Business Valuation of Auto Repair Shops
- Revenues. The higher the revenues, the more desirable the company is. ...
- Labor costs. Labor costs make up a good portion of operating expenses, and should be monitored carefully. ...
- Location. The location of the auto shop also plays a role in the business valuation. ...
- Years in business. ...
Full Answer
How do you value an auto repair shop?
Business Valuation of Auto Repair Shops 1 Revenues. The higher the revenues, the more desirable the company is. ... 2 Labor costs. Labor costs make up a good portion of operating expenses, and should be monitored carefully. ... 3 Location. The location of the auto shop also plays a role in the business valuation. ... 4 Years in business. ...
Why are auto repair businesses more valuable than others?
As a result, the pool of potential business buyers is larger resulting in a higher selling price. The auto repair centers that focus on excellent customer service tend to be more valuable. People are more likely to pay for top quality service and return when the need arises.
Should I Sell my auto repair business?
I have found that absentee (or semi-absentee) run auto repair shops with a strong manager in place are also easier to sell and generally support higher business valuations and asking prices. Another positive selling point is traditionally the auto repair business is considered very recession resistant.
How to increase auto repair shop profits?
6 Ways to Increase Auto Repair Shop Profits. 1 1. Take a Disciplined Approach to Your Finances. No amount of tips or secrets will increase your profits if you don’t treat your finances with ... 2 2. Schedule Appointments. 3 3. Inspect Every Vehicle. 4 4. Reduce Fees on Card Transactions. 5 5. Invest in Current Customers (and Employees) More items
How do I value my auto repair business?
Asset-Based Valuation The auto repair shop's assets (land, building, equipment, tools) are adjusted to fair market value, along with any liabilities (bank loans, amounts owed to vendors). This method values the business as assets less liabilities.
What is the average profit margin for auto repair?
For the automotive repair industry, the average profit margin is between 20-28% for parts and 50-65% for labor. In order to maximize your profit margins, you either need to increase your revenue or decrease your costs.
What is my body shop worth?
The average auto body shop is rather small with some $578,000 in annual revenues and a staff of just over 5....Example: Valuation of an auto body shop using multiples.MultipleMultiple valueBusiness valueLow0.21$463,200High0.92$1,171,100Average0.37$623,100Median0.31$564,5001 more row•Dec 19, 2012
How do auto repair companies make money?
6 Ways to Increase Auto Repair Shop ProfitsTake a Disciplined Approach to Your Finances. ... Schedule Appointments. ... Inspect Every Vehicle. ... Reduce Fees on Card Transactions. ... Invest in Current Customers (and Employees) ... Generate New Customers with Local Coupon Advertising.
What is the most profitable auto repair?
Brake jobs A car's brakes are one of the most critical. A full-service repair shop that offers brake adjustment, repair, and replacement services will never run out of brake job customers.
How much does a mechanic shop owner make a year?
While ZipRecruiter is seeing annual salaries as high as $118,000 and as low as $19,000, the majority of Auto Repair Owner salaries currently range between $31,500 (25th percentile) to $57,500 (75th percentile) with top earners (90th percentile) making $81,500 annually across the United States.
How do I run a successful auto repair shop?
How To Manage An Auto Repair Mechanic Shop?Increase Mechanic Productivity.Use Automotive Management Software.Reduce Employee Turnover Rate. ... Give Discounts And Introduce Sales Offers. ... Offer Guarantee & Stand Behind Them. ... Display An Ethics Statement.Store Budget.Reward Your Loyal Customers.
How can I grow my auto repair business?
6 tips To Grow Your Automotive Service BusinessAn Automotive Industry-Wide Problem.1) The importance of Top Tier Customer Service.2) Show your customers some love.3) Tech Is taking the industry by storm.4) Get Social.5) Newsletters & Content Creation.6) Word of mouth advertising.
How much markup is there on auto parts?
Many automotive business consultants suggest an overall 100% markup on parts in order to achieve an overall 50-55% profit margin. This markup is important to achieve a 30 to 35% net operating profit. Shops that fail to succeed often have net operating profits of less than 15%.
What is the typical markup on tires?
