Along the road to building the value of a dealership, it is necessary and appropriate to examine the dealership in a variety of ways. Each provides unique perspective and insight into how a dealer is proceeding along the path to grow the value of the dealership and if/when it may be ready to sell. Most dealers realize the obvious events that may require a formal valuation: potential sale/acquisition, shareholder dispute, death of a shareholder, gift/estate tax transfer of ownership, etc. A formal business valuation can also be very useful to a dealer when examining internal operations.
So, how does a dealer evaluate their dealership? And how can advisers or formal business valuations assist dealers examining their dealership? There are at least six ways and they are important, regardless of the size. All six of these should be contemplated within a formal business valuation.
Why is it important to evaluate a dealership in these ways? Together, these six ways provide a unique way for dealers and key managers to continuously reassess and adjust their performance to achieve optimal results. A formal business valuation can communicate the dealership’s current position in many of these areas. Successive, frequent business valuations allow dealers and key managers the opportunity to measure and track the performance and value of the dealership or over time against stated goals and objectives.
Originally published in the Value Focus: Auto Dealer Industry Newsletter, Mid-Year 2018.