In this article, we’ll show you how to calculate how much your auto repair shop is worth with simple but powerful math.
Conceptualminds | July 8, 2022
Auto Repair Shop Valuation
If you’re like most auto repair shop owners, you haven’t had a company valuation.
Official valuations, though important, are prohibitive expense for many, ranging between $5,000 and $20,000. Given that, makes sense why small business owners don’t bother.
However, not knowing your business’s full value puts you at a great disadvantage. Learn exactly why, and how you can calculate yours (With the help of a little back-of-the-napkin-math).
Having a Valuation Means Being Ready When Opportunity Knocks
Like buyers, making this man part with his money takes some doing
Since valuations can take upwards of four weeks, simply having your valuation on hand can let you respond to surprising opportunities such as financing, a possible business expansion, or a merger.
Learn How the Market Will See Your Auto Repair Shop's True Value
Over the many years, you’ve learned a tremendous amount about your automotive business and what drives it forward.
These learnings and assumptions form the basis of your strategy and decision-making—but they might not be rooted in reality.
Getting a full valuation removes those blind spots by teaching you what you were doing right—and wrong—all along.
Make Business Decisions Based on What Really Drives Valuations
You may not be able to see, touch, or feel intangible assets, but the value they add is very real.
When most business owners receive their first valuation, it’s often significantly lower than hoped.
Most owners overestimate the value of tangible assets—buildings, equipment, and real estate—but underestimate intangible assets (Things like reputation, profit margins, customer loyalty, and marketing efficiency).
3 Reliable (And Simple) Ways to Determine Your Auto Shop’s Value
Valuations are more art than science. As such, brokers and buyers use different methods to calculate them; it’s often best to examine a combination to get a good read of where your business stands.
The following four valuation methods will highlight different sides of your business and should be relatively simple to figure out.
1. Auto Repair Industry Comparison
2. Income-based Autobody Valuation
Income-based valuations only require you to multiply your net earnings by your earnings multiplier.
So, if your earnings were $400,000, for instance, you could expect close to the auto repair industry’s average multiplier, 2.2. That’s 400,000 × 2.2, 880,000.
Generally, the larger the company, the higher the multiplier.
A larger business can expect a 4+ multiplier.
3. Asset-based Valuation for Automotive Repair
Complex finance is best left up to people who see equations in their sleep
The math for this one is simple. Subtract liabilities—loans, unpaid invoices, or expenses from litigation—from your assets—real estate, equipment, and other holdings.
All assets and liabilities should be at fair market value (Not the sticker price, what a real-world buyer would actually pay).
In a Day You Can Get Way Better Prepared for Your Exit
Regardless of how you calculate your valuation, the real job ahead lies in growing your selling price.
Adding new customers is often a highly cost-effective way to increase your value.
That’s a task for marketing.
At Conceptual Minds, our team of master marketers help grow valuations with expertly planned marketing campaigns, backed by regular testing and research.
Print marketing is one of the fastest ways to grow your car count and thus your overall valuation.
We equip our clients with the tools and knowledge to understand results from their marketing efforts and get top ROI through our tailored services. Our Print Marketing Services