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Car dealership

How to Sell a Car Dealership

You can sell a car, but can you sell a car dealership?

Many successful car dealership owners started their careers as salespeople working directly with the customers on the lot. If that describes you, and you’re now considering selling your car dealership, it may be easy to convince yourself that you already have all the skills you need to succeed, and you’re ready to push forward. After all, you’ve probably made your living for years convincing buyers to purchase a high-ticket item. Selling your car dealership should be as simple and straightforward as selling a vehicle off the lot, right?

The truth is, there are aspects of the sale that are similar in both cases. But, they’re not the same kind of transaction, so the skill sets and best practices are very different. And, going about selling your business in the wrong way could be a costly mistake.

Car dealership

The most important element these two transactions share is that a successful sale depends on approaching it from the buyer’s point of view. With that central concept in mind, let’s review some tips to help you successfully sell your car dealership for a reasonable profit by putting the buyer’s wants and needs at the center of the sale.

Take the buyer’s view of your dealership

Before putting your car dealership on the market, take the time to objectively review the business through the eyes of potential buyers. Here are some questions every qualified buyer will want the answers to:

  • What is the current financial situation? (Profit/Loss, accumulated debt, etc.)
  • How have the finances changed over the last 1-2 years?
  • Does the business enjoy a positive reputation in the community, among other local dealerships, and — most importantly — with customers?
  • Is your staff staying with the dealership when it sells? How experienced and skilled are they?
  • What local economic trends have affected the dealership? And, what’s likely to affect it in the future? (For instance, consider the traffic flow, local taxes, and similar items.)

The main point of this exercise is to recognize that, unlike you, a prospective buyer is not yet emotionally invested in the company. This is a big difference from the car buyer who knows they need transportation, but who is otherwise making a primarily emotional decision when it comes to what make and model they drive away in. The prospective buyer of your car dealership isn’t going to overlook potential problems or warning signs based on the years of positive experience you may be falling back on.

car showroom

“Any buyer wants to see what that business is making and how quickly they can recover their investment,” according to Tim Lamb, president of Tim Lamb Group, a business brokerage specializing in car dealerships, “and there are so many other things that go into it, like a good location, facilities, great employees that have been there for a long time, a good economy, and the dealer network.”

To close the deal, you’ll need to make sure the buyer is completely satisfied that the business will be viable and profitable for years to come.

Don’t take the sale on by yourself

On the lot, salespeople prefer to handle the full transaction alone because it maximizes their commission. However, when you’re trying to sell your business, The importance of not doing it alone can’t be overstated.

To maximize your dealership’s exposure to potential buyers, and eventually the profit you can expect to earn from the sale, you would be wise to rely on a team of professionals who can help make the sale of your dealership successful. This may include any or all of the following:

An accountant

As noted above, your dealership’s financials will be a primary factor in any buyer’s decision. Having a professional accountant available to spot potential issues could save the sale.

According to CPA David Keller, “I have attended a few buy-sells over the years where the selling dealers could not close because they (the sellers) had to come up with the money to pay off the related debts secured by the assets they were selling. These were not pleasant situations, as they delayed the proceedings and, in some cases, stopped the buy-sell altogether.”

There may be some legitimate financial issues that will take time to address, so the earlier an accountant is brought in, the better. If resolving those issues means tens of thousands of dollars in increased profit at the time of the sale, the investment is well worth it.

A business broker

A skilled and experienced business broker can help with many aspects of the business sale, but one of the most valuable insights they bring to the table is a viable and realistic valuation of your dealership. They can also help bring in qualified buyers, and much more.

Car dealer

The following comments from other dealership owners help explain the value of working with a broker to sell your car dealership:

“There’s a very, very strong case for bringing in a broker,” said Schmidt, president of National Business Brokers, whose group has sold hundreds of dealerships over the years. And the best case is “creating the right competitive environment to maximize value in the sale.”

While you’re not required to have a broker, said Pat McNulty, who runs Owensboro, Kentucky-based McNulty and Associates, most dealers learn firsthand that they need one. “Of the clients I work with, the majority have already tried it on their own,” he explained. “There are so many pitfalls out there, it’s almost limitless.”

Without a broker, “you’re going to waste a lot of time and money bringing in an unqualified buyer,” said Greg Gilmore, president of The Apex Group, “A brokerage firm should provide qualified buyers. If you’re selling to the guy across the street, one of your buddies, that’s a different story.”

A commercial real estate agentSell Your Business

Understandably, a large part of your car dealership’s success revolves around location. It makes sense, then, to bring in a commercial real estate agent experienced with the local area when you’re getting ready to put the dealership up for sale. They can be an invaluable resource.

Auto dealership journalist, Thom Blackett, explains the importance of location this way: “In addition to price, consider your site’s proximity to other dealerships (and how that may benefit your business), access from the street (problematic intersections or one-ways might make it difficult for customers to pull into your lot), and the appearance and condition of surrounding storefronts and neighborhoods (car shoppers’ first choice won’t be a dealership in a rough part of town).”

An experienced agent can help you evaluate the look and feel of the physical buildings and lot area, signage, traffic situation, and more. They will make suggestions for improvements that will increase the value of the physical assets you’re selling, and make them more attractive to potential buyers. They can also help with information on other local sales in the recent past, which will factor heavily into arriving at a realistic valuation.

If you’re willing to approach the process from the buyer’s point of view and get professional help where needed, you can expect to successfully and profitably sell your car dealership.



Bruce Hakutizwi

About the author

USA and International BusinessesForSale.com Manager for BusinessesForSale.com, a global online marketplace for buying and selling small medium size businesses. The website has over 60,000 business listings and attracts over 1.5 million buyers to the site every month.

@BizForSaleUS

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