5 Things to Consider Before Retiring or Selling Your Automotive Business
When speaking with automotive business owners, I am surprised to hear how much Super and income producing assets have been accumulated and set aside. Even though they are mostly quite modest in nature or sadly what I call “smoke and chewy money”, for a lot of folks in the automotive industry their only chance of setting aside a significant amount of money for retirement is by selling their business!
This may not turn out well for many business owners. Let’s look at some really important factors…
1. Is my Automotive Business a Business that is ready to sell?
Do you own a business that has a proven system, and operating procedure that the business runs by? All buyers want a turn-key business that has reliable cashflow, profit that will give a “return on investment”. The buyer needs to know they can make money and that they have a loyal herd of customers. They want to know that there is a system to train staff. If it’s all in your head and there is no way to prove to the potential buyers (New Owner) that the business will have the same consistent success after the sale, then you are doomed. The more systemised the business and the less reliant on the current owners – what I call (owner dependency) – the better the multiples of profit and the sale price. Multiples can vary from 1 x, 2x, 2.5x to 3 times depending on the systemisation of the business. Having established an adjusted net profit, you need a multiple. The challenge here is to assess the many variables that can affect the multiple;
Financials: How is the business trading? Are the accounts in good order?
Profitability / Margin: Is there a healthy margin? Are the profits vulnerable?
Balance Sheet: How do the balance sheet ratios compare with sector norms? Any uncertainties?
Owner Dependency: Is there a strong team in place? Can the business survive the owner’s departure?
Contracts: Another important factor in the stability and therefore the multiple. Does the business have any contracted income and therefore, forward visibility of earnings?
2. Who is doing what in the business, who is performing the key roles within the business?
Currently, are you working as a technician, at front of house, as a service advisor or entering invoices and doing bookkeeping? Are you paying yourself the same salary you would have to pay someone to do the job you are currently fulfilling? It is imperative that you demonstrate that the business can still make a great profit even if you were paying another person to carry-out that function.
3. What requires house cleaning?
Are there outstanding liabilities? Outstanding ATO taxes? Outstanding leases? Outstanding warranty issues? Neither you nor the buyer/new owner will want this type of thing on their plate as things move forward, this could potentially cause you to lose the sale.
4. It’s important to show you have A Profitable business!
Some accountants often encourage businesses to spend money at years end to show a smaller profit and in doing so you end up paying less in tax. An issue with that is you basically spend an entire dollar to claim thirty cents back? What? Spend .70 cents to save .30 cents!
Other accountants will encourage you to have a three to five-year plan to get the house in order and sell, they’ll recommend the size of profit you should be aiming for. You should know up front that this strategy could see you paying larger taxes over a few years. There may be add-backs that come into play… An add back, is an expense that is added back to the profits (most often earnings before interest, taxes, depreciation, and amortisation, or EBITDA) of the business for the express purpose of improving the profit situation of the company. Your accountant may encourage you to pull back on spending habits that can impede on profits. And if you have an up to date business, they might even suggest no new capital equipment purchasing.
5. Is Your Business a Stand-Out amongst all the other businesses out there that are for Sale now and in the future?
I have spoken to owners who think about selling at the 11th hour, when the business is on the way down. The absolute best time, the best plan is to sell out when the business is pumping. It is important to prove to the new owner that it starts, idles, runs and drives well, that it is making great sales, has money in the account, pays all of its employee entitlements, it puts 15 to 20 percent of sales in the owners pocket, this is the best time to sell and retire. If the time is not ripe for you during these times, keep tucking away the profits until you do find a buyer, it’s your call!
At Automotive Business Coach we can assist with and provide loads of resources which include agreements, mentoring and coaching to automotive business owners to get the most out of their automotive business. For more knowledge and information on how to place and prepare for the sale and retirement plus other compelling business applications, Go To:
Unlike Red-Wine very few things ever get better with time. Facts do not cease to exist just because you ignore them. When emotion goes up, intelligence goes down. The mind, like the parachute works a whole better when it open.
Making mistakes is absolutely inevitable but admitting to them and learning is optional.
It’s nuts to think, believe that our ability, intelligence, and hard work can overcome a tough economy or a bad business formula.
