The automotive repair industry is a challenging space as it is constantly changing. Now and then, the owners want to transition their business. However, due to a lack of planning and a proper roadmap, there are likely to be more challenges that can bring down the multigenerational legacy.
Most of the time, the owners have the intentions and assumptions that the next generation is willing and capable of handling the business. But, again, a communication vacuum and little or no knowledge of family and individual goals can threaten the years of hard work.
When the younger generation doesn’t want to take over, the owners are left with no choice but to sell it. Here, if the decision-making is hasty, then chances are that the leading parties might not evaluate the business’s worth correctly. Resultantly, they can end up selling it for a lot less than its actual value.
Michelle Seiler-Tucker joins Matt DiFrancesco on the Your Business, Your Life podcast. She is the Founder and CEO of Seiler Tucker Incorporated and author of WSJ & USA TODAY Bestseller EXIT RICH. The duo discusses how you can build a sellable asset and sell your business for a considerable profit.
Your life and your business are intertwined. Limiting yourself to a basic financial plan that you seldom modify, track or improve can result in slower growth. Instead, you must have retirement, succession, and other transition plans that you keep re-visiting when any component of your business changes.
Sometimes juggling business and long-term planning can be very tricky. Having an expert can guide you and layout a sound roadmap that you and your business can follow. Schedule a free 20-minute conversation with Matt DiFrancesco to discuss your automotive business.
About Our Guest
Michelle Seiler-Tucker specializes in mergers and acquisitions and has been in business for over 20 years. Her firm has helped to sell over 1000 companies in various industries. She has a process in place that has been successful. It assists her in closing 98% of the deals, and on average, she gets 20%-40% more on the sale than what her clients ask for.
Michelle is also the Best-Selling Author of the book “Think & Grow Rich Today”, and “Sell Your Business for More Than It’s Worth”, and her latest book “Exit Rich” is available now for purchase. In addition, she has been featured on INC., Forbes, and USA Magazine, and she makes regular radio and TV appearances on Fox Business News and CNBC.
A Picture Of The Current Business Industry
The business landscape has flipped flopped. So startups are no longer at significant risk, meaning our economy is at great risk. That’s because 30.2million businesses employ over half the US workforce.
Small business is the backbone of our economy. Yet, out of 27. 6 million businesses, those companies that have been in business for ten years or longer 70% of them will go out of business. Take the example of Toys “R” Us, which went out of business after 75 years. Moreover, Disney Stores just closed up all their locations. Plus, Go dive is closing up 1500 locations, while GNC is closing down 900 locations.
These businesses are not being discussed. Due to a lack of information, business owners don’t know that these are being sold for pennies on the dollar. They’re closing their doors or, even worse, filing bankruptcy. That’s why it’s imperative to work with the business owner to get their business in tip-top shape before putting it on the market. So they have a sellable asset.
The Automotive Collision Shops
The owners in this space are technicians. They’re great under the hood and developing their processes. Unfortunately, they’re often missing out on the business. When the second generation comes, there are no family members who want to take over the business.
It is predicted that by 2035, 60% of the collision shops will be owned by the MSOs and large conglomerates. Only 40% will be independent. Due to this, small business owners can face a huge loss as they don’t know how to make it a more lucrative asset for a buyer to buy. And, so, they’re selling them on pennies on the dollar.
How To Make Your Business A True Asset And Sell It For Value?
Collision technicians have their heads under the hood, focused on the business. It’s pretty much every entrepreneur in every industry. The problem is that most entrepreneurs work in their business, not on their business. They have created a glorified job as they work every day versus a business that works for them. And that’s why 80% of businesses don’t sell because business owners are not building a sellable asset.
We cannot say that it’s wrong or a bad trait. It’s just that sometimes the business owners get so focused on the daily operations that they don’t follow up on the long-term vision. So, focus on working on your business because there’s no reason you should be selling pennies on the dollar. Private equity groups or strategic buyers will pay a lot more for the right businesses with proprietary assets.
Major Problem Area
The number one reason businesses don’t sell is that business owners don’t think about selling their business. They don’t think about selling until they wake up one day, facing a catastrophic event. And that could be internal or external. Inner is health issues, partners, disputes, divorce, and death. In contrast, the externals can be a pandemic.
So the worst time to sell your business is during crises or a catastrophic event and the best time to sell your company is when your business is doing well. Let’s not forget the owner burnout. They constantly have feelings that they can’t take it anymore, so they will want to sell. But the problem is that the price they need to be able to enter the next phase of their life is typically different from the value of their business.
