You have been in the dealership for a while now…with a smile on your face, dealing with yard guys napping in the RVs, techs taking 30-minute smoke breaks three times a day, sales guys who hit the beer fridge at 3 p.m. daily, RVs arriving half-built from the manufacturer, and on and on.
Then business was crazy busy for a couple of years. That was hard, but you made it. Now, the pendulum is swinging the other way, and who knows where it will settle.
Tired yet? I am tired just thinking about you all!
Have you started dreaming about naps in the afternoon, hanging out with grandchildren, or taking that Alaskan fishing trip? Everyone exits one way or another and there is no shame in walking off the field when your enthusiasm starts to fade.
Start planning for this now. The earlier you can plan, the better the result. Keep focused on your bottom line; the dealership’s financial health is what you are selling. Seek some sound advice to retain as much of that hard-earned wealth as possible.
Recently, I worked with a dealer who received an offer to buy his store but did not have time to meet with his advisors before accepting the proposition. When he later called them, the dealer realized the deal would not work for him. He tried to renegotiate the deal, but the jilted buyer was in no mood to start over.
Do Not Leave Too Late
When your enthusiasm begins to decline, your thoroughness and the dealership’s rhythm start to wane, as does the revenue, the bottom line and the price a buyer will pay. A buyer willing to purchase a turnaround will be expecting a bargain. Do not wait until you are that bargain.
If you are getting up there in years, health crises happen suddenly (this is a stressful gig). Sudden death can happen, and your family will be forced to figure everything out while trying to keep the dealership running. Terminal disease can strike, leaving you weak and desperate to sell while trying to survive the disease itself. So, leave at the top of your game and enjoy your retirement in health and comfort.
Many dealers will sell a business only once in their lives, so let’s talk about some important steps to exiting profitably.
Where to Start
Get some sound advice from qualified professionals. Although seeking guidance from experts will cost you upfront, you will save money in the end.
For example, spending $10,000 on a good tax attorney might save you $100,000 or $500,000, or much more at closing. Like running your business, consider the cost of hiring certified professionals as an investment in your bottom line.
Remember, the selling price is just the beginning. Keeping as much of the sales price as possible is the No. 1 objective!
Talk to professional advisors before you go to market so you have a plan. Then, continue the conversation as the deal unfolds.
Look for professionals who have the qualifications to advise you. Unqualified professionals may talk a good game, but real credentialed consultants must follow rules set by a regulatory body with high standards, fulfill ongoing education requirements, and adhere to ethical standards to protect the client—you.
Who Should You Talk To?
Accountants and tax attorneys. Your CPA has likely been at your side for many years, so let her know your plans. She will likely have some great insights.
With that said, your dealership is a complex organization. The accountant who prepares your annual tax returns is likely very good at filing tax returns and preparing financial statements but, like all of us, his knowledge is limited.
Tax planning can be very complicated. Of course, we all know the gain from goodwill is taxable, but what about the benefits of a stock sale vs. an asset sale? In our quirky industry, a buyer may be better off buying stock when a multiline dealership is involved. How does a seller minimize tax in that situation?
Tax attorneys are tax specialists. Tax is all they do. They have knowledge exceeding routine tax return preparation that can make a tremendous difference in how much wealth you keep at closing.
In addition, tax attorneys have “privilege,” which means your tax minimizing strategies are private from the IRS. CPAs like me do not have privilege.
Valuations and Valuators. You need to consult with a valuator to determine what your business is worth. The two most common credentials are CVA (certified valuation analyst) and ABV (accredited business valuator, also called a CBV in Canada.) Again, the credential means in-depth training, ongoing education and an ethical standard.
Beware of “rules of thumb,” averages and other “quick” answers from sidewalk experts. Each enterprise is unique.
A standard valuation likely will include your entire enterprise: cash, accounts receivable, fixed assets, goodwill (or “blue sky”), accounts payable and debt, etc.
In many cases, the sale will be an asset sale, which commonly includes only fixed assets, inventory/supplies and goodwill. That is, you are selling some and keeping some of your business, so the “selling price” might be only part of your total “value.”
Before you go to market, talk to your financial planners and wealth managers as well. These folks invest your sale proceeds throughout your retirement and beyond.
Certified Financial Planners (CFPs) come in two groups. Some are affiliated with an investment company like Schwab or Fidelity and are paid when you buy their products, for example, mutual funds, annuities and insurance. CFPs who charge by the hour cost money upfront but can help you with broader goals such as investing in real estate or other options.
Wealth managers tend to be CFPs as well as CPAs, tax specialists or attorneys. They are more likely to have the skills to advise you about your entire estate. Wealth managers typically advise higher net-worth individuals.
DIY Your Investments?
Early in my career, I prepared a memorable tax return for a woman who received a substantial sum of money upon divorce and decided on do-it-yourself investing. By tax time, her balance dwindled to almost nothing; she had to work a menial job and her future looked bleak.
If money management is your expertise, manage investments yourself. If not, consider a qualified professional.
Transaction intermediaries, such as brokers and mergers/acquisitions professionals, cost money because they have a rare set of skills: advanced financial knowledge, strong interpersonal skills, the willingness to work long and hard with no certainty of pay, and solid sales and marketing expertise.
Could you manage all this yourself? Sure, but often the work you would do in place of these professionals dies on the vine, as buyers and sellers are busy with their daily business. Moreover, buyers and sellers may find negotiating directly almost impossible without risking insult or injury that kills the deal.
Choose a representative carefully because this is an unregulated industry. A grocery store clerk can claim to be an M&A intermediary. “Packaged broker franchises” with homemade training packages, some forms and a certificate from a color printer are in no short supply. Realtor-brokers are prevalent as well but may not have the required specialized industry knowledge.
A good first step is to check the rep’s bio on LinkedIn. Search for elements that support their skills claims. Look for MBAs, CPAs, CFPs and former dealers themselves. Talk to people in the industry and verify their credentials.
Among the things these professionals will need are:
An in-depth understanding of the industry. Generalists often fail to sell dealerships because they do not understand manufacturers’ and floorplan companies’ requirements. The ability to obtain a Small Business Administration loan is not enough.
Sales and marketing skills. Look for some history where these skills are proven.
Strong financial skills. A business is an investment. Someone selling that investment must be able to answer buyers’ and advisors’ complex financial questions. M&A professionals need to read the story the numbers tell about your business’ greatness and opportunities.
Transaction attorneys are crucial. When it comes to the sale, you will need an attorney, and they specialize much like surgeons.
No one wants a foot surgeon performing their heart surgery.
If your family attorney does lots of transactions, she may be the one. If not, you and your intermediary should find an attorney with transaction experience, preferably with dealerships. A dealership with various manufacturers and floorplans is quite different from
a local retail dress shop.
Qualified intermediaries will gladly discuss your situation before you sign anything. At Stacey International LLC, we are always happy to have a no-pressure conversation about the process and your business.
Conclusion
Start planning your eventual exit now. Talk to the right professionals to help you receive and retain the most wealth from your sale whether you go to market this year, next year or at some future date.
A good mergers/acquisitions intermediary should be able to help you find the right professionals, if needed, and partner with you through the process.
Carrie Stacey is the owner of Stacey International LLC, a boutique mergers and acquisitions and business valuations firm, specializing in RV and boat dealerships. Stacey International is a firm of credentialed senior financial executives with locations in the USA and Canada. Stacey owned her own dealerships and managed others and has experience in professional sales, public accounting and corporate management roles at Daimler Trucks NA.
