Interacting With A Buyer Of Your Shop -

Interacting With A Buyer Of Your Shop

As an expert in your business, you can play a valuable role in staying engaged and working in partnership with your broker. While some brokers, especially those who sell commercial real estate, go out of their way to keep buyers and sellers from directly interacting, this is rarely the best method to achieve a successful sale of a business in the shortest amount of time.

Shop buyer - shop bays
No one knows your business facilities as well as you, so you are the best person to take the buyer on a tour of your automotive shop and describe how it operates.

As an expert in your business, you can play a valuable role in staying engaged and working in partnership with your broker. While some brokers, especially those who sell commercial real estate, go out of their way to keep buyers and sellers from directly interacting, this is rarely the best method to achieve a successful sale of a business in the shortest amount of time.

Although I will work hard in my capacity as an aftermarket-specific business broker and intermediary to find qualified buyers for your business, no one has more motivation to sell, or inside knowledge of the business, than you do. You can play a key role in instilling confidence in the buyer that the business can be purchased and managed successfully. A buyer who can visualize himself or herself running the business is more apt to have a comfort level after interacting directly with the seller and developing a sense of rapport.

Playing a Positive Role in Interacting With a Buyer

As a seller, you may have some mixed emotions or fears about life after ownership of your business; however, think back to how fearful you likely felt at the time you purchased the business or received it through family succession. Buyers traditionally are apprehensive about the challenges that they face in purchasing a business, and anything that you can do to help the buyer envision himself in your role increases the likelihood that he will have the courage to pull the trigger and make a decision to submit an offer and close on your business.

The questions that you get from the buyer interaction will also give you insight into how a buyer perceives your business and will let you know their concerns. Seeing your business through the buyer’s eyes will help you in future discussions with prospects and recognizing (and hopefully doing something about) whatever problems or deficiencies are keeping buyers from seriously considering a purchase.

Both you and your broker should have defined roles and responsibilities in the sales process so that there are no misunderstandings. No one knows your business facilities as well as you, so you are the best person to take the buyer on a tour of your automotive shop and describe how it operates.

Shop buyer do and don'tHere are a few suggested guidelines for the do’s and don’ts of communication with buyer prospects:

DO your best to follow the established roles and responsibilities between seller and broker, allowing the broker to orchestrate the step-by-step process to qualify, educate and close the deal with buyers.

DON’T allow a buyer to lure you into direct negotiations. It’s OK to participate in the sales pitch about the benefits of your business, but leave discussions about purchase price, terms and financing to your broker. Don’t give a buyer any indication about your “flexibility” in price. Simply indicate to the buyer that it is your broker’s job to represent you. That is, after all, why you hired him.

DO share with a buyer what you might do differently in your daily operations to increase sales and profits if you were to keep the business. Buyers want to feel that the business has upside potential and recognize that every business owner has ideas that just haven’t been implemented yet. Every time you humbly admit that you haven’t had the time or the skills to implement a particular program to expand the business, such as developing local fleet accounts, a little voice in the buyer’s brain quietly says, “Gee, I can do that and add 10% to sales …” After a few suggestions on how to improve the business, the buyer sees the potential for sales increases, which will be to your advantage when it comes time for the buyer to make an offer.

DON’T volunteer “subjective” negative information about your business. “The market is terrible. I’ve tried everything and still can’t reverse the 10% sales decline” is not a recommended sales strategy, even if you happen to be frustrated and burnt out in your business. But, be honest in answering direct questions with accurate facts and don’t misrepresent your business. Present your business in the best possible light. Every seller will have some level of gloom and doom thoughts from time to time, but try to focus on the positive when interacting with a buyer prospect. If you own a franchise business, be careful not to speak negatively about the franchisor. It is important for a buyer, especially one without automotive experience, to feel that they will get excellent support and training from the franchisor, as well as be treated fairly. Mention any specific examples in your tenure where the franchisor has done something that proved to be beneficial to you or the business.

DO talk about what you like about your business and the rewards you have received over the years of ownership. Most buyers, especially those who come from the corporate world and are concerned about job security, are looking for independence and control over their own destiny.

DON’T let recent events, trends or other circumstances that are impacting your decision to sell the business get the best of you. Try to focus your thoughts on the positive rewards of business ownership.

DO allow yourself to judge the background and capabilities of buyer prospects and their likelihood of success if they purchase your business, especially if you are leasing a building that you own or are offering seller financing and have a vested financial interest in their ability to make payments to you. You likely have dreams and plans for life after selling the business, and taking the business back from an unqualified buyer is probably not one of them.

DON’T think, however, that no one will ever be able to fill your shoes. If you are leasing your building or offering seller financing, you need to accept some level of risk and do your best to find a motivated buyer candidate who is willing to learn the skills of your business. The vast majority of businesses do sell to buyers without aftermarket-specific industry experience. A major auto service franchise reports that shops that transition to new ownership report a first year average sales increase of 15%.

DO everything that you possibly can to make a buyer feel that your business is not “rocket science” and that a person with reasonable business, customer relations and employee management skills can be highly successful and ultimately do a better job than you have done. It is OK to ask about a buyer’s current job and previous background. Listen carefully for anything in their description that points to a skill that would be valuable in running your business. Go out of your way to tell them specifically how that particular skill or experience will contribute to their success in running and growing your business.