Success will not make you invincible or bulletproof, success can and will make you stubborn, complacent and egotistical by themselves this is a cocktail for a major defeat. You get what you tolerate in business and in life. Never wait to address personal or substandard work performance, their either doing a great job or they aren’t. The cost to the business of tolerating an incapable or transgressing employee is far greater than the discomfort of having a tough conversation and a swift sword termination.
All opportunity comes with a cost.
Just about anybody can make money in good times. Poor cashflow is like Kryptonite to any business. It kills. No cash, No business, Cash is King and Marketing is Queen. It takes three good business deals to make up for one bad one. Put cash aside every week, especially during good times. Someday you’ll be grateful you did. Debt always gives the illusion of wealth. Real wealth is built on great cashflow, assets and very manageable (minimal) debt. The tougher the economic climate, the better capable you will need. It’s impossible to outrun or survive a tough market with weak people.
Every-time you make a hire it should be lift the average across the organisation.
You cannot babysit your way to a successful business, performance or accountability.
Always upgrade your talent base and never be afraid to pay them what they require.
Love doesn’t always get the job done, if it did then why are there so many screwed up people.
Great leaders and coaches guide, encourage and teach.
Not all progress is measured by meterage gain; sometimes progress is measured by losses avoided.
New cars, lots stuff, over expansion, chasing silver lures are all a sign of importance, not real success.
Invest in yourself, it’s the key to growth and wealth.
Plan and run all meetings only on outcomes and for results use scoreboards and scorecards.
Start fewer tasks, finish more things.
One of my mentors long ago said “There is hope and there are facts. When these two things collide, facts win every time.”
Every time my business said it can’t get any worse, it invariably did get a whole worse.
The dumbest thing management can do is announce a new lofty target for the year (Our revenue target is 2,00,000 million this year) without a solid working plan of how it’s going to be achieved and then there is the execution… who doing what and by when.
Having the right answer is smart. But having the right question is genius. The riskiest moments in business is when you think you are right. Great cash-flow and profit can fix most problems within a business.
1. Staff – For prospects and customers to buy from your front of house staff/service advisors, there are few things that need to happen: it’s imperative that they like your staff, trust your staff, and view your staff as the go to experts. For that to occur the first thing is your people need to sell is themselves, as the trusted go to person. Not your business or workshop, or the thing that customers want fixed, repaired or purchased. The best way I know… is by smiling, answering the phone with a hello this is Chris, providing the caller with their name and the name of your company, and then ending with a question that invites a clear response.
2.Tonality – This is important without a shadow of a doubt, the tonality on the phone is critical to success. Studies have shown that when it comes to what influences people during a sale, 55% is what the customer sees, 38% is the tonality of the salesperson, and the words used by the salesperson account for only 7% of the decision to make a purchase. Because the caller can’t see the person they’re talking to, they will be far more influenced by their tonality than by what is being said and the words they use. This is why your people need to slow the hell down, smile, and speak with genuine interest and understanding.
3. Customer Concerns – Your people should always bullet point the prospect’s concerns and repeat back the information the person provides to them. This reaffirms to the person calling that your staff is listening and this not only helps start a relationship with the customer, but it shows that your staff are interested in what they have to say, it keeps them engaged, and it causes them to actively listen, rather than simply asking more questions.
4. First-Name Basis – As soon as possible, your staff need to get on a first-name basis with the caller. By doing so, they will be taking the relationship from one between caller and service advisor to one between Andrew (staff member) and Rebecca (the caller). They should typically be able to get on this first-name basis after the first two exchanges. If your advisors need to obtain the caller’s name, an easy way to do so is by providing their name first: “By the way, my name is Andrew and your name is?”
5.Price – Please note – the callers are not always interested in price. The reason most people ask for a price is because they don’t know the questions they should be asking; most callers ask for a price to get the conversation started.
You’ve spent an enormous of money time and effort in building a real business, you’ve spent a lot of money to get the phone ringing, and every lost, mishandled enquiry not only costs you dollars$$$, but as soon as that customer or first-time caller puts down the phone, you can bet your last dollar they’ll be calling your competitor. You should want to share this information with your staff A.S.A.P it will make you a lot more money.
Business owners struggle continuously or fail for one primary reason:
They are great operators but lousy owners.
