Business Valuation Blog | Understanding Buying / Selling a Company

How is an Auto Body Shop Valuation Handled?

Posted by Business Valuation Specialists LLC on Jan 6, 2020 8:00:00 AM

Auto Body Shop Business Valuation

When your day is full of wreckers, welders, paint guns and primer, the value of your body shop may be the furthest thing from your mind. But if you've ever wondered what's involved in an auto body shop valuation, wonder no more. Here's an inside look at how the entire process is handled, what factors can impact your shop's value and what you can do with the valuation report you receive at the end of the process to grow your business and maximize your profitability.


How is an Auto Body Shop Valuation Handled?

To start, let's take a look at how the valuation process is handled. Once you've decided to work with an appraiser, they'll gather a certain amount of information about your shop to help with the valuation process. This will include information about your business' financial situation, assets, competitors, position in the industry or community, reputation and similar areas of interest to the appraiser. The business' finances will be adjusted to accommodate any one-time income or expenses to create a more normalized cash flow picture. Community goodwill and reputation will be taken into account as intangible assets. Competitors will be considered to help determine potential growth in the future and market share. 

These factors that impact value are not the only areas of concern, however. Does your body shop have a reputation for innovation and new approaches to how you get the job done? Do you have higher-than-normal bad debts from customers or high overheads due to an expensive location? Do you have unusually high assets from inheriting a shop or high liabilities due to an expensive business loan or poor tax choices in the past? These issues will also impact your business' overall value.

Another area to consider is why you're having the appraisal performed. If the body shop's owner has died suddenly and the heirs to the estate are pushing for a fast sale, the business will be appraised using very different methodologies than if it's being appraised for fair market value to determine current value or future income approaches to valuation to help determine the sale price of the company for a retiring owner.

There are a number of benefits to having a valuation report on hand for your business. If you suddenly have to shut down your business for several weeks due to a natural disaster, a crisis in the building or other issues, being able to quickly provide your insurance company with documentation of value helps to speed an insurance claim along. If you need a business loan to purchase a competing shop that is suddenly up for sale, proving the value of your company to your financial institution helps make it happen faster.

An auto body shop valuation can seem like a complex process, but the benefits you receive at the end through a comprehensive valuation allow you to grow your business and leverage that value towards a great future. However, not all shop appraisals are the same. It's vitally important that you work with an accredited business valuation specialist, so that you can rest assured that the value that is calculated is fair because it has been worked up by an independent third party with no interest in your business' future dealings.

Topics: Auto Body Shop Business Valuation