Now is a great time for many owners of oil change companies to sell and complete their exit strategy. This review discusses how to sell an oil change company. We also provide insights into how to determine your business’ worth and the role a business broker plays in the sale.
About The Auto Lube and Oil Change Industry
Auto lube and oil change companies primarily offer oil change services for all (or most) types of automotive vehicles. They also engage in selling various types of oil and other mechanical needs for automotive vehicles. They also engage in lubricating the chassis of automotive vehicles. Many offer additional tune-up services as well. This may include but is not limited to replacement (and repair) for air filters, oil filters, fuel filters, and spark plug wires. Here is the most recent data and projections for the auto lube and oil change industry:
- There are approximately 29,000 auto lube and oil change companies in the U.S.
- There was a 5.3% annual growth for the auto lube and oil change industry from 2018 to 2023
- The auto lube and oil change industry generates $9.9 billion in annual revenue
- The annual profit for the auto lube and oil change industry is $902 million
- Experts predict a sizable increase in annual growth (1.5%) from 2023 to 2028
The industry has seen substantial growth over the past five years. However, this growth is expected by many experts to slow down considerably as more large players enter the industry and more drivers switch to electric vehicles, which do not need oil changes but do require many other services oil change companies usually provide. Overall, now is an excellent time for many oil change company owners to consider selling.
You should also check: How to Sell a Chemical Product Manufacturing Company
How Much is My Oil Change Company Worth?
Oil change companies currently enjoy excellent valuations overall due to the recent success of the industry. Since financial information is the most important aspect to a buyer, companies that have seen spikes in profitability enjoy higher valuations. The most notable industry multiples (rule of thumb data) are:
- Auto lube and oil change companies sold between 2.83 and 5.04 times the Seller’s Discretionary Earnings (SDE)
- Auto lube and oil change companies sold between 5.25 and 5.43 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Auto lube and oil change companies sold between 0.49 and 0.56 times the annual net sales
Your business broker will look at much more than your SDE and EBITDA when they calculate your value. Your location plays a major role in your valuation as well, along with your growth potential, workforce quality, local reputation, and reason for selling.
How to Sell an Oil Change Company for Fair Market Value (FMV)
You can sell an oil change company in four easy steps. Of course, you should first receive a market-based valuation from your business broker, who can help you establish a fair market value for your company. After the valuation, the sale process involves:
#1: Establish Your Asking Price and Goals
Once you receive your valuation from a professional business broker, you can begin to set your asking price and goals. Your broker can help you determine the best sale price based on your fair market value. Of course, you may have other goals as well, such as finding a buyer who will continue your long-term vision and keep your employees.
Additionally, your goals may dictate your asking price. For example, if you are more interested in a fast sale and getting the absolute most for your company is less important, you may choose to ask for (or accept) a lower sale price. If you are in a position to be more patient, you may have a higher (and stricter) asking price.
#2: Market Your Oil Change Company
Confidentiality is essential during the sale of your oil change company. Your business broker maintains confidentiality while finding a qualified buyer. In doing so, brokers typically leverage their connections, networks, and databases. They also screen offers as they arrive. In fact, many business brokers are able to advertise your company (discretely or in some cases anonymously) with hundreds of potential buyers.
#3: Select a Buyer, Negotiate a Deal, and Complete Due Diligence
Your business broker will help you select the buyer that helps you reach your goals the est. Of course, the highest bidder is often the one selected. However, this is not always the case. In some instances, particularly in those where the sale price is not the primary goal, the seller chooses another offer, such as the one that the seller feels has the best vision for the company’s future.
Negotiations and contingency planning also occur during this third stage of the sale process. Once a buyer is selected and signs a letter of intent (LOI) that establishes the purchase price and other important details, due diligence begins. The buyer has the opportunity to request documents, conduct walk-throughs, etc. before they move to closing.
#4: Close The Sale and Transfer Ownership to The Buyer
Closing is the final stage of the sale process and, for many sellers, the last stage of the exit strategy overall. The sale closing is necessary to review the purchase agreement for a final time, attain final signatures, and confirm the payment. The transfer of ownership also takes place during this final stage. This may involve updating insurance and lease information, notifying employees, notifying existing clients and customers, and completing all legal, financial, and operational paperwork.
Are You Planning Your Exit Strategy?
Here at Sigma Mergers and Acquisitions, we help oil change companies sell for fair market value. We also provide consultancy services along with a free, no-obligation business valuation if you are not yet sure if selling is right for you. Reach out today for more information and to schedule a time to discuss your exit strategy.
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!