DON’T be nervous. Relax, be yourself and be honest, but measure your words. Listen carefully to the buyer and look at their body language. Often, you will be able to detect their concerns and think of something to say that will help overcome them. When all is said and done, if they feel that they can be successful, they will want to buy your business.

DO talk about why you are selling the business. Most buyers are very interested in your reasons and will try to read between the lines if your answer is vague. “I want to pursue other business interests” will likely cause a buyer to think that there is something wrong with your business that you aren’t willing to share. So, think about your reasons in advance, be prepared with a specific answer and think about how that answer might be interpreted by a typical buyer.

DON’T “oversell” your business or your own skills in making it successful. Yes, it is important for a buyer to think that you have a quality, profitable business, but it is even more important for a buyer to think that they have the capability to make it even better and grow sales and profitability. Ironically, one of the most common reasons that a buyer doesn’t buy a business is that they think it is too well-run and that they will not have the experience and capability to run it as well as the seller. Few buyers want the challenge of buying a business that seems very complex and requires the seller’s years of experience and skill level to continue its success.

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Shop Equipment ROI – Tooled for Profit

Understanding how to calculate ROI can help your purchasing decisions.

I’m not a financial scholar by any means, but I know what return on investment (ROI) is. It’s a mathematical formula that yields a representation of the profitability of any type of investment. In the automotive repair industry, we primarily associate this with equipment. Admittedly, I’ve never used the term much, more often approaching things from the standpoint, “Am I making money with this or not?” As technicians and shops, our typical thought process centers on each individual job, how much time and money we have into it, so we’re used to thinking profit or loss, and also pretty good at knowing if we made money, or if we lost our “back quarters.”But over time I’ve learned that the thought process alone is not always the best approach, and making money doesn’t necessarily mean a good ROI. Even if you don’t go crazy with an exponentially long, complicated equation, if you understand the basic idea and process of calculating ROI, it can help you make good purchasing decisions. The base calculation would be dividing your net profits by the cost of the equipment. That’s your ROI. Then, if you want to take it further, you can divide that number to get a time-based ROI average.Let’s look at a basic calculation. You buy something for $10, then sell it for $14. Your profit is $4. Divide profit by investment, ($4/$10) and you get an ROI of 40%. Not bad, but if it took two years to make this profit, then your ROI would be 20% annualized, which is not as impressive. You can use this basic formula to compare products you sell as well, and it may help you decide what’s best to keep in stock or not.Now let’s try something with equipment. You have an old tire machine that’s paid for. You average one set of tires per week and it takes 1.5 hours to complete the job. You decide to buy a new tire machine that is much quicker and more efficient but it cost you $20,000. Now the same job only takes one hour. Based on the cost of technician salary, you calculate that it saves you $30 per job with this new equipment. In this case you would use the formula: savings (additional profit)/investment. At one set of tires per week, that works out to $1,560 per year. $1,560/$20,000 equals an ROI of approximately 8%. That’s not too good. It will take you almost 12 years to pay off the new machine.On the other hand, if you average five sets of tires per week, then your additional profit for the first year is $7,800. $7,800/$20,000 equals an ROI of 39%. That’s pretty good. A general rule of thumb is to pay off any piece of equipment within two to three years. This puts you right on track.But now, here is the problem. This is where we throw the proverbial wrench into the plans. Equipment is tricky. You should also calculate in installation and maintenance costs, as well as the cost of training for the new equipment, and factor in how long the equipment is going to be relevant. This is an especially important factor when considering a scan tool, the required updates and how long before it’s potentially obsolete. In the case of a tire machine, you can also calculate in savings from other benefits of a new machine, such as no more damage to wheels or tire pressure monitoring system (TPMS) sensors, which the new machine can eliminate.Some of this can be overwhelming, and it makes me realize why it’s easier just to fly by the seat of your pants and wonder, “Am I making money or not?” It’s an important business aspect, however, to know what is behind the idea because it can benefit you in so many ways. Even without math, you can almost visualize the numbers in your head.I’ll try it by leaving the formulas out to decide whether it makes sense to buy a dedicated TPMS tool when you already have a full-function scan tool with TPMS ability.If you get a TPMS problem every day and you use your full-function scan tool to diagnose it, most likely it takes much longer to boot and longer to navigate to the function. Even then, it may not cover all you need. Because there’s such a vast amount of information that a full-function scan tool has, it simply takes more for the manufacturer to keep everything current. Plus, you often must still rely on service information for certain procedures and then, if it’s the only scan tool for your shop, it ties it up for use in other diagnostics.Now, let’s compare that to a dedicated TPMS tool. Built with only one function in mind, they can make the process much quicker, have greater coverage, boot quicker and quickly walk you through all steps of any required TPMS resets. When you factor in the savings in time and the fact that your primary scan tool isn’t tied up, you can prove the value of a dedicated TPMS tool through ROI calculations. On the other hand, if you rarely work on TPMS systems, you can prove it wouldn’t make sense at all, since you do have the function on your primary scan tool.While you haven’t done any calculations, you’ve thought of it in that manner and can picture where the calculations might end up. If you’re on the fence, the math will give you the answer. Ultimately, your accountant could take the idea even further, with an undoubtedly more advanced knowledge of ROI, and almost certainly a way to calculate depreciation into the formula. That’s where I sign off, but you get the idea. It’s a great concept that represents fundamental business financials.

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