Not knowing the exact business worth and dreaming of higher valuation and selling it for pennies is financial suicide. So, to steer clear of it, you need your evaluation done every year. And the reason for that is some events increase valuation or events that decrease valuation. The pandemic is a perfect example of this.
The 5 types of buyers
You must understand the kinds of buyers you will encounter in the market. Here are the 5 types:
- First-time Buyers – 90% of buyers are first-time buyers. They buy small businesses, for example, coffee shops or small automotive shops.
- Turnaround Specialists – They buy distressed assets, get in there and fix them.
- Private Equity Group – They buy based on platforms and add-ons. An example is that a private equity group already has an automotive platform. Then, they will consider add-ons, such as smaller companies that are under a million dollars in EBITDA.
- Strategic Competitors – These are typically the best buyers because they’re buying synergies or something that will help catapult their business to the next level, like trademarks, patents, contracts, or branding.
- Sophisticated Entrepreneurs – These are buyers who are industry agnostic. Instead, they chase EBITDA and cash flows.
The 6 P’s of a business’ infrastructure
When you go into a business, you define who your target market is. And then, you identify all their specific needs or target market-specific needs. That’s how you maximize value and get the highest sales price. Once you have figured all this out, now is when you build in a solid infrastructure and build your business on what we call the six cylinders or six PS.
People
Business owners haven’t built a sellable asset because they are working in their business. They are the business! If I pull that business owner out of business, there is no business. That is not sellable. Buyers are not buying jobs; they want to buy businesses. So you got to build the infrastructure, which is the synergies buyers are buying. Hence, you will have to invest in the people.
“You don’t build a business, you build people, and people build the business.”
Product
70% of businesses out of 27.6 million companies are going out of business after being in business for 10 years. The number one reason for that is lack of Aim. Business owners stop innovating after a certain time, and they get complacent. This is where the definition of insanity comes in! Doing the same thing over and over again and keep expecting different results.
So, the second p, the product, is about asking yourself: Are you keeping up with the industry? If you don’t have a good product and aren’t trying something new to keep up, you will not survive. Keep innovating!
Process
Processes are often overlooked. They aren’t discussed as a core component and are often neglected. However, it is crucial to understand that they can make or break a business in the eyes of buyers. When designing your processes, you should keep the customer experience in mind. Are they efficient, productive, and well documented? If you can define your operations, you will see exponential growth in your business.
Proprietary
The fourth P, proprietary assets, is the most significant value driver for your business. The more synergies you have, the more you’ll be able to get for your business. Think about what kind of proprietary assets you have, for example, Brands, Trademarks, Patents, Databases, Contracts in Place, IP Real Estate, etc.
Patrons
The most important element of any business is the client base. This is because customers provide a constant flow of revenue. Therefore, it is imperative to have a diversified, loyal client base, without which a business will run out of gas.
Profits
Profits are the most profound P since your business would not be sustainable without them. Does your business generate over or under $1 million in EBITDA (Earnings before interest, taxes, depreciation, and amortization)? Do you have multiple revenue streams and residual income? Ultimately, profits aren’t the problem; rather, they’re a symptom caused by not focusing on the other 5 P’s.
Get In Touch With Michelle
If you want expert advice and services regarding buying, selling, fixing, or growing your business, you can contact Michelle. The best way to reach her is through her website. Remember, it’s crucial to know the true worth of your business as that will impact your life and the legacy you have built.
Contact HighLift Financial Today!
Financial planning is more than just analyzing your possible costs and seeking different ways to manage these costs. It’s a road map, a guideline, a reminder of your goals. An expert in this area will help you identify or recall what you are trying to achieve in the short-term and the long-term. Schedule a free 20-minute conversation with Matt DiFrancesco today!
At HighLift Financial, we believe in constant growth. Thus, we take our time to inform business owners about updated practices and ways in which they can further grow their business. Hence our blog section or the “Difran Digest” is dedicated to showing the leaders that financial planning is more than just numbers and affects more than just the daily operations. In short, your business affects your life and vice versa!
Disclaimer
The information compiled and posted here solely represents the opinions and views of the guest. It might not be similar to the opinions and views of High Lift Financial. It is not a substitute for tax or legal advice or professional investment.
Always consult your financial advisor with any personal or business planning queries. DiFrancesco Financial Concierge, LLC. d/b/a HighLift Financial is a Registered Investment Advisor registered with the State of Pennsylvania and subject to the State of Pennsylvania’s regulatory oversight.