Let’s imagine two dealers talking about selling their businesses. What does that chat sound like?
The world has changed over these past few years and it’s unclear whether it will revert to pre-pandemic norms.
Many of us are positioning ourselves to be ready to take full advantage of opportunities that could come our way.
Others are wondering if their time has come, and have been asking themselves privately “do I really want to go through something like this again?”
The questioners look at the post-pandemic challenges, chip production challenges, raw material shortages, shifts in the attitude of employees present and future, possible new retailing models, return of inflation with higher interest rates, and the increasing focus on technology needed to keep brands and consumers happy and say “Yikes!”
On the flip side, prices being paid for dealerships these days are pretty darn good and perhaps it’s time to head for the sidelines.
The opportunists, on the other hand, never ones to back down, see nothing but blue skies on the horizon.
Let’s eavesdrop into a conversation between two dealership buds. Tim is the optimist and Dave is the questioner.
Dave is overheard saying: “I wish the good old days were here. Sure, they weren’t perfect, but they were a lot better than this, except for the profits of course. I’ve been thinking about where to go from here. Where is this all headed? How about you Tim, what are you thinking?”
Tim sits back and ponders a minute while a young waitress drops off two cold drafts and some salty nuts. He hunches over trying to keep his voice down and says, “I think you’re absolutely crazy Dave, we are about to enter the best times in our long careers and I for one want to be at the front of the parade.”
They raise their glasses, then Tim offers a quick fist pump and makes a toast to the great years ahead! Dave takes a small sip, places his glass on the table, leans back and says: “You’ve got to be kidding me, right?”
“It’s now my turn to ask you a question Dave. What are you so afraid of or are you just tired and out of gas?” asks Tim.
Dave responds: “I’ve still got lots of gas in the tank Tim, but I am wondering where I should use it. As you know Sara and I have a family, mostly grown up now and on their own. No one in the family is remotely interested in the car business. Sara keeps hinting that perhaps it’s time to retire and enjoy what life we have left, spend time with our grandchildren and travel.”
Dave pauses slightly, and then continues. “Sara is also worried that if I kick the bucket, she’ll be saddled with cleaning up all the business stuff,” he says, pausing to take another sip.
“Sara wants all the business stuff taken care of before that happens. She has been talking with Terry’s wife and she says life has never been better since he sold his dealership at the beginning of the pandemic. All the business risk is off the table and she and Terry have never felt better.”
Tim replies: “Dave, but Terry is five years older than us and was always weak in the knees. He was a terrific dealer but worried way too much about what he could not control. The stress of the business got to him. Terry only had one store, granted it was a wonderful store. I wished I’d have known he was thinking of selling because I would have been very interested.”
On the flip side, prices being paid for dealerships these days are pretty darn good and perhaps it’s time to head for the sidelines.
Dave says: “You couldn’t afford it. I heard he got 10 times the blue sky!”
Tim snaps back: “10 times what? Terry was so conservative that he never made the kind of money he should have. He was not a risk taker, as we both know. Sure, he got what he considers a lot of money but if you or I owned that store, it would have been worth an awful lot more. His big windfall was in the real estate, he had a valuable piece of property there.”
Dave then asks: “How would you have paid for the real estate and the business?”
“We’re getting off track here Dave,” says Tim.“But the short answer to your question is that I would have joined forces with CARS as a real estate partner and then the business acquisition price would have been very manageable. In fact, the cash saving from the potential redeployment of the downpayment alone would provide the capital to buy more stores.”
Dave then asks: “Tim, what about all the industry changes coming down the pipe. I for one find our business quite complicated these days with my brands taking greater influence over how I run my business and deal with my customers. The technology spend needed to keep pace with increasing capability requirements along with ongoing staff training is no small spend. I can only see this increasing as time goes on. On top of that, there is the whole move to electric driven by government mandates. It’ s going to take time for the customers to catch up.”
Tim sits back and nods: “I do think about those things and others but view them as temporary situations along the path.”
He goes on to say, “I am concerned that if I do not invest and continue acquiring more dealerships and provide the individual business investments necessary to keep pace with brand and consumer expectation, time and opportunity will pass me by and I will be left out in the cold. This will still be a great business for decades to come and I want to be part of that.
Tim adds: “My son and daughter are both interested in the business and excited about the future and where the industry is headed. They have the education from the Automotive Business School of Canada and are active on my brands’ committees. They gain insight from those committees.”
“Sounds like you’re in for the long hall Tim,” says Dave. “Having your son and daughter so involved is a huge bonus. I don’t have that luxury. Just like you though, I don’t want to wait too long to cash in and I don’t want to be left out of today’s prices either.”
Tim closes the conversation by saying: “I guess we both have a fear of being left out, albeit from different perspectives.”
