Are you planning on selling your auto shop at any time in the future? Not all auto repair shop owners plan on selling. Some of them intend to work in their shops until they can no longer work and then close the doors. Most owners would like to recover a large portion of the time, love, and sweat equity they’ve put into their shops and realize a profit from a sale down the line, though. If this is you, it’s better to begin your exit planning sooner rather than later if you want to get the best price for your business.
Shop Ownership – How Will You Get Out?
Currently, the Automotive Management Network is running a poll called Shop Ownership – How Will You Get Out? If you would like to take this poll, click here. The answer options given for this poll are:
- Sell it on the open market
- Sell it to an employee
- Sell it to a partner
- Family members will take over
- Close the doors, shut it down
- I refuse to leave
A few years ago we wrote a blog asking owners how independently they could operate their shops. In other words: How well would your shop run if you were to take a month vacation? A six-month vacation? We said:
“Many owners like to maintain control of their entire business, keeping a finger in every pie, but one secret to greater success is finding competent people to fill important positions within your company and allowing them to do so. It may take some doing to find and retain capable responsible people to be your manager, your sales advisors, and your technicians, but it is worth it to invest time and money.”
Begin Your Exit Planning Process Sooner Rather than Later
The exit planning process is far more complex than many owners realize, but one of the best ways to begin is to determine how well your business can operate without you. If it can’t run at all, you have a lot of work ahead of you to make it salable. No one wants to buy a business that can’t run without its manager who is planning on leaving. The first step, then, is to determine what the shop’s weaknesses are and to begin to fix those weaknesses over time. Some common weaknesses are:
- The shop is too owner dependent.
- The shop does not have all of its processes and procedures written down and implemented so every employee understands and follows them.
- The shop does not have reliable people in key positions.
- The shop’s future management is inadequately prepared to lead.
- The shop doesn’t have a large, loyal, or diverse enough customer base.
Once you know what your shop’s weaknesses are, you can create a plan of attack for increasing its value by addressing them. Many business owners are familiar with business plans. They are comfortable with writing business plans and following them to increase profitability and grow their companies. Exit planning uses the same kind of approach, and having a written plan is very useful.
The biggest challenge of exit planning is that there is a lot on the line for an owner and most owners do not start planning soon enough. If you have an auto shop that is not very profitable and you are young, you can make changes and try new things, tweaking and adjusting until you find something that works. You may not make all the profit you would have if you had done everything perfectly from the beginning, but you can still build a successful business and be satisfied with your accomplishments.
If you do not plan for your exit soon enough, however, your business might not realize anywhere near the price you think it’s worth, and you might be forced to take less money when you sell it or to stay with the shop to help manage it through a transition. Too many owners wait to ready their businesses for sale until they are impatient to retire or until an unexpected life event forces them to sell. At that point, there is little they can do but take what they can get for their shops. Often these businesses do not sell at all.
If your answer to our above poll is either “Close the doors, shut it down,” or “I refuse to leave,” and you have enough money for retirement and your family, this is not your worry. If you do want to realize a profit on all of your hard work or pass along a shop that will continue to function to your family members or a partner, you should begin thinking about your exit planning sooner rather than later.
What are you doing to ready your auto shop for an eventual sale? We want to know, so leave your comments either here or in our forums.