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10 Rules For Selling Your Transmission Shop (or any shop for that matter)
These are the rules I followed to sell our shop.
TEN COMMANDMENTS
FOR SELLING YOUR TRANSMISSION REPAIR SHOP
1. Value Your Shop Appropriately (and in this Business, Value is Based on Cash Flow)
You must be realistic about valuing your shop. Sources state that 70% of all businesses for sale never sell, which is probably due to the business being priced too high or having a bad financing structure. You should be familiar with the prices of other shops that may be for sale in your area and be in a position to assess the cash flow and other financial points regarding your shop that are favorable when compared to these other shops. To be able to assess this, before your business goes on the market for sale, you should have certain financial records ready. You should have your last 2 years of business federal tax returns, profit & loss statements and bank statements, and from these records have calculated an accurate annual net income/cash flow figure. REMEMBER: HIGH CASH FLOW IS WHAT SELLS CENTERS AND ALLOWS BANKS TO MAKE BUSINESS LOANS! Serious buyers will immediately ask for this information so it benefits you to advertise it. 95% of the time, Buyers will want to see your tax returns right at the outset to check that you have been accurate in your statements and to assure that they can get a bank loan, if one is needed. Nothing will kill a deal quicker than a potential buyer feeling uncomfortable about the accuracy of the information he is being given and a seller not being able to prove it from his financial records. BOTTOM LINE: If you cannot provide substantial proof of your advertised cash flow, do not expect to sell your center. On the other hand, if you can provide such information but not from your financial records, be prepared to help your Buyer with financing.
2. Write a Comprehensive One Page Fact Sheet About Your Shop
Buyers will need to know many details about the business being sold and you do not want to risk leaving out pertinent data they will need to know. So rather than having to re-state this information each time you talk face-to-face with a potential buyer, make up a one-page summary of the key financial statistics about your business (number of employees, average weekly/monthly sales, net income/cash flow, lease terms, list of equipment etc.) and also include some history of the business and your ownership and management, important attributes of the area or particular location where you do business, what you would recommend to a new buyer to increase business once he takes over, the reason for selling and any training that will be available after the sale, etc.
3. Get Maximum Advertising Exposure to Generate Lots of Potential Buyers
To sell your business, you need lots of potential buyers (ones that are financially qualified) to see that your shop is for sale. Buyers looking for the right opportunity may be willing to relocate and can come from all over the United States or Canada so you need wide-reaching advertising exposure. You must advertise adequately on the internet to get the word out to the right buyers and you will need to know what to tell them about your shop to generate maximum interest. While it only takes one buyer to buy the business, it is always best to generate maximum leads to assure success in selling your business.
4. Get Non-Disclosure/Confidentiality Agreements (NDA) Signed
Have all potential buyers sign and date a confidentiality agreement before you give out any information. This is very important to protect your ongoing business during the sale process. Make sure that potential buyers understand how important confidentiality is, not just to you but also to them in the event they buy your business, and that they must sign it before you can have any dealings with them.
5. Get the Negotiations Going and then Keep Them Moving
Make sure that when you get an interested buyer, you stay in touch and, especially when you are negotiating the terms of the sale, that you keep moving forward. No situation, whether it be a point of
negotiation or providing information needed for various decisions that must be made along the way (such as with a lender or financial advisor) should be left sitting. Anytime this happens, it could kill your deal.
6. Get a Purchase Agreement Signed and Deposits Placed Immediately
Getting a purchase agreement signed and moving ahead under its terms to reach closing on the transfer of the business is critical. Your goal at this point is to sign off on any contingencies as quickly as possible. To be sure everything goes smoothly, have your accountant ready to address the allocation of the purchase price under the purchase agreement. Waiting until later may delay your deal and, again, Delay Kills Deals!
7. Set a Clear Limit on the Time for Due Diligence by the Buyer
Due diligence by the buyer should last no longer than two weeks. If you have followed the steps given here, you will have your information organized and ready and this is all the time a buyer should need to investigate your business. You do not want to be waiting for a deal to become final, only to discover that the buyer you thought you had has decided not to move ahead and your other potential buyers have moved on to other interests. The purchase agreement should specify a defined time period for the due diligence, and all parties need to keep to the schedule. Remember, Delay Kills Deals!
8. Get Your Money in Hand Before You Stop Observing This Sale Process
Until the title to your business transfers and you are paid the purchase price from the escrow, the business is not sold. Many deals fall out of escrow for a large variety of reasons. Continue to keep in touch with any other leads/potential buyers you may have and keep collecting contact information for any new leads. Be sure that you have a successful deal before you let up on any of your efforts to sell your shop.
