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they enjoyed during the pandemic . But there are still plenty more buyers than sellers in the powersports arena , and valuations remain strong .

Given this backdrop , how can you accurately determine what your dealership is worth ? Our group , the Stanek Group at Morgan Stanley , recently co-hosted a webinar with George Chaconas and Courtney Bernhard of Performance Brokerage Services to answer those questions .

In this article , we explore the factors that impact your dealership valuation . In our ‘ Part 2 ’ on this topic , we will explore ways to plan for a dealership sale to maximize proceeds .

NEW LANDSCAPE FOR THE INDUSTRY

George C . Chaconas , senior partner , National Harley-Davidson & Powersports Division of Performance Brokerage Services told us on a recent webinar that the market will determine what a willing buyer will pay and what a willing seller will accept .

With that said , Chaconas believes buyers are becoming more selective and sellers are becoming more realistic than they were at the height of the market a few years ago .

Chaconas ’ s partner , Courtney A . Bernhard , believes she ’ s been breaking seller ’ s hearts lately . “ The goodwill is pie in the sky ,” she says . “ Based on our analysis and comps , it often comes down to how motivated the seller is and how motivated the buyer is to own a franchise in a certain business .”

Every dealer wants to know their multiple , of course . But it ’ s hard to throw out a standard multiple without doing careful analysis . Chaconas shares that there ’ s a wide range of multiples , depending on each buyer ’ s and each seller ’ s immediate needs .

“ I ’ ve sold money-losing powersports and Harley-Davidson dealerships for millions of dollars because of the opportunity for a buyer to own a franchise business with territorial protection ,” Chaconas says .

MIND YOUR BUCKETS When Bernhard starts working with sellers , she advises them to look at their business as a series of buckets . Some buckets need to be filled up with more data and other buckets need to be cleaned up before the sale .

For instance , for furniture , fixtures and equipment ( FF & E ), Bernhard often sees 25−year-old items on the depreciation schedule or even items that have long since been disposed of . That ’ s a red flag for buyers . On the flip side , Bernhard says she often sees

OTHER DEAL FACTORS THAT BUYERS CONSIDER :

Market presence . Dealers are always interested in acquiring a strategic or geographic footprint , or maybe a line that they don ’ t currently carry . new items that have come into the business – special tools and lifts , etc . – that have never been added to the depreciation schedule . This is also a red flag .

Then there is mismanagement of parts , accessories and general merchandise . “ I ’ m super passionate about this area ,” Bernhard notes . “ Whether it ’ s automotive , powersports or Harley-Davidson , the parts department gets absolutely no love .

“ Dealers don ’ t move obsolescence off their sheets . If you are preparing for a sale , when is the last time you did a full physical inventory on your parts ? Are they barcoded ? Questions like this always come up before closing . The last thing you want is to show a huge delta between what the seller thought they had in inventory and what is actually there on the shelf .”

With advance planning , you have time to clean up those inaccuracies . There are wholesalers that will buy used parts as well as an active market online .

Finally , consider moving out old inventory as quickly as possible . Don ’ t sit and wait for the best deal . Just get it out the door . “ You don ’ t want to be negotiating over used inventory that ’ s underwater at your closing ,” Bernhard says .

When it comes to your real estate , Chaconas explains that it ’ s imperative to get a thirdparty appraisal done by a reliable national firm . Also , if you have been paying yourself above ( or below ) market rent on your real estate , Chaconas says you ’ re understating ( or overstating ) your earnings and that can impact your valuation . He says the new owner will insist paying only market rent .

“ We often see the seller turning over unadjusted profit / loss statements to the buyer without factoring in the recasting that could make the earnings look substantially different ,” Chaconas says . “ This gives the buyer leverage over what gets recast .”

CONCLUSION You ’ ve worked too hard to build your dealership to leave exit planning to chance . Start the planning process well in advance and make sure you have the right team in place to ensure the best possible outcome for you , your family , your dealership and your community .

Brad Stanek , CFP , is a senior vice president of The Stanek Group at Morgan Stanley in Chicago , IL . Reach him at brad . stanek @ ms . com .

Paulina Matel , CFP , is a financial advisor at The Stanek Group at Morgan Stanley in Chicago , IL . Reach her at Paulina . Matel @ morganstanley . com .

What ’ s the buyer ’ s first impression of your dealership ? Is it clean ? Are the tiles stained ? Is the roof leaking ? Is the parking lot paved ? Has the exterior been painted recently ?

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Financial performance . Many buyers are looking to buy dealerships with strong revenue growth and financial track record .

Operational efficiency . Dealerships that run well without the owner being present are also very attractive to buyers .

Curb appeal . It ’ s like selling your house .

Getting your ducks in a row . Have upto-date and well-organized financials . Make sure key business documents are not missing . If a buyer sees you scrambling around to find important documents at closing – articles of incorporation , shareholders agreements and updated minutes – they ’ ll assume you ’ ve also been running your dealership in a haphazard fashion and that can impact your valuation .