By Marcus Palmer, Managing Director, RV, Huntington Distribution Finance and
Tracy Williams, Managing Director, Marine, Huntington Distribution Finance†
- Determine your dealership’s value
- Develop your dealership’s value proposition
- Prepare your dealership for sale
Building a thriving dealership is a testament to an owner’s dedication and hard work. However, it can be easy for busy owners to overlook a crucial aspect of entrepreneurship: planning for the succession of their business.
While thoughts of stepping down or selling your dealership may seem far away, it is never too early to begin planning for an eventual exit. Developing a comprehensive plan can protect the legacy you’ve built and secure your business’ future.
Whether you plan to sell to an individual, another dealership group, or to a private equity firm, pass the business on to a family member, or transition ownership to a trusted successor within the dealership, the strategies in this article can help guide the way.
Determine your dealership‘s value
Understanding the value of your dealership is critical when preparing for a sale or transition of ownership. You might have an idea of what your business is worth, but dealers may want to consider obtaining independent opinions on the valuation.
Hiring an outside party with expertise in this area, such as an accountant, tax expert, or advisor, can help provide an objective valuation of your dealership. These same experts can also educate dealers on market conditions and trends that might impact that value.
Once you understand your dealership’s value today, you can begin examining the different areas that are driving value for your business. Prospective buyers and investors pay attention to these value drivers, so knowing what they are – and, more importantly, how to improve them – is key.
Develop your dealership’s value proposition
Think about what makes your dealership stand out. What are your biggest differentiators from competition? What is your elevator pitch to buyers or investors?
Even if your plan is to pass the dealership down to family members or sell it to a long-time employee, this in-depth analysis will enable future owners to further improve and maintain your business’ success.
You can use these questions as a starting point for this exercise:
- What is your dealership’s history and story in the marketplace?
- How does your dealership compare with its peers?
- How is the dealership positioned in the market it serves?
- What sets your dealership apart from others?
For example, perhaps your dealership is known as a top seller for a particular market niche. You may have been filling a particular market need with the same products or services for years, but buying habits and economic factors change. When was the last time you confirmed you are still meeting those needs? Are you selling the brands and products most popular for that demographic today?
Prepare your dealership for sale
Interested buyers will want to know the dealership’s history and what the plan is for the future. Moreover, potential buyers will scrutinize your financial records, including profit margins, revenue trends, inventory turnover, and expenses. Be prepared with a well-defined financial history to attract buyers and justify the asking price.
Buyers will also want to know that your current offerings are meeting customer demands, and your dealership has a strong customer base and solid relationships with brands and OEMs. Be prepared to provide information about customer demographics, repeat business rates, and existing lease agreements and contracts.
Identify areas of improvement based on these expectations, such as:
- If you are lacking a service, such as storage, or accessories for a new boat or RV, think about adding it to your offerings.
- If sales staff are relying on outdated strategies, consider improving training and sales enablement materials.
- Consider updating or shifting inventory offerings to better align with current purchasing trends or market demands. You may find that conducting market research and customer surveys helps you better understand your target demographic’s needs.
Improvements in these areas can greatly impact business value. Develop a plan to address these needs before diving into a sale. Consider the time needed to build up these areas in your succession plan to ensure you can accomplish everything.
Consider succession planning now
Whether you are just a few years from exiting the business or much longer, it is never too early to begin planning your exit strategy. You have dedicated time and resources into building a successful dealership, and you deserve to be rewarded for those efforts. Transitioning or selling your business is a complicated, many-faceted process that requires the help of experts to guide you. Seek out the right team of experts to assist you in this process.