THA 052: Lessons I Learned When I Sold My Shop

Watch like a DOCUMENTARY … Learn like a SEMINAR.

The Academy Panel:

• Margie van Lierop sold the business Beach Cities Garage in Laguna Hills, CA  in mid-September 2017.  She is now a Business Consultant and Free-Lance Writer, Business Consultant for Bogi Lateiner, a ghostwriter for several automotive related websites and will vacation throughout Europe – May, June, and July. Margie’s previous episode HERE.
• Scott ‘Gonzo’ Weaver sold his business Superior Auto Electric in Tulsa, OK, in 2017. He had the shop for sale for a while, but a medical condition accelerated his move as he had to mothball the shop while he recovered. Scott continues to write for magazines and automotive publications. He is remodeling his home and teaching student the automotive trade. Listen to Gonzo’s previous episodes HERE.
• Dave Winters formerly of Swedish Automotive in Seatle, WA, sold his shop in 2017. He and his wife recently purchased a new home and moved 50 miles from their previous house to the Olympus peninsula in Washington. He has plans to travel in a motorhome and walk the dog whenever he wants.

Talking Points:

• You must have a clean and transparent Profit and Loss statement.
  • It may take a few years to clean the P & L and you may have tax consequences.
• Use your accountant and lawyer to support your move to sell your business.
  • Account can help evaluate the business
  • Lawyer will look at every detail of all contracts.
    • Example if you lease and the landlord is willing to take on the new business owner, be sure your name gets off the lease transfer.
• A business broker can be used but don’t hesitate to do some marketing yourself.
  • You will pay a broker a fee.
• Confidentiality is one of the most important elements of any transaction
  • People like to talk. Mum is the word. Do not share with anyone.
  • Your risk is team morale, loss of key people.
  • Non-Disclosure Agreements for the buyer so they do not leak the potential transaction and your information stays confidential.
  • If leaked you’ll have to have an emergency meeting with your team to explain your decision and if the deal is not signed, you risk a lot.
  • Confidentiality allows you to find a good transfer of ownership and speak to your team in the proper way. New owner gets a chance to embrace your team on day one.
• Owning your property and holding the lease is an income stream and figures in on the entire transactions value to seller. Become a landlord.
  • Professionals need to help you come up with a sale price.
  • You may use a multiple of your profit or (EBITDA- Earnings before Interest, Taxes, Depreciation, and Amortization). Which is why having a clean and transparent P & L is so critical.
  • An option. Value the business with and without specific assets (equipment & tools). The price may be more attractive if split out this way.
• The current replacement value of your tools has no connection to what you can sell them for.
  • Keep in mind that your tools do not have the value to a new buyer as much as they do to you in running a going business. You made money with your tools over the years and they are not worth retail. They are on your books at a depreciated value.
• If your business is dependent on you, the business may be worth less to a potential new owner. Read the E-Myth from Michael Gerber.
• Careful with terms. Do you want the shop back after one or two years? Work your deal so you can get your cash. Find a buyer with money or good credit to get loans. SBA loans are a great option for the buyer.
  • Find an internal candidate who can earn a percent of the business over time and qualify for SBA money.
• As you make decisions on your business always consider what ramifications they will have on the eventual sale of the business.
• Life after selling:
  • Hobbies
  • Travel
  • Stay busy, but don’t worry about the business you sold.
  • You’ll have a non-compete clause so be retired.
• Prepare for your tax liability from Uncle Sam on the capital gains on your business. Do not spend all your money.
• Boomers need to start thinking about an exit strategy. It may take a few years to get the package together. Many options to consider.

Episodes on Succession Planning HERE.