Episode 2 - Beyond the Lot | Understanding Dealership Valuations with Kevin Timson and David Harkins

The discussion highlights (1) the importance of understanding value drivers like brand, real estate, and fixed operations; (2) the wealth of insights found in factory financial statements; and (3) the impact of local market dynamics on dealership valuations. David also emphasizes focusing on controllable factors, the significance of good valuations on succession planning and the challenges posed by current economic conditions in understanding how valuations will increase over the next several years.

Key Episode Takeaways

• Stronger decision-making: Good valuations can help dealerships better manage cash flows, risk, and earnings growth.
• Focus on what you control: While manufacturer affiliation is a key determinant of dealership value, dealers should focus on controllable factors like service customer retention and go-to-market strategy for vehicle sales to enhance the value of their own dealerships.
• Build leadership depth: The development, recruitment, and retention of effective managers can significantly impact dealership valuations.
• Leverage the monthly data sent to manufacturers: Monthly factory financial statements are high-quality reports that give dealers more data points to manage their business than many owners in other industries have.
• Match buyers to opportunities: Lower-valuation stores attract buyers who see financial metrics that suggest room for operational improvement.
• Plan for succession realities: Succession planning is notably different in automotive retail because it requires OEM consent.
• Prepare ahead of the market: Professional valuations can help dealers proactively prepare for future market changes well before a dealership is put up for sale.