"Our average margin is 19.87 percent, and we do have trouble selling tires at that percentage because customers state they can find the tires cheaper elsewhere." A parts manager in Southern Pines, N.C., replies: "I find that $25 a tire is enough to keep us in the market with everyone else."
How do I start an auto repair shop?
Start a car repair shop by following these 10 steps:Plan your Car Repair Shop.Form your Car Repair Shop into a Legal Entity.Register your Car Repair Shop for Taxes.Open a Business Bank Account & Credit Card.Set up Accounting for your Car Repair Shop.Get the Necessary Permits & Licenses for your Car Repair Shop.More items...•
How do I build a successful car company?
Take the time to research the different options and determine the kind of business you want to open.Put Together a Business Plan. ... Decide on a Location. ... Secure Financing for Your Business. ... Hire the Right Employees. ... Start Marketing and Attracting Customers.More items...•
How much do garage owners make UK?
The salary of a car repair shop owner can vary depending on how well the business is doing. But to get an idea, if they own a successful business that is producing a healthy amount of profit, they can expect to earn around £45,000 in the first couple of years, and then around £50,000 after 10 years.
Why are auto repair centers so valuable?
The auto repair centers that focus on excellent customer service tend to be more valuable. People are more likely to pay for top quality service and return when the need arises. Needless to say, such return business and customer referrals lead to higher profitability and increased business value.
How to value an auto repair business?
To value any other auto repair business, you can do a comparison against these recent sales. To do so, calculate valuation multiples that relate the business selling prices to their financial figures such as revenues, profits, cash flow, or assets.
What is a successful auto repair shop?
Successful auto service centers develop strong reputation and loyal customer following in their market. These companies act as experts who are able to advise and address a wide range of customer concerns. Unsurprisingly, well established auto repair shops tend to command consistent earnings and higher profitability.
Why is seasoned management important?
Availability of seasoned management over and above the owners is important as well. Such shops are easier to take over even for a someone who is not an auto repair expert. As a result, the pool of potential business buyers is larger resulting in a higher selling price.
What is independent auto repair?
Independent auto repair shops are usually privately owned and focus on a number of essential services for the ever growing pool of cars.
What is included in the value results above?
The value results above include the inventory addition as is typical when valuing the auto repair shops.
How to estimate the value of a company?
A typical way to estimate the value of a company in this industry is to use the annual revenue as the key metric. To illustrate the idea, let’s take a typical company with $462,000 in annual sales and inventory on hand of $50,000.
What is weekly car count?
Weekly car count . The number of cars serviced by the auto shop is an indication of how busy the shop is, the growth potential of the company, and how the current revenues are derived.
What is the role of location in auto valuation?
Location. The location of the auto shop also plays a role in the business valuation. If the location is highly visible with lots of drive-by traffic, potential buyers will be more willing to pay a higher price for the business.
What does the number of bays, lifts, and parking spots indicate?
The number of bays, lifts, and parking spots provides an indication of the current and future capacity of the auto repair shop. For instance, without enough parking or bays, the growth potential of the shop might be limited. Years in business.
How do auto technicians get paid?
Are the auto technicians being paid on an hourly system or flat rate system? Auto shops using the flat rate system pay their technicians based on a national standard of how long it should take to perform a particular repair. For instance, if the national standard says a particular job should take 45 minutes to perform, the technician will be paid for 45 minutes of work regardless of whether he finishes the job in 30 minutes or 2 hours. If a technician is good, he might be paid for 70 hours of work while actually only working 40 hours. Utilized correctly, the flat rate system could boost productivity.
What is labor cost?
Labor costs. Labor costs make up a good portion of operating expenses, and should be monitored carefully. Comparing the ratio of labor costs to sales with that of the industry plays a role in the valuation of the business. How the auto technicians are paid .
How many hours can a technician work?
If a technician is good, he might be paid for 70 hours of work while actually only working 40 hours. Utilized correctly, the flat rate system could boost productivity. Parts costs . The cost of auto parts is another expense that should be watched carefully because it affects the bottom line.
What happens if the current owner is already doing everything possible with marketing and sales are still suffering?
If the current owner is already doing everything possible with marketing and sales are still suffering, potential buyers might think twice before making an offer. Conversely, if the current owner hardly advertises and customers are rolling in the door, potential buyers might offer a good price for the business with the expectation that they can increase business even more after the purchase.
