Preparing Your Dealership for the Future

If you’re reading this blog there is a good chance you continue to produce good profits even though you have experienced challenges in numerous areas. Your business has felt the pain of rising interest rates, inflation, and a changing used vehicle market. But despite those obstacles, you have still experienced decent margins on new vehicles and increase from fixed operations.

At this moment, it’s not uncommon to believe that you will eventually see a decline in profits as new car inventory increases. But overall, we are hearing quite a few dealers tell us that they are optimistic about the future. And, we understand why.

Record profits in 2021 and 2022 have driven up the value of franchised dealerships, and all these factors should keep buy/sell activity in 2023 at a robust level.

As you face those new challenges and opportunities, it is time to look to the future of your dealership. How far away are you from retirement? What is your succession plan? What kind of capital requirements are required under the Electric Vehicle program with your manufacturer? And, will those change how you operate? As you answer these questions, you may decide now is the right time to sell your dealership.

Timing is everything.

Public retailers have publicly shared their plans to buy more dealerships that play into their expansion strategies. Private dealer groups remain highly active, having purchased 93% of the dealerships that sold last year. A lot of dealers who are flush with cash from pandemic governmental programs and record profits in recent years, have excess cash and can be aggressive in acquiring new stores to grow their operations too. They are ready to consider your dealership. Today.

Your management team and our advisors should be discussing these issues with you to help you decide if you are more in the “selling” or “buying” mode. It will help develop an effective strategy for short- or long-term ownership transition plans.

Our forecast is that as we think strong profits and demand for acquisitions come together, the value of your dealership will remain high. If you do not have a succession plan or your family or team is concerned about the future, many like you are able to sell their business today and create generational wealth.

About the author: Tom works closely with Brady Ware’s dealership clients providing various business solutions and financial consulting services. Tom also assists dealers to develop plans to increase profitability and increase efficiency in dealership operations.