Are you the owner of an auto muffler company? If so, then it helps to understand your company’s value and have a planned exit strategy. This guide discusses how to determine the value of your auto muffler company, along with a step-by-step guide to the sales process.
About The Auto Mufflers Industry
Auto muffler companies primarily sell repair and replacement services for exhaust systems of automotive vehicles. This includes family, commercial, and public transit vehicles, from small sports cars to public buses. Companies within this industry may sell additional services, although they are primarily focused on services related to the muffler and exhaust system. The industry offers stability and may experience growth as more Americans opt for used rather than new vehicles.
How Much Are Auto Muffler Companies Worth?
There are three primary types of business valuations. If you are selling your auto muffler company, then your business broker will likely recommend a market-based valuation method. This involves the use of critical financial data such as your seller’s discretionary earnings (SDE) and your earnings before interest, taxes, depreciation, and amortization (EBITDA). Your broker will use this data along with industry multiples, also known as rule of thumb data. This gives a general idea of your auto muffler company’s worth. The industry data are as follows:
- Auto muffler companies sold for approximately 2.47 times the Seller’s Discretionary Earnings (SDE).
- Auto muffler companies sold for approximately 2.86 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Auto muffler companies sold for approximately 0.35 times the annual net sales
Industry multiples are used as a starting point for market-based valuations. Of course, there are many other factors that may influence your value. Notably, other factors that may influence your value include:
- Your location
- Growth potential
- Quality of your equipment
- Quality of your workforce
- Your reason for selling
These factors may lead to an adjustment of value. For example, if your company is located in a growing area with little competition, the valuation may be adjusted higher. On the other hand, if you are selling due to fraud or internal organizational conflict, it could negatively impact the company’s value.
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How Do I Sell My Auto Mufflers Company?
Above we discuss market-based valuations, which is the first step in the sales process. This allows you to plan and prepare your sales strategy before you market and find a buyer. The five primary stages are:
- Due Diligence
Below is a close look at each step. We strongly recommend speaking with a licensed business broker about the specific details related to your business as no two sales are identical.
Your market-based valuation tells you the worth of your auto mufflers company. Specifically, it tells you your fair market value, which is the selling price that is considered fair based on market conditions and specifics of your company. Your professional valuation helps determine the best time to sell, helps you determine your asking price, and provides negotiation leverage.
You should take time to prepare before you find a buyer. This helps you with negotiations, due diligence, and closing. Preparing ahead of time can also reduce the time it takes to close a sale as well. This stage should involve setting a strategy with your broker and attorney. You should also prepare all financial and legal documents, such as your tax returns, profit and loss statements, balance sheets, employee lists, client lists, insurance information, lease information, and more.
This is the step all too many auto muffler company owners go to right away. Instead, you should only proceed to this step once you are happy with your valuation and have prepared all you will need for the sale. We strongly advise working with a business broker to maintain confidentiality. Keep in mind, selling an auto muffler company is far much different as you are not advertising publicly. Your broker understands how to utilize private challenges and the networks they have established.
Due diligence allows the buyer the opportunity to adequately research your company and ensure they are comfortable moving forward with the purchase agreement. This stage includes requests for the seller to provide financial and legal documents. The buyer may ask to see licenses, leases, and insurance policies as well. In some cases, the buyer requests to meet with key employees, along with a scheduled walk-through of the workshop. Of course, due diligence looks different for every sale, so you may experience additional requests as well.
After the buyer has closely reviewed all business details and feels comfortable proceeding with the purchase, a day and time is scheduled to close the deal. This visit involves a final review of the purchase agreement and other purchase documents (by the buyer and seller’s attorneys). The final signatures are attained as well. The transfer of ownership usually begins during the closing visit also, along with notifying employees, insurance companies, landlords, and customers of the transaction.
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Contact The Business Brokerage Team at Sigma Mergers and Acquisitions
Sigma Mergers and Acquisitions has years of experience helping companies sell for fair market value or higher. If you are considering selling your auto mufflers company and want more insights into your company’s value on the market and how the sale process works, get in touch with us today and schedule a time for a consultation.
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!