Why is curb appeal important?
Curb appeal is important when it comes to auto shops. Would you want your car getting worked on at a place that was falling apart? Probably not and neither would anyone else. Curb appeal for auto shops is a lot like curb appeal for doctor’s and dentist’s offices; people are wary of a facility that doesn’t look professional. Additionally, no one wants to wait around an auto shop for a couple hours while their car is repaired if the place is run down. Buyers are looking for businesses that are ready to go and that includes the physical appearance of the business. It never hurts to spend few extra bucks now to spruce up your facility so that when you are ready to list your business, buyers are not put off by the appearance.
What is a DPR in auto sales?
DPRs account for the majority of sales for most auto shops and are a fantastic source of dependable revenue. To obtain a DPR, you will need to meet various requirements set by the insurance agency. These requirements often include negotiated labor rates and approved vendors for parts. Once you have met the requirements of the insurance agency, ...
How to market an auto repair shop?
To get started on a simple yet effective marketing campaign, I recommend beginning with a basic website. For an auto repair shop, you don’t need anything fan cy – just generic information like hours, coupons, services, etc. Next, you will want to claim your social media pages and create posts a couple times a week. Finally, it’s a good idea to claim your page on internet review sites such as Angie’s List or Yelp. By doing this, you can ask customers to review you in a public, online forum which will promote word of mouth advertising, and it will help with your Google SEO rankings. Keep in mind that marketing takes time to generate business; don’t get discouraged while your pipeline is building.
How to boost value in business?
A key factor to boosting value in your business is diversifying your supplier base and negotiating contracts to ensure fair pricing on materials. Expensive parts can eat up your profits and drag down your numbers. By diversifying your product suppliers, you have several options for when you need parts and can shop around if the price is too high or the lead time is too long. Having a varied supplier network will appeal to buyers because it shows them that your shop is always working to keep profits high and costs low, which will reflect in your financials.
More Than Tools and Knuckle Busting: Valuing an Auto Repair Shop
When you own or are considering buying a repair shop, it's important to know the value of your business. But how is that value determined? Beyond simple calculations of tools, supplies and real estate, there are a wide range of factors that tie into your shop's overall value.
More Than Tools and Knuckle Busting: Valuing an Auto Repair Shop
What's your shop worth? It's an easy question, but the answer is much more complicated. You have the value of your assets, typically to include your tools, office equipment, materials and property. However, it took a lot more than a few things to build your business.
What is auto body repair?
Auto body repair shops are a sizable part of the very large auto services industry. The companies address the essential need in collision repair, car exterior and interior maintenance and a host of value added services that go along with keeping your auto in top shape.
Do auto body shops sell to other owners?
From time to time auto body shops sell either to other owner-operators or as part of a larger scale consolidation in the local or regional market. When the sales of businesses occur, the actual business selling prices indicate just how valuable the companies are, at least in the current market conditions.
How to get new customers for auto shop?
One of the best sources of new customers is your current ones! Encourage a referral program for your auto shop that rewards customers with discounts or gifts. Often the only barrier to getting referrals is just a quick question as they are checking out, “Do you know anyone who could use an expert oil change?”
How to increase profits in auto repair?
To increase your auto repair shop profits, follow these rules: Reduce Exp enses. It never hurts to look through your expenses and cut extra services that aren’t contributing to your bottom line. For example, some shop owners cut their monthly trash pickup bill in half by switching to an every-other-week schedule or switching to a smaller dumpster. ...
Why schedule repair appointments?
Scheduling repair appointments helps control labor costs. Make more accurate predictions of who needs to be in the shop and when, order parts in advance, and control your work mix.
How to reduce your expenses?
Reduce Expenses. It never hurts to look through your expenses and cut extra services that aren’t contributing to your bottom line. For example, some shop owners cut their monthly trash pickup bill in half by switching to an every-other-week schedule or switching to a smaller dumpster. Other shop owners have cut the expense for off-site storage by selling off old items. And still, others have reduced expenses by price-matching their laundry services.
How to retain employees?
To retain employees, invest in training and tools to help your technicians be more efficient and improve their work atmosphere. This can reduce turnover and improve the productivity of each employee.
