The Challenges of Selling an Auto Repair Business
When selling any kind of business, there are challenges that come along with it. This is especially true of certain service businesses. You not only have to find the right buyer, but they need to have certain skills and passions in order to really make the business work.
As an example, let’s look at an auto repair business, and what you are actually selling. The reason you need a business broker is that you need someone knowledgeable who can help you overcome these challenges. Here are some great examples.
Finding a Qualified Buyer
The first key is to find a qualified buyer, but what is a qualified buyer? In this case, the person will need several qualities. Not only will they need to understand running a business, but they will need to have a deep understanding of the automotive industry and the direction it is headed.
While often the equipment goes with the business that is being sold, there are some items that will not be included as they belong to shop employees. If these employees stay, that is not a problem, but if they should choose employment elsewhere, some tools might need to be added or replaced.
Three is also a need for someone with a passion for the business or alternatively a buyer who wants to manage the business, but not be involved in the day to day operations. This person can then hire those who do have that passion to run the business for them.
Finding a Buyer Who Can Get Financing
The next challenge is finding a buyer who can qualify for financing and has the appropriate down payment. While often a good option for the auto repair business is a management buyout, where someone who already works for the business buys it from the owner, if the individual cannot qualify for the needed financing, the seller often carries a large part of the loan.
This adds to the risk for the seller, although it can also turn out to be an excellent arrangement that also provides continuity for customers. If you as the seller are not willing to carry the financing and want to sell the business outright, this can be a challenge.
Entertaining the Possibility of Other Types of Buyers
As mentioned, sometimes you can sell an auto repair business to an investor who wants to own the business, but not manage the day to day operations. There are other possibilities too, and other types of potential buyers.
One of these is a larger automotive repair chain who wants to buy your auto repair business and rebrand it as one of their own. They get an established shop with an established reputation to add to their chain, and you get a buyer who has the cash or financing to make an immediate purchase.
The other option is a franchisor who wishes to take over your location and brand it under a franchise name. In that case, you are really just selling your location and the equipment you have. If you have a lease, you need to make sure your landlord is amicable to a new tenant under those circumstances.
When you are selling an auto repair business, you should be aware of all of these options when deciding how to market your business.
Dealing with Location
What if your auto repair business is not in the greatest location? You can still sell, but you might not get everything you are looking for. When you hire a business broker, they can help you with a business valuation, and your location is a large factor in that. Whether you own or lease the premises where you do business is another factor.
The key is to emphasize the benefits of your location, and while you need to be honest, minimize the issues with your business location. Perhaps you pay less of a mortgage or rent, or you get good industrial traffic and vendors are close by. Often you have more space in a less popular location, allowing you to do more work in your shop. If you have loyal customers, location may not be as big of a factor for you.
No matter what, you can still market and sell your business even with a less than ideal location. Just be aware of how it will factor into a buyer’s decision.
Structuring the Sale
Lastly, the structure of the sale can be another challenge. There are a number of ways to structure a business sale, and finding the right one for an auto repair business is very similar to any other business. A business broker can help you walk through this process.
As an example, if you own your premises and plan to sell them rather than rent them back to the new buyer, you’ll need two valuations: one for the property and one for the business itself. The one for the property will have to be done first so that the business appraiser will know what amount to add to the business value.
Are you ready to sell an auto repair business in California? You’ll want to hire a business broker to work with you, and here at Rogerson Business Services, we would love to talk with you about what we can do to best help you sell your auto repair business. Contact us today.