance of "seeing the forest for the trees."... Read More

Is Your Management Style Assisting or Hurting Your Business?

Many times business owners can have significant differences in management styles that can deter the growth of both the employees and the business.Employees can have differing needs that require differing methods of management... Read More

Manage Your Time - Save Your Business.

If you work from home, chances are you already know that you're really pulling "double duty". You probably work on your business while doing the laundry, corralling the kids, or fixing dinner... and... Read More

A Leadership Lesson: Two Guys With Guns

PERMISSION TO REPUBLISH: This article may be republished in newsletters and on web sites provided attribution is provided to the author, and it appears with the included copyright, resource box and live web... Read More

Tales from the Corporate Frontlines: Creating a Culture of Empowerment

This article relates to the Culture & Climate competency, commonly evaluated in employee satisfaction surveys. AlphaMeasure defines climate as the effect an organization has on the employees, while culture refers more to the... Read More

Develop Your People and Make More Money

What is the no. 1 asset in your business beside yourself? It's your people.Then why is it they often fall to the bottom of the list when it comes to doing anything to... Read More

Business Fails When We Do Not Talk

You may remember being told as a child, "Keep quiet!" "Children should be seen, not heard," and "You talk too much." You were a "good" kid if you kept quiet. However, being quiet... Read More

Quick Tip - Effective Meetings Earn a Profit

Most people treat meetings as a free resource that can be used to deal with any issue. As a result, huge amounts of time and money are wasted on trivia.A meeting is a... Read More

What Makes a Good Appraisal Interview?

WHAT MAKES A GOOD APPRAISAL INTERVIEW?Here is a tip for supervisors that will contribute to a successful appraisal interview. Give advance notice. Employees like to have advance notice of the appraisal session so... Read More

Delegation for Business Leaders - How Letting Go Works

A leader's role is to focus on those areas of operation where he or she can deliver the greatest value and this requires huge shifts in perspective of the role. Leaders differ from... Read More

How to Leverage Your Strengths for Peak Performance

Ask almost any business leader how to most effectively develop people and build teamwork and you'll hear, "tap into employees' strengths." Yet when it comes to their own careers, many managers still focus... Read More

The Boss Didn?t Understand Why His Staff Wasn?t Reading His Mind

Many people believe that everyone sees the world exactly the same way as they do. This is never true and was the source of much turmoil in Dr. Jacob's office.When the Job Isn't... Read More

Phone Sex is Bad for Business

On August 3rd/2005, Reuters reported that a German man had colluded with a phone sex operator to defraud his employer's company out of approximately 16,000 Euro or almost 20,000 US dollars, by making... Read More

ISO 9001 and Total Quality Management

Total Quality ManagementTotal Quality Management, or TQM, has become one of the most frequently discussed topics in current business literature. Because of the competitive pressures created by Japanese companies, quality became a competitive... Read More

Management Training: Are You Satisfied With The Results?

If you're not satfied with the results of your management training programs, maybe it's because you handle training as a 'one shot' event rather than a process of developing your people to be... Read More

The Gift of Gratitude

Gratitude might seem like a soft or even an obvious subject to you. Perhaps you would rather read about a leadership lesson or a marketing approach or even a motivational technique. If that... Read More

Getting Software Developed for Your Business

At some point, your business is going to need to have some software development. Maybe your business is small, but existing software doesn't fit your needs. Maybe your company is larger, with significant... Read More

Corporate Governance for Business Owners

It is clear that good Corporate Governance is in the best interests of shareholders of public companies, but how can it benefit shareholders of private companies and other business owners?Will a good system... Read More

What Every Manager Should Know About How to Reduce the High Cost of Employee Absenteeism

Employers pay a high price for absenteeism, often more than they may realize, in terms of both financial and production losses and employee morale. Managers may view the tasks of finding a substitute... Read More

Truth or Consequences: How to Give Employee Feedback

In the bestseller, Good to Great, Jim Collins discovered that, "the good-to-great companies continually refined the path to greatness with the brutal facts of reality."And, in his recent autobiography, Jack Welch reports that... Read More

What Cross-cultural Training Can Do for You

International business is more complex than ever before. Success in every sector is now seen in global terms. Yet success in working with colleagues from different cultures is no easy goal. In order... Read More

Allan Kempert Discovers That Truly All You Gotta Do Is Ask

A year or so ago, I met Allan Kempert. Allan was the Quality Assurance Supervisor for a metal stamping company in Ontario, and just completed Norman Bodek's book, The Idea Generator, Quick and... Read More

Employee Retention: Its a Changing Game

As a management consultant, I have seen some poorly conceived retention policies at otherwise well-run companies. The philosophies underlying these policies lack some basic knowledge of two things:1. human nature, and2. the changing... Read More

Think Twice Before Selling ROI

When we're selling to business people, our value proposition has to show a good return. Solid, credible Return On Investment (ROI) calculations are supposed to prove this for us. But if we don't... Read More

Five Key Strategies for Making Your Nonprofit Business More Effective

I love tennis both as a spectator and a weekend player. I also believe that effective nonprofit organizations are an essential part of vibrant, engaged communities. As I was watching The... Read More