Why is it important to reduce idle time in garage?
Reducing idle time in the garage is key to increasing profitability. You’re already paying for the lights to be on all day, so if you don’t have cars in bays, you’re spending money without getting anything in return.
Do tips increase profits?
No amount of tips or secrets will increase your profits if you don’t treat your finances with discipline. Driving more customers and increasing margins will be moot if you spend all that extra revenue right away. To increase your auto repair shop profits, follow these rules:
What is a business broker?
A business broker or commercial real estate agent familiar with auto repair business sales in the area
Why is it important to observe first hand how a shop is run?
Allows you to observe first-hand how the shop is run, so you can make informed decisions about which aspects of the current arrangement you want to keep and which you want to refine or replace
How long do you have to work with a new owner before you take over?
But if circumstances allow, you can benefit a lot by working directly with the owner for a month or more prior to taking over as the new owner.
What does working with a current owner do?
Even if it must be for only a brief period, working alongside the current owner provides a solid foundation on which to base your final decision whether to buy, as well as to build on their success after the transfer of ownership.
Is auto repair a recession proof business?
For the mechanically inclined, owning an independent auto repair business offers a recession-proof income where strong customer service and hard work can create long-standing customer relationships and excellent repeat business.
What is Art Blumenthal?
Leveraging more than 30 years of experience as both an aftermarket business owner and aftermarket technology executive, Art Blumenthal LLC provides business intermediary and advisory services to both buyers and sellers of industry businesses of all sizes. Art is a member of IBBA (International Business Brokers Association, Inc.). For more information, or to initiate a no-obligation confidential consultation, visit www.art-blumenthal.com.
Why is confidentiality important?
Confidentiality is important and needs to be continuously managed. If word gets out that your business is for sale, it could adversely affect sales and your relationship with your employees and stakeholders. An experienced broker knows how to simultaneously market your business and maintain strict confidentiality.
What are the biggest mistakes that sellers make?
One of the biggest mistakes that a seller can make is leaving dollars on the table through an improper “recasting” of the financials that does not maximize the cash flow. A broker who has industry-specific experience will have seen dozens of financial statements for automotive businesses and, therefore, will know exactly which expenses to question as higher than industry norms.
Why is it important to have a broker?
Tax planning with your accountant is also important in reducing the impact of capital gains tax.
What is a CBR?
Before your business can be marketed, a comprehensive Confidential Business Review (CBR) is prepared to educate prospective buyers on your business and the industry. A professionally prepared CBR will include information from the sources in the chart at left, so you will want to have this information readily available to provide to your broker.
What does it mean to sell a business with confidentiality?
Selling a business with confidentiality means you can’t advertise it by name or put up a sign, so it’s even more important to address several key aspects of your business before it is marketed .
What is a dual pricing option?
If you are willing to consider seller financing, then one strategy to consider is a dual-pricing option, where you advertise both an “asking price” based on seller financing and a lower price for an all-cash deal.
Some Industry Sector Stats
- Take a look at some key industry statistics. There are over 81,600 companies in this line of business in the USA alone, classified under NAICS code 811111 and SIC 7539. Combined, the auto service centers produce $37.7B in annual revenues. The average auto repair shop is $462,000 with a staff of 4. Successful auto service centers develop strong reputation and loyal c…
Recent Business Sale Comps For Auto Repair Shop valuation
- As you can expect, such companies often become acquisition targets selling to competitors or larger firms working to expand their market share. So the selling prices that result in such deals are a good indicator of what the companies are worth. To value any other auto repair business, you can do a comparison against these recent sales. To do so, calculate valuation multiples tha…
Example: valuation of An Auto Repair Center by Multiples
- A typical way to estimate the value of a company in this industry is to use the annual revenue as the key metric. To illustrate the idea, let’s take a typical company with $462,000 in annual sales and inventory on hand of $50,000. Here are the valuation multiples we choose along with the results:
Inventory Is Added to The Multiple Result
- The value results above include the inventory addition as is typical when valuing the auto repair shops. Note that there is quite a range in our business valuation results. But what makes some companies worth more than others? Above all, this is a labor intensive business involving highly specialized auto mechanics. As a result, for higher valuation multiples the staff has to be manag…