Just because you’ve run your shop for 20 years doesn’t mean it’s worth a million bucks, a shop coach emphasized to a room full of shop owners.
The problem, explained Bryan Stasch, vice president of program and content development at the Automotive Training Institute, during last year’s Midwest Auto Care Alliance Hi-Tech Training & Expo, is that a shop owner doesn’t understand their own financials.
“Now, a profitable business should sell quick. Problem is, the value of the business is not anywhere close to what people think it is,” Stasch said during the session, Maximizing Profitability and Return on Equity in Automotive Repair Shops. “I have some people say, ‘I’m going to sell it for $1 million.’ When I look at the P&Ls and do the multiples, it’s worth half a million. I’m like, ‘Where do you get where do you get a million from?’”
The owner believes that because they’ve been running it for a couple of decades, it should be worth the exorbitant price.
“Guess what that means? Nothing,” Stasch said of the length of time your shop has been operating.
He explained that business value comes down to one thing: “What creates the value? EBIDTA times a multiple. What builds the multiples? How well of an oiled machine you have.”
He didn’t sugar-coat the reality many shop owners face.
“I hate to say this, but I’ve met way too many of these over my years. Many automotive repair businesses are never bought or sold or successfully transitioned to new leadership. That’s because the founder fails to focus on what builds true market value or duplicatable model,” he said. “‘Maximize profitability. Build a business to run without you,’ should be the car you’re chasing.”
“But here comes the problem — they’re also proud of the fact that it doesn’t run well without them.”
To build a desirable business, Stasch said it needs to run without the owner being involved in every detail.
“To build a sustainable, expandable, sellable business, you must create a repeatable, consistent service offering that doesn’t rely on you,” he explained. “I have some people are very, very proud that they run their business and of what they do. But here comes the problem — they’re also proud of the fact that it doesn’t run well without them.”
He reminded the audience that the most valuable businesses are the ones where the owner is more of a figurehead than a daily operator.
“The most valuable, sellable business is a well-run machine, that the owner’s more of a mascot. They’re the ones doing all the glad-handing in the community. They’re the face in the community, not the one behind the counter all day or turning wrenches,” he explained.
For some, stepping back from the day-to-day grind opens the door to rediscovering their passion — whether that’s fixing cars or mentoring the next generation.
“And they’re really doing what they love to do; what got them in the business. So however you think about a succession plan, that’s up to you,” Stasch said. “Just keep in mind that that business needs to be able to run without you having to be there every day.”
Image credit: Depositphotos.com
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