Auto brake service shops remain in high demand as more car buyers opt for used cars than new ones. This trend is likely to continue according to experts, which has led to demand for established auto brake service shops. This review discusses how to value and sell an auto brake service shop for fair market value (FMV).
About The Auto Brake Service Industry
Auto brake service industries primarily generate profit with auto brake services. This includes auto brake repair and replacement for sports cars, sedans, trucks, SUVs, cargo vans, commercial vehicles, public transit vehicles, motorbikes, and other types of motor vehicles. Auto brake service shops also offer other mechanical and electrical repair and maintenance services, such as oil changes, and A/C repairs. This industry is different than full-service auto repair centers, however. Auto brake service shops typically do not provide engine or transmission repair and replacement services.
Market-Based Valuation: Determine The Value of Your Auto Brake Service Shop
As a general rule of thumb, auto brake service shops usually sell for 30% of their annual sales plus inventory or 4 times their monthly sales plus inventory. An additional rule of thumb data for the auto brake service industry include:
- Auto brake service shops sold between 1.05 and 2.25 times the Seller’s Discretionary Earnings (SDE)
- Auto brake service shops sold between 1.96 and 3.74 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Auto brake service shops sold between 0.33 and 0.54 times the annual net sales
Your specific valuation should go beyond rule of thumb data, although this is an excellent starting point. Your business broker will also consider your shop’s location, growth potential, local reputation, quality of your workforce, and purpose for selling. For exit strategies, business brokers generally use a market-based valuation, which determines your auto brake service shop’s fair market value.
How to Sell Your Auto Brake Service Shop for Fair Market Value
Your business broker (and other members of your team) can work with you to develop a personalized strategy and exit plan. Although your process may look different than other sales, the general process for selling an auto brake service shop includes these steps:
- Establish your sales goals
- Prepare for the sale
- Market your company
- Complete due diligence
- Close the sale
Establish Your Sales Goals
You will form your sales goals after you receive your business valuation. This, of course, includes your sale price, which should be based on your fair market value. With that said, you may be able to sell for above your valuation. Your broker can help you determine the right asking price. You may also have additional goals that are important to you. For instance, you may only be interested in buyers who are going to keep some of your key employees on staff.
For some auto brake service shop owners, you may desire to improve your valuation before entering the market to help ensure their goals are met. In other cases, it may be best to sell your shop immediately.
Prepare for The Sale
Once your goals are set, it is time to prepare all that you will need to find a buyer, negotiate, complete due diligence, and close the sale. Your broker, attorney, and certified public accountant (CPA) professional can assist you with this process.
Market Your Company
Your business broker should handle the majority of this process for you. However, they also keep you informed throughout the process, particularly as it pertains to the details of all offers you receive and ongoing negotiations. Your broker will leverage private avenues to sell your auto brake service shop to maintain confidentiality throughout the sales process.
Complete Due Diligence
Due diligence offers the buyer an opportunity to ask questions, request financial documents, verify licensing and legalities, and check on the normal daily operations of your auto brake service shop. This likely includes a walk-through of your service shop. You (the seller) may also need to provide:
- Business tax returns (three years)
- Profit and loss (P&L statements)
- Balance sheets and other financial documents
- List of equipment and assets that are included in the sale
- Customer lists
- Employee lists and records
- Any relevant contracts or leases
- Licenses for business operation
- Copy of your insurance policy
- Legal documents (i.e. current legal disputes)
The documents you need may look different based on the specifics of your auto brake service shop. No two businesses are the same, and it is important to remain transparent and provide all the buyer needs and requests in a timely manner. Of course, this does not mean the buyer should be able to drag the process on for months, and your broker should be there to help ensure the due diligence process is organized and moves quickly so you can close the deal sooner.
Close The Sale
After due diligence, the buyer and the seller can agree to a time for closing (if this date is not already established in the letter of intent). At closing, you and your attorney will need to provide certain organizational documents, review the purchase agreement for a final time, and start or continue the transfer of the company to the buyer.
Start The Sales Process With a Market-Based Business Valuation
Now is an excellent time for many auto brake service shops to consider selling. Contact us today if you would like to learn more about the potential for selling your shop and how much you may receive by doing so. We provide free, no-obligation business valuations.
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.
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