Buying an automotive business can be one of the best investments you’ll ever make — if you play your cards right. No matter what, people keep driving, which means they always need their vehicles maintained and repaired. Essentially, the auto maintenance business is solid, virtually recession proof, and continuously growing.
But just because an industry is growing, that doesn’t mean every business within it is experiencing that growth. If you’re considering buying an auto repair shop, a tire shop, a car wash, or any other type of automotive business, it’s critical that you understand what to look for to make a wise purchase decision. Below, the experts at Auto Center Sales explain what every investor should look for when getting ready to buy an auto shop.
Unless you’re highly confident in your ability to turn around a struggling business, the first thing you’ll want to know is whether an auto shop is profitable. You should ask to see prior years’ tax returns, ideally for three years back, to determine how the business has historically performed.
You’ll want to do some digging here — don’t just look for revenue and expenses. Find out what the expenses are, whether they’re justified, and whether there are areas for improvement. An experienced automotive business broker can help you find this information, as well as suggest opportunities for creating more profitability after you take ownership.
Location and Condition of the Business
Buying an auto shop in a high-traffic area of town is ideal. But the condition of the business — regardless of where it’s located — is another critical consideration. Consumers won’t flock to an unkempt location, so if you’re considering buying a business that could use a makeover, keep that in mind.
If the location is unkempt, chances are the machinery and equipment are too. You’ll need to invest more funds into the business from the get-go just to increase its appeal and functionality. That said, your offer should reflect any necessary improvements you must make after taking ownership of the shop. Working with an experienced broker can be helpful in this regard since it’s often difficult to assess the cost of improvements that must be made.
Reputation in the Surrounding Community
If an auto shop has a stellar reputation in the local community, in most cases, you’ll spend far fewer marketing dollars to maintain and grow the business. Buying an automotive business that’s either relatively unknown or that has a lukewarm reputation means you’ll take on greater risk.
If you’re like most business owners, you’re hungry for growth. So what kind of growth potential does the business you’re considering have? Are there enough customers in the area to grow? Is there room to add more service bays as your customer base expands? If there’s not a lot of room for expansion, your profitability could hit a ceiling in the future. Consider whether you’re comfortable with that idea and if you’re not, continue your search.
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Ready to Buy an Automotive Business? Contact Auto Center Sales
If you’re in the market to purchase an auto repair shop, a tire shop, a car wash, or any other type of automotive business, get in touch with our team at Auto Center Sales. As one of the leading automotive business brokerages in the United States, we’ve been facilitating auto shop deals for over 25 years. To learn more about our services and how we can help you secure a successful deal, call our Eden Prairie, MN office at 1-800-874-5793. You can also contact us online, and we’ll be in touch promptly.