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. ...
Is it easier to buy an auto repair shop?
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. The auto repair centers that focus on excellent customer service tend to be more valuable.
What makes a good auto repair business?
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.
Where can a consumer go to get a car repaired?
One, the consumer can go to the dealership where the vehicle was purchased, and the auto repair facility at the dealership tends to be the most expensive. Two, the consumer can go to an independent auto repair shop. There are shops that specialize in European vehicles, domestic vehicles, or Japanese vehicles, etc.
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 can I make my repair shop more efficient?
Here are some tips for increasing efficiency in your shop to get these results.Improve visibility. Do you know what is in your automotive shop at all times? ... Take advantage of on-site training. ... Embrace technology. ... Decrease employee turnover rate. ... Appreciate your staff.
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.
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…