Business Valuation Blog | Understanding Buying / Selling a Company

More Than Tools and Knuckle Busting: Valuing an Auto Repair Shop

Posted by Business Valuation Specialists LLC on Jul 11, 2018 11:08:00 AM

When you own or are considering buying a repair shop, it's important to know the value of your business. But how is that value determined? Beyond simple calculations of tools, supplies and real estate, there are a wide range of factors that tie into your shop's overall value. Here's a quick look at why valuing an auto repair shop is vital to your business' bottom line and may reveal additional value you may not have counted on when making financial decisions for your company.

More Than Tools and Knuckle Busting: Valuing an Auto Repair Shop

What's your shop worth? It's an easy question, but the answer is much more complicated. You have the value of your assets, typically to include your tools, office equipment, materials and property. However, it took a lot more than a few things to build your business. Shouldn't that be compensated? Whether you're selling your business, need a loan to expand your operation or just want to get an idea of what it's worth, you need to include all aspects of your business, not just the material assets you've purchased over the years.

What about the work you've done to establish your shop as a leader in your area? How do you value the training and certifications you've worked towards to improve the service and quality you deliver to your customers? Have you donated time, materials or financial assistance to organizations in your area that has built goodwill in the community? Do you deliver superior customer service or better outcomes for your customers? These are all important areas of your business and they should be recognized as part of your business' overall value.

The income you've built over the years didn't come easily for your business, and it shouldn't be discounted in the valuation process. A new shop may have to work several years to gain the level of income you've achieved. Should you simply throw that away when selling to a new owner? Absolutely not! The new owner will gain income over starting a new shop because they'll benefit from your customer base and reputation in the community, so you should be compensated for that improvement in their situation.

What about the specialty services you provide that no one else in your area can manage half as well? If you've spent time perfecting your diesel mechanics or focused on revitalizing aging hybrid electric cars, that expertise deserves compensation. What about a new owner? If you're staying on board to help them learn the ropes of your specialty, isn't that worth something extra, considering the new owner will probably benefit from the higher rates you've charged for your expertise over the years? Don't shortchange the progress you've made in special areas of mechanics and repair work. 

By taking the time for valuing an auto repair shop, you can rest assured that your business' overall value is being considered rather than the simple sum of all of its parts. But when you do have a business valuation performed on your repair shop, make sure that you work with a certified business valuation specialist who has experience in your industry. By doing so, you'll receive a valuation report that will stand up to strong scrutiny, whether you're dealing with the tax office, insurance company, financial institution or the court system.

Topics: valuing an auto repair shop