Are you interested in selling your transmission shop or considering the possibility? This guide shows you how to determine the worth of your transmission shop and the sales process. Specifically, this guide focuses on AAMCO franchise transmission shops, although the valuation guide and sale process applies to other transmission shops.
About The Transmission Shop Industry
The AAMCO franchise dominates the transmission shop industry and has a substantial market share. Their name recognition and ability to spend more on marketing and advertising make it more challenging for small independent franchises to compete. Here is a closer look at AAMCO and the transmission shop industry overall:
- There are approximately 550 AAMCO Transmission repair shops in the U.S. (There are 7,000+ transmission shops nationally)
- AAMCO franchises, in particular, earn far more revenue than the average mechanic shop owner (and are consequently more valuable)
- There was a 1.9% annual growth for the auto repair industry between 2018 and 2023
- The auto repair industry is expected to remain strong with an expected 1.3% annual growth between 2023 and 202
Although AAMCO is a major player, numerous smaller transmission shops remain booked weeks in advance. Largely, the success of smaller shops is due to local reputation and name recognition, whereas AAMCO relies more on national reputation and recognition.
A Step-by-Step Guide to Selling Your Transmission Shop
Although every sale is unique, the process should include established steps to ensure efficiency and success. Below is a general description of the six primary steps you can expect when you sell your transmission shop or AAMCO franchise.
Step 1: Receive a Professional Valuation From a Business Broker
A professional business valuation reveals your transmission shop’s worth. So, what is in a professional business valuation? Buyers are concerned with the return on their investment, so your financial records are a primary indicator of how much prospective purchasers are willing to pay. These financial records include your discretionary earnings (SDE), annual net sales, and earnings before interest, taxes, depreciation, and amortization (EBITDA).
Buyers use rule of thumb data to determine the worth of your AAMCO franchise or transmission shop. A rule of thumb is a calculated average of value from the most recent sales data for transmission shops. Here is the current data:
- HVAC companies sold between 1.71 to 2.72 times the Seller’s Discretionary Earnings (SDE)
- HVAC companies sold between .25 to .43 times the annual net sales
- HVAC companies sold between 2.40 to 4.28 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Transmission shops with similar financial records and local reputations as AAMCO have similar rule of thumb data. However, as discussed, much more goes into a valuation than financial records and calculated averages based on past sales.
Step 2: Determine When You Should List Your Business for Sell
The next step is to determine the appropriate time to market your transmission shop. Not every business is ready to sell right away. In many cases, the best time to sell is months or even years later. You and your partners, along with your business broker, can determine if you can reach your sales goals in the current market or if you should continue improving the valuation and list at a later time.
Step 3: Find The Right Buyer That Meets Your Goals for Sale
The sale price is important, but your goals may go much deeper than the financial aspect. For instance, you may also want to ensure the buyer keeps your transmission shop’s employees. It is vital to establish goals beforehand and find buyers that can continue your vision. Your business broker can help you bring your transmission shop or AAMCO franchise to market and find the right buyers.
Step 4: Negotiate The Sale of Your Business
The negotiation process is filled with complexities. Notably, this step involves a review of your intangible and tangible assets. Contingencies and other contract details are negotiated during this stage as well. Your business broker should handle this process for you and keep you informed.
Step 5: The Due Diligence Process
The due diligence process begins after receiving the letter of purchase intent from the buyer. This is the final step before the sale’s completion. The buyer reviews the financial and legal documents. They may request certain documents (i.e. tax returns) during this stage. The goal is to progress through this stage in a timely and organized fashion. To ensure the swift completion of the due diligence process, the seller should have all documents ready.
Step 6: Close The Deal and Transition The Business
The last step is the transaction and confirmation of the purchase. Your business broker, attorney, and CPA are all involved in this process. The notable steps that are taken during this final stage in the sale of your transmission shop are:
- The buyer signs the purchase agreement
- All documents are reviewed
- The final signatures are attained
- The payment is sent and confirmed
How a Business Broker Can Help You Sell Your Transmission Shop
The sale process for a transmission shop is complex with numerous legalities and accounting processes involved. Consequently, selling a business without professional assistance is challenging (if not entirely impossible).
A business broker plays a vital role in the sale of transmission shops, and they are a great place to start as they can provide a professional valuation and help you to determine if and when you should bring your shop to the market. They also assist with most steps throughout the process, from finding you a buyer that meets your goals to ensure a smooth transition of the transmission shop business to the buyer.
Contact Sigma Mergers and Acquisitions to Start The Sale Process
The business brokers here at Sigma Mergers and Acquisitions are here to help you sell your transmission shop. We have helped sell more than 600 businesses over the years. The key to our success is personalization, and we work hard to ensure the little things that make your business unique are not unnoticed or undervalued during the sales process. You can schedule a consultation to learn more and get the process started.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!