If you’re planning to sell an automotive service, parts, or repair business, you’re likely wondering if the profit you stand to make on the sale will be greater than (or equal to) your investment. It’s all too easy to assume your company is worth more than its actual market value, and that’s why true business valuation is so important. Below, the automotive business brokers at Auto Center Sales discuss what you need to know to ensure you list your business according to its true market value.


Be Realistic About the Market

If you’ve researched the sale prices of other automotive service businesses that have sold in your area, it’s easy to get caught up in the idea that your business has a similar value—but that’s not always the case.


The true market value of your business relies heavily on the numbers behind your business and the current market, not what other businesses in your area have previously sold for. If the economy is trending upward, your business may be worth more than you might assume. But if it’s trending downward, the price you have in your head may not align with what the market is currently doing.


The last thing you want is to list your business at an inappropriately high price because not only will it sit on the market forever, but you’ll also be disappointed when you’re forced to lower your asking price. Listing your business below its market value isn’t ideal either. Prospective buyers may assume there’s something wrong with it and pass it by, which can significantly slow down your sale. And ultimately, you could leave thousands of dollars on the table that you really deserve.


If you’re waiting to sell until the market catches up with what you think your business is worth, you could be waiting a long time. If you’ve got an idea of your company’s market value in your head, it’s always best to re-evaluate with the help of the professionals—like our team at AutoCenter Sales. We can help you run the numbers, put you in touch with our industry-leading connections, and ensure you list your business at a price that coincides with its true value. 


Factors That Affect an Automotive Business’s Market Valuation

Whether you plan to sell a tire shop or sell a car wash, a parts business or an automotive service business, the same general factors determine the company’s market value. They include:


●        Revenue. The higher your annual revenue, the more attractive your business is to prospective buyers. Your business valuation may be higher than you first assume if your revenue is high enough that prospective buyers have the option of becoming absentee business owners.


●        Customer or vehicle count. The number of customers or vehicles your business serves on a rotating basis serves as a solid indication of how busy your shop is and how much profit a prospective buyer stands to make after the purchase. If the number is high, that’s good. If it’s not as high, there may be additional growth opportunities, and an automotive business broker can help prospective buyers see that potential.


●        Labor costs. Labor costs comprise a significant percentage of your business’s operating budget. Comparing labor costs against sales helps determine business valuation.


●        Cost of goods sold. The ratio of your parts costs to your revenue also plays a role in business valuation. An automotive business broker with extensive industry knowledge can help you determine if your costs are in line with industry standards, and if they’re not, a broker may be able to put you in touch with better vendors.


●        Location. If your business is situated in a bustling part of town, it’s more attractive to prospective buyers, which means they’ll be willing to pay more for it.


Other factors that influence the current market value of your business include:


●        Average repair order or sales per customer

●        Number of bays, lifts or parking spots

●        Your discretionary income

●        Whether you pay your employees an hourly rate or a salary

●        The number of years you’ve been in business

●        What your current marketing efforts look like and how they perform


Keep in mind that the above list is far from comprehensive. A wide variety of factors affect how much your business is worth, and if you don’t consider all of them, you’ll end up listing your business at an inappropriate price. To ensure you set realistic expectations for your upcoming sale, having a professional business analysis is highly recommended.


Need Help With Your Automotive Business Valuation? Contact AutoCenter Sales

If you’re planning to sell an auto repair, service, or parts business, don’t hesitate to contact our team at AutoCenter Sales for assistance. For over 25 years, we’ve been facilitating automotive business sales and purchases across the United States, and our extensive industry knowledge and connections will help ensure you get the deal you deserve. To learn more about how we can help you successfully sell your auto business, give us a call today at 1-800-874-5793 or connect with us online and we’ll be in touch.