Understanding the value of an auto dealership requires an understanding of the industry’s unique terminology, factory financial statements, and hybrid valuation methodologies.
The valuation of auto dealerships can be unique. Unlike most valuations used in the corporate or M&A world, cash flow metrics such as Earnings Before Interest, Taxes and Depreciation (“EBITDA”) are infrequently employed in auto dealership valuations. Further, the valuation of one auto dealership compared to another auto dealership can be completely different due to a variety of value drivers in the industry.
In this whitepaper, we break down the value drivers of a dealership, discuss when you might need a formal valuation, introduce the valuation methodologies used by professional business appraisers, and go into some depth about topics such as dealer financial statements and normalizing adjustments to the balance sheet and income statement. We hope that the information in this whitepaper will make you a more informed user of business valuation services.