It’s a crossroads every RV dealership owner comes to at one point or another. Thoughts of “should I, or shouldn’t I, sell my dealership this year?” linger in their heads. Of course, one crucial factor driving the decision of which route to take is the answer to the question –
“What is my dealership worth in today’s market?”
If you’re just beginning to explore the sale of your dealership or are not quite ready for a professional dealership valuation, this is the guide for you. Here, we’ll go in-depth into the current market for dealership sales, the complex world of dealership advisors, and how to navigate finding business buyers.
So, keep reading to learn more about current dealership valuations and the best practices for valuing yours in today’s market.
Dealership Valuations: 5 Driving Factors to Consider
After COVID-19 created unprecedented growth across the market, RV dealership sales and business valuations are normalizing back to pre-pandemic conditions. The good news? The global RV market is expected to grow exponentially at a CAGR of 7.5% through 2028.
So, if you’re in the market to explore RV dealership valuation or the sale of, the first things to understand are a few of the factors that drive value. In the RV dealership space, there are generally five specific factors that affect a valuation in today’s market.
Product Lines
The product line(s) you sell have recently moved to the top of the list for helping drive RV dealership valuations. Although the acquiring dealer must get approval from each of the product line manufacturers to continue selling those brands, in the vast majority of the cases, this is quickly accomplished.
“What product lines do they sell?” is generally one of the first questions asked by an RV dealership suitor. More often than not, having lower ranking product lines is the biggest hindrance to selling an RV dealership for the value being sought by the selling dealer.
Real Estate
Of course, the piece of land your dealership sits on and its value will also be a driving factor in its overall dealership valuation. Beyond just the location and the health of the local economy, the physical building or facility of your dealership will also be a factor in its value.
Being well-lit or containing a renovated or upgraded customer waiting area are small things to consider that can impact the intangible asset value (which we’ll get into next!) assigned to a dealership when seeking a business buyer.
Service Capabilities
Your service capabilities are a key factor in acquiring dealerships. As customer service continues to become more and more important, having an ample amount of enclosed service bays with room to expand is a critical piece of the puzzle when looking to sell your RV dealership.
Branding
Your RV dealership’s branding, or level of customer loyalty and recognition, will also play a part in its valuation. Just as any established brand would be more trusted than an unestablished brand, in any industry, the way in which the RV dealership brand is held in the eyes of the public will affect its overall value.
Buyer Demand
Last but not least, being aware of and keen on the market’s current buying behaviors and strategically capitalizing on that demand can also drive or increase the value of your dealership.
When an RV dealership successfully aligns itself with the trends of customers, they’re often more successful and foundationally sound than others. This factor can also result in higher annual profit margins, which is another driving fact that’ll drive a dealership’s valuation, too.
Valuation Multiples & Calculating Value
Valuing RV dealerships is a complex process that can also involve multiple approaches. One of the most common dealership valuation methods is the “blue sky” method. Basically, this combines and calculates value based on two things: tangible items (assets and earnings) and intangible items (such as the driving factors above!). To get a ballpark idea of how much your dealership is worth in today’s market, or it’s “goodwill value,” the equation goes like this –
The net value of the tangible assets (assets – debt) + the value of the intangible “blue sky” (pretax income x a multiple between one and five) assets = its total fair value in today’s market.
The multiple assigned to determine the value of the intangible or blue sky assets is determined based on the health of the overall business (i.e., the factors we already discussed). Even though this blue sky or goodwill value will not be the end all, be all when it comes to the final selling price of your dealership, it does give you a good glimpse into what your dealership is worth.
After running the numbers and doing your own calculations, if you’re unsatisfied with the end value, simply look at the basic areas used for the calculations to determine where improvements need to be made. By improving the driving factors in valuations or other actions, such as reducing debts, you can work towards increasing the selling price you’re hoping to achieve.
Finding a Dealership Advisor: The Importance of Expert Help
Now that you know a few basics about dealership valuations, you can better answer the question, of – what is my dealership worth in today’s market? While conducting your own research and due diligence in the early stages of considering business buyers is recommended, when it’s time to get serious about selling your dealership, it’s crucial to source expert help.
Dealership consultants, like RVBS, use their experience and expertise to navigate the sale process with the utmost success and value. In fact, the RVBS founders, Scott Degnan and Mike Lankford, have over 60 years of combined RV industry experience, garnering them not only a reputation for ethical practices but also impressive results.
Maximize the value of your dealership and curate a competitive environment amongst multiple business buyers with RVBS – where sellers receive fair market value for their assets and life’s hard work (with an over 90% closing rate!).
Learn more about RVBS, or connect with our team today, to begin exploring your unique dealership valuation in today’s market.
