Powersports Business May 2024 | Page 13

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Powersports Business • May 2024 • 13
on top of your pre-owned vehicles , as the price of pre-owned vehicles is coming down and we are seeing a lot of dealers under water ,” he adds . “ Be sure to get your aging inventory off of the floor . When you get into negotiations , you don ’ t want to be caught off guard with your pre-owned vehicles not being worth as much as they were just 90 days ago .”
Courtney Bernhard , a partner at Performance Brokerage Services , says another misstep dealers often make is terminating franchise agreements during the sale offering . She notes this oversight stems from the COVID years when dealers brought in extra lines to offset inventory shortages from their major lines .
“ Remember , those franchises were contributing to your top line sales during the COVID years ,” she cautions . “ When a buyer is assessing your numbers and sees those franchises still listed on your website , they ’ ll be under the assumption that those franchises are going with the sale . But if you ’ ve terminated those franchises without disclosing to the buyer or your advisory team , that can pose an issue because you never really know which franchise the buyer values most . It is imperative to have full transparency through all phases of the transaction .
until we ’ re in the thick of negotiations ,” she adds . “ As a dealer , you need to be as open and honest as possible with your advisors before going to market .”
Bernhard explains that more exits are being driven by the health concerns of Boomer dealers or the health of a key family member slated to take over the dealership . “ Health issues also need to be discussed before going to market , even though these conversations won ’ t be shared with buyers . We have to know all the factors at play before getting into negotiations .”
On a recent webinar , Paulina Matel , CFP , explained that planning for an exit or a succession plan can be very daunting . “ Valuing your business is about more than just listing your business for sale ,” she says . “ It ’ s a highly
emotional decision that also comes down to understanding complex financial , tax , legal and operating decisions . It ’ s also about planning for illness , burnout , death and even divorce .
“ Maximizing the value of your dealership is just the start ,” she continues . “ You must know when the time is right for you and your family to exit so you can live a lifestyle beyond what you even thought was possible .”
It starts with planning your exit years in advance of when you think the time will be right .
Are you wondering how your corporate structure could impact the taxation of your dealership upon sale ?
Are you wondering how to set up an
internal succession plan that would allow you to retire or move on to your next passion project ?
Are you curious to know how potential buyers would value your dealership based on your most recent financials ?
Stanek-Haack Group or Performance Brokerage can help answer those questions with a complimentary 30−minute consultation to discuss your options .
Brad Stanek , CFP is an executive director of The Stanek-Haack Group at Morgan Stanley in Chicago , IL , brad . stanek @ ms . com .
Paulina Matel , CFP is a financial ddvisor with The Stanek-Haack Group at Morgan Stanley in Chicago , IL , paulina . matel @ ms . com .
PREP AHEAD A common misstep made by dealers is not preparing proactively for a sale . Oftentimes they aren ’ t thinking of selling when a buyer calls them out of the blue with a seemingly attractive offer . Before they know it , the deal is moving forward quickly , and important things are being overlooked . As the 5Ps adage goes , “ Prior planning prevents poor performance .” If you get an intriguing offer unexpectedly , there ’ s no reason why you can ’ t step back and let the buyer know you ’ re interested , but that you need to review the deal with your advisory team and that you ’ ll get back to them shortly . The more planning you have done in advance , the better position in which you ’ ll be .
Before going to market , it ’ s very important to think carefully about what you want to do with your life post-sale . What kind of travel do you want to do ? What do you want to do for the most important people in your life and the causes you believe in ? You ’ ll want to be crystal clear about how much you ’ ll need to net from the sale of your dealership after fees and transaction costs to support your ideal lifestyle without worrying about running out of money . Only then can you determine if the offer you ’ re getting is enough .
Research shows five out of six business owners ( 83 %) don ’ t have a written exit plan in place and four out of five ( 78 %) don ’ t have a formal advisory team to help them plan their exits . Are you surprised that seven out of eight owners ( 88 %) are not fully satisfied with their deals ?
PLANNING IS KEY Bernhard remarks she and her colleagues are getting deluged with calls from dealers thinking about selling lately – owners who initiated conversations with her team several years ago . At the time , they were “ making so much money and having so much fun , they wanted to keep riding the prosperity wave ,” she notes . But now times are different , and revenue is dropping just as significantly as it spiked during COVID . “ We ’ re not just seeing a softening of the market , but there are more challenges with OEM approvals . Manufacturers are getting pickier about dealers not meeting certain goals – targets which often in the past , weren ’ t clearly defined . These are things we often don ’ t learn about