9. Keep a 100% Positive Attitude Throughout the Process
A 100% positive attitude leads to positive interest from buyers, which then leads to positive results, i.e. the sale of your shop! Your positive attitude will make prospective buyers want to deal with you and make all your dealings go more smoothly – key ingredients in making any sale.
10. Hire An Experienced Consultant Who Knows the Industry to Help Bring About a Sale
You need a result-oriented industry consultant who can respond to the types of questions that a prospective buyer might ask about owning a transmission repair center and help that buyer to better understand the opportunity involved in owning your business. Keep in mind that most general business brokers are just that — they take all types of listings from anyone that comes to them and do not concern themselves with knowing about the specific business being sold. They would be just as happy leading a potential buyer to purchase a donut shop that they have listed rather than selling the merits of owning a transmission repair shop. At a minimum, you should be looking to hire someone who has had experience in selling auto repair businesses and who can persuade you that they can “walk the walk and talk the talk” of why your business is a great opportunity.
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5 Replies
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So…Where can one find “At a minimum, you should be looking to hire someone who has had experience in selling auto repair businesses and who can persuade you that they can “walk the walk and talk the talk” of why your business is a great opportunity.” I’ve looked everywhere and I can not find even a listing in all of Chicagoland for an Automotive Business Broker that has credentials, and verifiable sales. I would Love to have any referrals any member has, good or bad.
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That list of 10 rules was written by a former shop owner who retired and started selling other people’s shops in semi-retirement. His name is Art Eastman and he lives in southern California. No wonder he put that in. I really don’t know if he’s even doing it anymore. There’s no shortage of business brokers, but to find someone automotive-specific may be hard to do. You can contact Art at: art_mr0007@hotmail.com If he doesn’t do it anymore, maybe he can point you in the right direction. I followed everything in the list except the last part about hiring a broker. I did it all myself. Contact me if you need to talk. J. Larry Bloodworth / larrybloodworth@gmail.com / 801-885-2227
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My tax accountant had been bugging me for a few years to get an appraisal on my business. I used a broker named Art Blumenthal who had written articles for a Shop Owner magazine I read. At the time he offered a free analysis if you sent him some financials. Number seemed good to me. A year or so later I mentioned to a few people that I might be a year or three from retiring – might want to sell my shop. Had a few people hear that through the grapevine and approach me. Got a bit serious with on eof them and my crew approached me and said they didn’t want to work for that person; would I entertain an offer from them? We put together a deal and its been almost three years. And they are doing FANTASTIC at making money AND keeping our customers HAPPY! So maybe I wouldn’t make hiring a Broker one of the first steps…
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Steve, I didn’t sell through a broker either. I consider my broker who wrote those 10 rules to be a good friend. He wanted to GIVE his business to me so he could fully retire since he just recently purchased a multi-million dollar home in the San Diego area. Frankly, I don’t need any job, let alone a job requiring flying around the country.
Just curious, did you sell your real estate with the business?
Did you lease your real estate with the business?
I posted an earlier topic titled, “HOW TO GET BUYER FOR YOUR SHOP REAL ESTATE”. I mentioned the business real estate website LoopNet.com. I received a lot of leads through LoopNet. However, what ultimately sold my real estate was the good old fashion 8″ X 30′ FOR SALE banner on the building itself. That’s where I made my full retirement.
Five years earlier, I had sold only the business to my largest competitor. The way that happened is through simple phone calls. I called the 4 largest competitors and told them my business was up for sale. From the time I made those calls to the time I had cash in hand was only 6 weeks. The real estate sold in 2 weeks.
A word of advice, have a pre-payment penalty clause written into your mortgage agreement. My original real estate sales terms were for $2.3M financed @5% for 30 years. We would receive $9,600/mo. for the rest of our lives. Five months later, the buyer sold his business to a national concern. The same month, they paid the mortgage off in full. The bad part about that was that we incurred a $400K tax bill all in one year. OUCH! Don’t let that happen to you.
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[quote quote=123520]FOR SELLING YOUR TRANSMISSION REPAIR SHOP[/quote]
There’s no one-size-fits-all answer to this question, as the rules of selling a transmission shop will vary depending on the specific business and its location. However, some general tips to keep in mind when selling a transmission shop include:
1. Do your research and be prepared before putting your shop up for sale. Have a realistic idea of what your business is worth, and be familiar with the market for transmission shops in your area.
2. Price your shop realistically. It’s important to find a balance between pricing it too high and pricing it too low – you don’t want to scare potential buyers away with an unrealistic price tag, but you also don’t want to sell yourself short.
3. Have all of the necessary paperwork ready to go, including financial statements, contracts, and leases.
4. Take the time to find a qualified buyer who will continue running the shop as a transmission specialist.
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