analytical approach in determining the overall value of
an automobile dealership is based on an assessment of the
goodwill value, or as it is known in the automobile industry,
the "blue sky" value of the continuing operation
of the business in the trade area, as outlined by the vehicle
manufacturer. This value is then added to the value of the
adjusted net worth of the business.
The most common approach in determining
the intangible blue sky/goodwill value is the income approach.
Simply put, the dealerships average adjusted net earnings
over a period of five years are applied against an earnings
multiple or a capitalization rate, which then establishes
the blue sky/goodwill value of the business. Adjustments
to the dealerships earnings may include excessive owners
salary, rent which does not reflect the property at its
true market value or LIFO adjustments. Adjustments to the
balance sheet of the financial statement must reflect the
business assets at their true value. Typical adjustments
would be in the used vehicle and in the parts inventories;
old receivables should be written down.
In addition, we utilize the National
Automobile Dealer Association (NADA) Guide to Valuing an
Automobile Dealership, which is a general discussion of
various approaches to valuing automobile dealerships, and
as such, validates our valuation approach.
Our business valuations are usually
used for estate tax, marital dissolution, partnership disputes
and other litigation purposes. Additionally, adjustments
can be made based upon minority, non-controlling or fractional
interest in the dealership business.
Our business valuations are done in
accordance with the IRS REVENUE RULING 59-60.
Since all business valuations are unique
to the individual dealership, please call for a price quote
Valuation reports generally take two
to three weeks to complete.