Business operators get tired and Business owners get rich…. You cannot succeed at a high level in business without business skills and tools.
Any Business, any Workshop do not function by themselves. The Quality of your team is the single most important component of a successful and efficient operating business, yet it is the one place where business leaders and owners tend to make exceptions and tolerate substandard outcomes and to large degree mediocrity.
The players on your team are highly important to your success… responsible for kicking the goals and winning the game. They are you’re the leverage for you to live life on your terms. Lousy players, poor leverage, more brain damage and the less money you can bank. All A players have six common traits.
1. They have a scoreboard that tells them if they are winning or losing and what needs to be done to change their performance. They will not play if they can’t see the scoreboard. Do you have a score board? All of my high performing mentees have scoreboards in the businesses!
2.They have a deep-seated internal, emotional need to succeed. They do not need to be externally motivated or begged to do their job. They are keen and want to succeed because it is who they are . . . winners. Motivation is for apprentices, bystanders and casual participant. A players and professional rarely need motivating. Instead of trying to design a pep talk to motivate your people, why not create a challenge for them? A player’s love being tested and challenged. They love to win. I’ve even seen B players move from B to A when challenged.
3. They love to be measured and held accountable for their results. Like the straight A student in high school, an A player can hardly wait for report card day. C players dread report card day because they are reminded of how average or deficient, they are. To an A player, a report card with a B or a C is devastating and a call for renewed commitment and corrective actions.
4. They have the technical head and axe to do the job. This is not their first gig or car race. They have been here before, many times over and they are technically brilliant at what they do. And they are humble enough to ask for help.
5. The four most important questions to ask an employee are:
What else needs to be done
What else can I do
What do I need to do
What can I learn so I get better and add value to the business
6. “A” players see opportunities. “C” players see only problems. Every situation in your business is asking a very simple question: “Do you want me to be a problem or an opportunity? Your choice.” You know the job has outgrown the person when all you hear are problems. The cost of a bad employee is more than their wage or salary.
My 5 rules for hiring and retaining “A” players are:
Ensure that there is high level of support during implementation
Here is an all-important and clear distinction: You cannot babysit your way to high performance and accountability. Who you have on your team will dictate whether you have a high performance or high maintenance business and oodles of brain damage.
There are plenty of hidden diamonds within your business? Years ago, a great friend gifted me a book titled “Acres of Diamonds, “It tells the story of a farmer who was doing well in life but wasn’t completely satisfied. He heard that a number of other farmers had gone off in search of diamond mines and become instant millionaires. He decided to sell his farm and go out to find his own treasure. He searched the African continent for more than 12 years without success. Unfortunately, in a fit of desperation, he gave up and threw himself into the ocean and drowned.
Back on old farm the new owner was out feeding an animal and noticed a rock beneath the creek that had a strange glint to it. He took the rock to an expert who confirmed it to be a large diamond! As he continued to walk the he started notice rocks everywhere!
The farm that the original farmer sold in an effort to find a diamond mine, was discovered to be the greatest diamond mine on the African continent! Instead of complaining about a lack of diamonds, he would have done better if he had spent the time mining the old farm.
Have you been looking for that one new Business Strategy that will take you over the top that will make you a millionaire? Like the farmer, you are already surrounded by a great source of wealth. What I am talking about here is Mining your Database. If you successfully mined your current data base and achieved a 10 percent improvement in the number of returning customers?
Let’s go through the mathematics of this, let say your million-dollar workshop has 757 “active customers” (10% is say 76). Based on the workshop owner’s average invoice of say ($471.00), and visits per vehicle (2.00), you would pick up an additional $71,592.00 in sales for the year! (76 x $471.00 x 2.00 = $71,592.00)
The mathematics don’t lie, and profit isn’t a dirty word! Focusing on marketing to your existing customers is the key to building your business and of course with regards to all the hidden diamonds. I’ve discovered that it’s hardest to see the solution that’s right in front of you, so make sure you keep reading to discover two mining strategies you may have overlooked.
Two strategies that will help you drive greater business and personal prosperity
Take Care Mark Selbst
“The No Bull-Dust Approach to A More Profitable Automotive Business, A Better Business Life And More Time Off”.