Faq's

Business is business and no matter how close a dealer is to automotive sources, such as bankers, zone managers, corporate executives and such, the first thing these people will ask themselves, whether they are willing to admit it or not, is: how will sale of the dealership affect MY businesses?

If an advertising agency informed a dealer it was thinking about going out of business, would the dealer give them more work, or look for another agency? If a new supplier were being phased into a dealership, would the dealer favor the old supplier? There is no difference between dealerships, banks, finance companies, factories, suppliers, or any other business, with respect to the thought for survival.

FACTORIES AND LENDERS ARE PUBLIC COMPANIES AND THEIR EMPLOYEES HAVE A DUTY TO ITS SHAREHOLDERS TO DO WHAT'S BEST FOR THEIR COMPANY. If these people are your friends, they are friends because they are good people. If they are good people, they can’t be expected to look out for your interests, over the interests of their bosses and shareholders. To do less, would be inconsistent with their duties.

With respect to a financially troubled dealership, however, a decision to sell will have unique problems. A lender may fear not receiving full payment of capital loans, or reimbursement of out of trust positions and, the factory will know, that, in most cases, the dealership's retail sales will be affected in some manner. The important things for a dealer with financial problems to remember, are: (a) REGARDLESS OF HOW THE DEALER EXPLAINS A DECISION TO SELL, THE THOUGHTS OF THE LENDERS, FACTORY AND SUPPLIERS, RIGHTFULLY SO, WILL BE DIRECTED TO PROTECT THEMSELVES AND THEIR COMPANIES; and, (b) the dealer had better be prepared for their questions when speaking with them.

The factories and banks are looking for discipline and organization in the sale process. Automotive Advisors of America, Inc., can provide that discipline and organization.

THE DEALERSHIP'S FINANCIAL STATEMENT CAN'T TELL YOU.

Although most people will say that a dealership “worth” consists of the sum total of following assets (less liabilities): 1. Fixed Assets; 2. New Vehicle Inventory; 3. Demonstrator Inventory; 4. Used Vehicle Inventory; 5. Parts and Accessories; 6. Special Tools; 7. Work in Process; 8. Sublet Repairs; 9. Miscellaneous Inventory and Supplies; 10. Prepaid Expenses and Security Deposits; 11. Corporate Goodwill (May or may not include company name and telephone numbers); 12. Personal Goodwill (Could make a big tax difference with “C” corporations); 13. Covenant Not to Compete; and, 14. Consulting Fee Agreement.

SOME OF THE PROBLEMS IN ESTABLISHING THOSE VALUES ARE :

1. FIXED ASSETS (There are five definitions used to value “fixed assets” and the spread between them could be over half a million dollars. Which one did you use?)

2. NEW VEHICLES INVENTORY What is a new vehicle? Are current model year conversions “new” vehicles? What about vehicles that have one or all of the following: miles, damage, non-OEM add-ons? Carry-overs? What about dealer prep, advertising monies, floor-plan assistance, etcetra.)

3. DEMONSTRATOR INVENTORY (Same questions as “new”, plus a couple of others).

4. USED VEHICLE INVENTORY

5. PARTS AND ACCESSORIES (Just because part or accessory is in its original, unmarked, unopened box, and in the current parts and accessories catalogue, doesn’t mean it’s returnable). Also, just because a part may be non-returnable doesn’t mean it’s not worth retail.)

6. SPECIAL TOOLS (There are several ways to value special tools.)

7. WORK IN PROCESS AND SUBLET REPAIRS (There are several methods to value these items too.)

8. MISCELLANEOUS INVENTORY AND SUPPLIES

9. PREPAID EXPENSES AND SECURITY DEPOSITS (What’s on the statement may be high or low. These items must be independently valued.)

10. CORPORATE GOODWILL (May or may not include company name and telephone numbers).

11. PERSONAL GOODWILL (Could make a big tax difference with “C” corporations).

12. COVENANT NOT TO COMPETE (What should be eliminated from it?)

13. CONSULTING FEE AGREEMENT (What needs to be required to be tax deductible?)

Having gone through the above, additional planning with your team is still required to determine the maximum dollars you will have after the sale and after tax, if you are the seller, and the minimum and maximum number of dollars you can pay for bluesky, if you are the pruchaser.
In short, the same dealership has different values to different people because, in the final analysis, return on investment depends upon what the purchaser perceives can be earned in the store (by that particular purchaser), what the purchaser perceives the intrinsic value of that particular dealership, franchise, location (or all of the above) represents to the purchaser's organization or future plans.
All of the above needs to be "tailored" to each unique situation whether you are a purchaser or a seller - and that's where Automotive Advisors of America should be used to help obtain you optimum value for your efforts and assets - whether you are buying, selling, valuing or just planning.

