Most dealership owners are ill-prepared to sell the business or retire and nearly half of dealerships close when the owner retires, according to Andi Gray at Chicago-based financial services firm Strategy Leaders.
During a Jan. 31 webinar, Gray broke down the challenges faced by dealers as they look to sell their businesses. According to Strategy Leaders’ recent surveys, Gray said most dealers are optimistic they will pass the business on to family members, but many end up liquidating.
By the numbers
- 10% of business owners surveyed by Strategy Leaders say they anticipate selling to a competitor;
- 10% want to sell to outsiders — the “least valuable transaction” to pursue, Gray said;
- 50% of dealers say they plan to pass the business to their children, family or employees, but most don’t want it. Strategy Leaders reported 75% of those in line to run the business said they “would rather have the money than the business.” Further, only 5% of dealers looking to pass the business on to family or employees do so; and
- 40% of businesses end up liquidating.
“There’s a lot of potential that gets left on the table,” Gray said at the conference. Most dealers — 75%, according to Gray — don’t have any written plans for transferring operations.
“A lot of surveys that we saw say that owners tend to overestimate the value of their business by 50% or more,” Gray noted. She added that now it’s a buyer’s market, so sellers are less likely to cut the perfect deal.
Gray said that, on the buyer side, potential acquirers must weigh the pros and cons of the dealer they’re considering, including profitability, the quality of its vendors, its customer list and whether customers are paying at or above market rate.
Registration is now available for Equipment Finance Connect. The dealer-centric equipment lending and leasing event of the year offers opportunities for dealers to learn new strategies, foster valuable partnerships and emerge with ideas to immediately apply to their businesses. Learn about free dealer registration at EquipmentFinanceConnect.com.
