Have you ever dreamed of leaving the repair world behind?
Maybe you want to sail off into the sunset on a boat. Maybe you’ve realized you need to start getting things in order for your family. Heck, maybe you’ve just realized that you want to try a new line of work.
Whatever it is that drives you, the outcome is usually the same: It’s time to sell the shop.
If that idea makes you nervous, don’t worry! We’re here to help.
A lot of shop owners—OK, a lot of people in general—don’t think beyond the next week or next month. Retirement is a dim possibility many decades away. At least, that’s what it feels like.
To tell you the truth, there are other reasons why you might end up selling your shop. You might love what you do but have to sell; things like car accidents, illnesses, and family matters can change up your life plan in the blink of an eye.
Regardless of why you end up deciding to sell, you can’t just list your business on eBay or Amazon and figure someone will buy it. There’s a lot that goes into getting a shop ready to sell, and a lot that goes into the process, too. That’s why we sat down with Rick Perrin, a Certified Business Transition Expert™ with decades of experience in helping business owners make their exit. Rick had some great tips for any owner to keep in mind, even if that owner isn’t planning on selling for years—many of these tips are good business practices, and a great way to build up your shop’s value over time.
If you’ve been thinking about selling your shop, or are just starting to wonder how to fund that boat, then grab some coffee or tea and read on. We’re here to show you the basics!
WHAT DO YOU WANT FROM A SALE?
Before you do anything, you’ve got to make a decision that will impact everything you do from here on out.
(No pressure, though!)
Take a moment (or a few days) and figure out what you want from a sale.
Here are the two questions you should ask yourself before doing anything:
- What are you looking for in a sale? Do you want to sell the shop over time, as quickly as possible, for the highest price possible?
- Do you want to keep working at all, or do you want to sell it and be done?
There’s no doubt that some owners just want to say so long to their shop and let someone else deal with it while they ride off into the sunset. But others may really enjoy wrenching but be burned out on, say, the business side of things. If you fall into the latter category, you may be able to craft a deal that lets you stay on in some capacity, even if you aren’t the majority owner anymore.
Take some time to think about these things. They’re important!
Whether you want to unload the entire business or just part of it, your next steps will always be the same. You need to make your shop look appealing to a potential buyer.
Rick provided us with a handy list of things to keep in mind:
When you walk into your shop, try to look at it the way a visitor would.
- Is your shop clean and freshly painted?
- What shape is your equipment in?
- Is the furniture in the waiting room in good shape, and do you have safety measures in place?
We’re classifying “operations” as how the shop runs whether or not the owner is in the vicinity.
- What services are you equipped to offer?
- Do you have processes and workflows in place for getting paperwork through, or for assigning work?
- Do you have an organized, well-managed front office?
Take a close look at your techs and administrative staff. With techs, you need to strike a balance; yes, you want some experienced techs, but if everyone is extremely experienced and highly paid, that means skyrocketing costs.
- Do you have low turnover, or are you trying to replace people every week?
- Are your techs all up-to-date (or getting there) on certifications?
- Do you have a career path in place?
Be warned: a potential buyer might go to Yelp before even picking up the phone to express interest in you. If your shop has a good reputation, that boosts its potential sales price; if it doesn’t…well…
- Can you prove customer satisfaction with your shop through online reviews or even more traditional methods, like plaques and certificates?
- Do you know your NPS score?
- Does your shop have any community involvement?
And that’s before we get into things like sales and profitability. “Higher sales mean a higher sales price,” Rick says, but that higher sales price is also contingent on good recordkeeping: if a buyer doesn’t feel comfortable with your books, then they’re going to offer you a lower amount.
How do you prevent that? Well, like the selling points we mentioned above, keeping your books above board isn’t just something you should do when you want to unload the place—it’s also just a good business practice.
Your financials play a critical role in how much someone is willing to offer for the place, because they’re an indication of what kind of business the shop can do under new management. If your books are in order and pass muster with an accountant, you’re likely to receive a higher offer than you would if you just shoved a bunch of scratch paper at someone.
By the way, buying a shop is likely an entirely separate post on its own, but if you’re an owner who wants to expand by scooping up the repair place down the street, you can use the guidelines above as a jumping-off point.