Click on : Why Us

Over the years, we have helped many car people. We live through referrals and earn our fee by putting much effort and knowledge into structuring and closing sales.
Unlike some professionals, we do not bill by the hour. We believe it is counter-productive to our clients' interests to base our fees on the the philosophy: "The longer you take, the more you make". Therefore, we structure our fee arrangements to provide that we get the same fee no matter how long it takes us to complete the project. Consequently, we are constantly motivating the rest of your team to "move things along". (As a side-effect of this structure, we try to make ourselves available 24/7, because important questions do not necessarily arise between the hours of 9:00 AM and 5:00 PM.
Unlike brokers, we charge an up-front retainer that is deducted from our total fee which is payable at the close.
We believe that a retainer helps separate serious clients from those who are "just testing the waters" and not sure they really want to do business. Time and advice are our stock and trade. Consequently, if someone is not serious about a transaction, we are not interested in squandering our resources. If a person is serious, we have enough references and experience to justify our fee.
With respect to sales, our fee is usually 7% of the assets, excluding vehicles, however, on larger transactions, we have negotiated a "sliding" scale. With respect to other transactions, we base our fee upon the particulars of our assignment, and it is agreed upon with our client before we are retained.
When buying a store, we generally set a flat fee instead of a percentage. Otherwise, the more our client pays, the more we would be rewarded. Similar to our thoughts with regard to "hourly" billing, we feel that a fee arrangement based upon the premise "the more you pay, the more we get,"would counter-productive.
When working a deal within the contigious 48 states, we make our own flight arrangements, pay for our own hotels, and buy our own meals. We do not write-down that we spoke to someone five minutes here, or seven minutes there, or get involved in minutia like billing for phone calls and copies. We focus on making the deal and we make our money by closing deals.

We make our own flight arrangements, pay for our own hotel, buy our own meals. We don't write-down we spoke to someone five minutes here, or seven minutes there, or get involved in minutia like billing for phone calls and copies. We focus on making the deal and we make our money by closing deals.
The retainer is deducted from a total percentage (usually 7% - less on extraordinary sales) which is paid when the sale is closed. (When buying a store, we generally set a flat fee instead of a percentage. See above: "What Does Automotive Advisors Charge?)
Thank you for considering Automotive Advisors of America, Inc. If you feel, after we review the information and discuss your particular situation with you, that we are the people for you, we will visit you to reach a fee agreement, explain some preliminary moves you need to take to prepare, and begin putting a package together for you.

In reality, ONLY ONE PERSON (THE BUYER) PUTS MONEY INTO THE TRANSACTION. Hence, in reality, the fee is always paid by the Buyer. While some brokers try to make it look like they are doing the seller a favor by collecting from the buyer, the way Automotive Advisors sees it, the bottom line is that it is always the buyer's money that pays the fee and the odds are, that the seller will net less money by structuring the transactin in that manner.
If, for example a buyer pays $2,000,000 for and item and the broker charges 10%, the broker's fee will be $200,000. Consequently, if the buyer pays half and the seller pays half, the buyer will have to come to the table with an extra $100,000 and, in essence, will be paying $2,100,000 for the dealership, and the seller will net $1,900,000.
On the other hand, if Automotive Advisors handled the transaction, the buyer would put the entire $2,100,000 into the sales price and Automotive Advisors would charge a 7% fee ($2,100,000 x .07 = $147,000), leaving the selling dealer with a net of $1,953,000. In other words, the buyer would be paying 26 1/2% less, by paying Automotive Advisors 100% of its 7% fee, instead of allowing the Seller to pay 1/2 of a 10% fee.
Now when a consultant, attorney, broker, or Realtor tells you that you don't have to pay (or that you only have to pay a percentage of the fee, or that you will split the fee with the buyer), the difference is that the buyer writes a check to directly to the consultant / broker, instead of you or the escrow company taking out your share and writing the check to the consultant / broker out of the balance.
A buyer knows how many dollars a buyer will pay and you know how many dollars you want to net, regardless of how you want to describe the payout.
Think about it another way. If the buyer has a pound of bacon in his or her pocket to buy the item, there is a pound of bacon on the table -- no matter how many ways you slice it.
HOWEVER, IF A CLIENT WANTS TO SAY "THE BUYER PAID THE FEE", we will structure the transaction that way, but we are advising you ahead of time, that we think we will be getting the best of you.
REALITY CHECK: Have a couple of your friends call the broker to say they are interested in your deal. If the broker is more intersted in "hooking" the buyer, than in marketing your dealership, you might want to reconsider your position.

See : Buying and Selling Automobile Dealerships – Out of Trust Situations – Tips