Are you planning to sell your Collision repair shop soon? The current market is both crowded and competitive. As a seller, you can face multiple issues and frustrations that can be otherwise avoidable with proper details about the risks of selling a company in the current market. Although there are numerous ways that we can look at, these are the 8 most frequent mistakes that could have devastating consequences and result in anxiety or loss in a business sale.
If you plan to sell your business soon and need an exit strategy, schedule a free 20-minute conversation with Matt DiFrancesco. Discuss your vision and find out how you can adjust the nuts and bolts of your business and life to become prosperous in the future.
Automotive Technicians Vs. Exit Strategy
Owners in this space are technicians. They are great under the hood and developing their processes. Unfortunately, most of the time, the second generation doesn’t want to take over the business.
Plus, the general understanding of an exit strategy is that it is planned right when the owner is ready to sell. However, this isn’t the right approach as you will require time to add value to the business, know the market, and plan the next phase of life accordingly.
According to Michelle Seiler-Tucker, as she was a guest in our podcast, “Your Business, Your Life,” 60% of collision shops are expected to be owned by large conglomerates and MSOs by the year 2035. Only 40% will be independent.
Therefore, small business owners can suffer a huge loss, as they need to learn how to make their assets more valuable, so they are selling them for pennies. Read more about our guest, Michelle Seiler-Tucker, and ways to build a sellable asset here.
Mistake 1: Not Having A Solid Business Plan
A solid plan is the foundation of any successful business, and selling your collision repair shop is no exception. Without it, you are more likely to make costly mistakes or lose out on potential buyers. So before putting your shop on the market, have a well-thought-out business plan outlining the sales process, financials, and any necessary documents or information.
Mistake 2: Not Adding Value To Your Business
Imagine selling a house. You will engage in multiple activities, such as cleaning it and making it more presentable and welcoming. Before you hang the “For Sale” sign in the front yard, you will absolutely make sure to spruce the space up.
Selling a business requires the same steps. Check out your physical facility and see what needs to be fixed and repaired. It is important to spend some time preparing it. This includes cleaning the premises, updating equipment or furniture, and organizing all records and documents. By doing this, you will give the prospective buyer a good impression.
In addition, if there are any small changes or offerings that can bring in the diversification factor, which will add value to your business, include those too. The goal is to add as much value as possible to sell it for more. A few proactive measures can impact your bottom line!
Mistake 3: Not Valuing Your Business Correctly
A successful business exit planning is not hasty. You must never be in a hurry to sell your business and end up leaving money on the table. So, before putting your collision repair shop up for sale, it is important to research the market—including the current value of similar shops and their components, such as equipment, inventory, and real estate. This will help you understand the potential value of your shop and set realistic expectations for what buyers are willing to pay.
On the other hand, overpricing is a common mistake too. You should always land yourself in the selling process once you have pinpointed the realistic value of your business and not stick to the top dollar just because you believe it’s worth it.
One way to gauge the value of your business is to base it on quantifiable criteria. Secondly, as a Collision shop owner, you will have an in-depth understanding of the business. Therefore, you can proceed with the valuation by asking yourself if you would purchase another collision repair business at the valuation you have determined.
Mistake 4. Not Investing In Professional Services
Selling a business is a complex process that requires multiple steps and paperwork. While the DIY approach may be effective in some cases, for most business owners, hiring an accountant, an attorney, and a business broker will not only provide you with peace of mind but will also increase your sales price.
So, investing in professional services such as lawyers and accountants is important. This helps ensure everything is done legally and correctly, which can prevent potential issues down the road.
Mistake 5. Not Getting The Word Out
Once your collision repair shop is ready to be sold, you need to get the word out to potential buyers in order for it to find a new home. Advertising your shop through popular marketplaces, social media, or other local avenues can help spread the word and ensure that interested parties know it is available. Getting the word out is one of the most important steps in selling your collision repair shop.
Mistake 6. Not Being Flexible
Selling a business can be lengthy, and potential buyers may request or ask questions requiring you to be flexible. Keeping an open mind and being willing to negotiate will go a long way toward helping you sell your collision repair shop quickly and successfully.
Mistake 7. Not Understanding The Impact Of Taxes
Before putting your shop on the market, it’s important to understand how taxes will impact the sale. Depending on where you live, local and federal taxes may have to be paid during or after the sale. Make sure you understand the potential tax implications so there aren’t any surprises down the road.
Mistake 8. Not Having Patience
Selling a business is time-consuming, and it can take anywhere from several weeks to several months before it is sold. It is important to have patience throughout this period and not let your emotions get the better of you. Having a good understanding of what is involved will help you stay focused and motivated during this time.
Conversely, the opposite of this can also be problematic. Eventually, you may receive an offer that requires you to accept it or negotiate a compromise. It is a mistake to procrastinate or be indecisive in accepting a reasonable offer.
BONUS! Mistake 9. Not Seeking Professional Advice
Selling a business can be difficult, so it’s important to seek the advice of an experienced advisor or broker who can provide valuable guidance and insight. An experienced advisor can help you navigate the process and ensure that the sale goes as smoothly as possible.
Conclusion
An experienced business owner does not pre-judge a buyer prospect but discerns who is financially qualified to buy your company. Therefore, it is crucial to bring on board Financial planning companies such as HighLift Financial, with extensive business exit strategy experience and a Certified business exit consultant on the team.
Selling a business after growing it for years and coming up with the right value while steering clear of the emotional value attached to it can be a very complex process. You have to be prepared to be flexible and available to potential buyers. Make sure you take your time and sit with an expert to go over each detail because an exit strategy can affect your business and life.
There is a tug-of-war between competitors in the business world. Find out what three areas need to be on your radar for 2023 to take your collision repair business to the next level.
Contact HighLift Financial Today!
Financial advice does not only benefit the wealthy. It can help you protect and build your assets, make the most of your investments, and ensure your long-term financial stability. Schedule a free 20-minute conversation with Matt DiFrancesco to discuss your exit strategy.
Disclaimer
Matt DiFrancesco is the Principle and Financial Technician at High Lift Financial. He is a Certified Exit Planner (CExPTM), an exclusive designation, and he is the only one specifically focusing on the collision repair industry. He can be reached at matt@highliftfin.com or (814) 201-5855. No tax or legal advice is intended.