Are you considering selling your business?

Motor, Sep 2003 by O'Connor, Robert (Bob)

During these difficult economic times, many shop owners are considering selling their business. But what they feel their business is worth and its true value are often significantly different.

Our company routinely communicates with independent auto repair shops throughout North America, and one of the most common statements we've been hearing lately is, "I'd like to sell my business."

You've spent years, maybe even a lifetime, building your repair business, and now you're ready to move on. With so much time, money and energy invested, you want to ensure that the fruits of your labor are duly rewarded. Before you take the plunge, though, take a good look at the marketplace. You'll need to decide if now is the most opportune time to sell, and if your company is actually ready to be sold. While pondering these initial questions, carefully consider how the sale may affect your financial and personal situation, and what impact it will have on your employees and family.

In addition to the philosophical questions to consider, there are fairly specific questions that need answering. For example: Where will you find a buyer? How much will you be able to get for the business? What kind of terms should you offer? Should you tell your employees?

We'll take a look at some of these questions in more detail and see what options are available. If you've decided to sell your business, the first thing to do is develop a selling plan. Such a plan includes four main components: evaluation, preparation, pricing and marketing.

Evaluation

We hinted at it earlier, hut now lets ask the question outright: Is this the most opportune time for you to sell? The initial thought to sell a business often occurs when it becomes too difficult to operate or unprofitable with little hope of turnaround, or when ill health prevents the owner from continuing to run the business at a level that will sustain profitability, growth and stability. Rarely is an auto repair business placed on the market for sale based on a previously established succession plan, or when it's a highly profitable entity.

Having stated this, if your business is profitable, it may be to your advantage to create a succession plan inclusive of the sale of your business. More often than not, when the succession plan is well thought out, preparation for the sale allows for greater success in finding the right purchaser and selling for a price close to the full value of the business.

If your business is just breaking even or is unprofitable, you're faced with selling it for whatever the assets will bring or with continuing to operate it until it s profitable enough to maximize the revenue from its sale.

In addition to questions regarding the condition of the business, you'll need to determine whether or not the economy is too sluggish, credit is too tight or the cost of money is too high. These factors can significantly impact your ability to sell.

Preparation

Aside from the financial aspects of the business, you'll need to know if your business is really ready to be placed on the market or if you have some work to do beforehand. Some of the items to consider are:

Employee stability. Purchasers are going to check whether your employees have been around for a while. A very high turnover rate could be a reason for a buyer to pull out. To prepare for sale, do a complete written bio on each employee, explaining job descriptions, compensation, credentials and performance histories. Accompanying photos would also be a nice touch.

The physical condition of your shop. To convey the best impression to a prospective buyer, your shop should be clean. A fresh coat of paint inside and out, some asphalt sealer and new striping in the lot can make the place look like new. A written description of each amenity that may not be obvious to a purchaser should be available, along with any competitive advantages your shop may have over others in the area.

Your shop and office equipment. Many shop owners keep obsolete equipment around much longer than they should. Make a pass through your shop with an eye to spotting equipment that's no longer useful or is in disrepair. Get rid of all the obsolete equipment, repair broken equipment and clean or paint the rest.

While spotless shop equipment sends a message of personal pride of ownership, the same holds true for office equipment. Dirty monitor screens and keyboards are signs of negligence and/or lack of caring. The prospective purchaser should have access to an inventory of all shop equipment, along with all owners manuals. If you need to establish a value for this equipment, contact local equipment suppliers to get a "fair market value" figure for each piece. Remember, any equipment attached to the walls or floor may have become the property of the owner of the building via a lease agreement.

Your database. Aside from your employees, your database is your greatest asset. However, in many cases it's also the most neglected asset. Shops should establish a method of consistently updating their customer and vehicle information, as well as a routine for purging the database of inacuve customers. This is necessary for marketing purposes, of course, but it's also important to have an accurate count of active customers along with their complete history available to a prospective buyer.