Rick let us in on a little secret: the more recurring business (and thus recurring revenue) you have, the more valuable your business is. This is true in practically every industry, but especially in heavy-duty repair.
In the general automotive world, that recurring revenue might come from insurance companies that are referring business to a shop. In the heavy-duty repair world, that recurring revenue might come from…wait for it…the preventive maintenance you perform for fleets.
We’ve talked a lot about PM work in the past, why you should be all over it, and how Fullbay can track it for you, so at the risk of repeating ourselves, get as much PM work as you can! If you can show that you’ve got a lot of work locked down for the next few months, your buyer doesn’t have to worry as much about sales.
When you’ve got your shop and operations cleaned up, shiny, and ready for review, it’s time to talk to a broker.
(As a note, you can generally secure a broker at any time. If you don’t have the above in order, they’re very likely going to tell you to focus on those things first.)
You can find a broker through your bank, or through other repair shops; ask for names, look them up and make sure they’re reputable. Your broker is going to be your most important advocate; they generally are paid by percentage commission on a sales price, so it’s in their best interest to get as much for your shop as they can.
Generally speaking, a broker will come in, chat with you, look at your financials, and calculate what they think you ought to list the business for. “You may or may not like [their suggested amount],” Rick says, adding that you can get second opinions, too.
The broker you decide to do business with will generally give you some homework (probably involving some of the steps listed above, if you haven’t executed on them already) and put together your book, or sales listing. This is a writeup on your shop, financials, and listing price; once you approve it, your broker will go out and start drumming up interest.
So, once you’re up on the market, how long does it take to actually sell your shop?
Rick advises that it generally takes up to a year to sell a shop. Obviously there are a lot of variables that go into the timing—including your location, your competition, the state of the economy, and so on—but a year is a pretty fair estimate.
The following steps have to happen (and these aren’t all the steps—just some important ones):
- Finding the right buyer
- Due diligence (where the buyer looks at your books, details of the business, etc)
- Negotiating the sale
- An environmental review of the land
- Potential buyer obtaining a bank loan
Steps like due diligence and applying for a bank loan can take a couple of months on their own. Sometimes everything can be moving along swimmingly, only for the bank to refuse a loan.
In short, things can drag out and get really frustrating. Don’t let it get to you.
“Stay focused on the business while you’re trying to sell it,” Rick says, adding that the amount of time it can take even with the right buyer is a good reason to start planning your exit a couple years in advance. Give yourself time to take care of everything and time to deal with unforeseen issues.
The frustrating hang-ups are also a good reason to work with a professional business broker. They’ll take care of a lot of the more exasperating things for you.
There’s one element you might consider even before you hire a broker, though a broker can also help you out with this matter:
Can you sell the business to a longtime employee instead of a total stranger?
In some cases, you may be better off with this sort of sale. Rick suggests taking a look at your current staff to see if any might be interested in eventually buying your shop. “They can’t just be a good tech,” he adds, “because running a business is more than just turning a wrench. Can they supervise, train, discipline?”
The list of traits they’ll need goes on. Does this potential buyer have a tolerance for risk? How do they feel about paperwork and dealing with things like insurance?
Additionally, selling the shop to an employee can lead to different types of deal structures. Maybe the employee buys from you over time. Maybe you pull them out of the repair bay and start training them up on things like marketing and managing the books. Maybe as they take over, your role shrinks, and you even go back to wrenching.
In short, promoting from within can lead you to a lot of options—but you need to make sure it’s the right person. If you’ve got an employee who is interested in eventually taking over your shop, bring in a broker anyway. Professionals like Rick know what questions to ask; they can give the owner an idea of whether the employee as buyer makes sense.
WANT MORE INFO? WE’VE GOT A WEBINAR FOR YOU!
While we hope this guide was helpful, we know there’s a lot more that goes into selling your heavy-duty repair shop. That’s why we’re sitting down with Rick himself to go more in-depth into this fascinating (and important!) topic.
Watch the replay of our webinar, Selling Your Shop: How To Grow Your Businesses’ Value here!