12 • May 2024 • Powersports Business

BY BRAD STANEK AND PAULINA MATEL CONTRIBUTING WRITERS

In Part 1 of this article , we discussed the economy ’ s impact on buy-sell activity , and key considerations for determining value , the merits and key differences of an internal transfer versus selling to a third party . Now , we ’ ll explore the wisdom of having a formal written plan , having an advisory team with industry experience and how to avoid common mistakes when preparing for sale .

Dealers often ask what they can do to protect their interests and get maximum value for their dealerships , even if they ’ re years away

from exiting . Two things come to mind : 1 . Have a written exit plan in place well before you go to market , and 2 . Have a strong advisory team with relevant industry experience .

Let ’ s start with the written plan . This document is very important as it spells out your ideal exit plan and timeline , whether it ’ s a third-party sale or an internal transfer . A good written plan will help you determine how much in proceeds you ’ ll need to net after the sale , so you can live comfortably and not outlive your money . We ’ ll talk about your “ walkaway ” number in a minute . The plan should help you uncover areas of your

personal spending that can no longer be run through the business after selling , such as expenses you will now need to pay out of pocket , like vehicles , boats , club memberships , dining and entertainment .

Your plan should include a realistic “ walkaway proceeds calculation ” that takes into account not only what your dealership is worth , but how your corporate structure will impact the taxes you face after selling or transferring . The walkaway calculation should also account for transaction and advisory fees you are likely to face at the time of the sale . The written plan should also reference any tax-saving and financial planning opportunities you can use to minimize your taxes and fees in the year of a sale . Most importantly , you want all of these details included in your plan well before you list your dealership for sale . That way , you ’ ll be in better position to retain the wealth you worked so hard to build .

When it comes to the advisory team , make sure you surround yourself with a cohesive team and not a group of individual advisors each acting on their own . Additionally , you want to make sure your team of advisors has experience selling dealerships , has negotiated buy-sell agreements before and is familiar with the powersports industry . Without that industry experience , you ’ re at a significant disadvantage against most buyers who have many transactions under their belts . No matter how good your longtime attorney and CPA are , if they haven ’ t done many dealership transactions , they ’ ll miss important nuances in the industry , which could mean leaving money on the table . By knowing what ’ s reasonable and customary in the powersports industry , you ’ ll be well positioned to maximize your proceeds , minimize your taxes and prevent leaving money on the table as you navigate the exit process .

By knowing what ’ s reasonable and customary in the powersports industry , you ’ ll be well positioned to maximize your proceeds , minimize your taxes and prevent leaving money on the table as you navigate the

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COMMON MISTAKES TO AVOID George Chaconas , senior partner for the Harley-Davidson & Powersports Division of Performance Brokerage Services , told us on a recent webinar we hosted that one of the most common errors that dealers make is not having clean , accurate , up-to-date financial statements and operating statements . Another mistake he sees is not normalizing their earnings through adjustments to rent , or salaries and add backs , since small to midsize businesses try to minimize their taxes by running a lot of personal items through their business .

“ We also see many sellers neglecting to do inventory every year and forgetting to update their depreciation schedules , whether they bought a new piece of equipment or got rid of a piece of equipment ,” he notes . “ Finally , we see dealers forgetting to get their building , roof and HVAC inspected pre-sale .” He adds that overlooking these types of things can create a sense that there are other hidden issues and ultimately be more time consuming to remedy during the negotiation phase .

First impressions are often overlooked by owners . “ When I pull into a dealership , is the signage up to date ? Is there mold and rust visible ? Do I see potholes in the parking lot ? It ’ s also about making sure you are staying