Hi there,
I'm Matt. I help people who own auto shops, body shops, tire shops and towing companies get the most for what they've built.
I'm not asking you to sell anything. This is just what I've learned about what makes a shop worth more. Take what helps. If you ever want to talk, I'm here.
Matt
Your shop may be worth more than you think
Buyers pay the most for a shop they trust to keep making money after you step back.
You've probably worked 50 or 60 hours a week for years to build your business. Your name is on it. Your customers trust you. Whether you want to sell, hand it down or just keep growing, you should know what it's really worth.
Here's the good news. Auto businesses are in demand. Cars will always need fixing, and a computer can't do a mechanic's job. Buyers know that. And when more than one buyer wants your shop, the price goes up.
What buyers pay extra for
Two shops can each make $600,000 a year and still sell for very different prices. It comes down to the things in this guide. Most of them are in your control.
Buyers pay more for numbers they can see
The more of your money shows up on paper, the more a buyer will pay for it.
What a buyer will ask for
- Your tax returns for the last 2 to 3 years.
- Your profit and loss reports (P&Ls) for the same years. They should match your tax returns.
- A P&L for this year so far, with bank statements to back it up.
- Sales reports from your shop software.
Why loans matter so much
Most buyers don't pay all cash. They get a loan, often from a bank or the SBA (a government-backed small business loan). When your shop can qualify for a loan, a lot more people can afford to buy it.
More buyers means more offers. More offers means a better price.
About cash
Here's the honest truth. A bank will not count money that isn't on your tax returns. If some of your sales are in cash and not reported, the bank leaves them out. That lowers how much a buyer can borrow.
Some buyers may still give you credit for part of it. But it's usually on their terms. They may ask you to finance part of the sale yourself. That means you wait to get paid, and you carry the risk. The best way to get paid for everything you earn is to have it all on paper. If you have questions about past years, talk to a tax pro.
The biggest deal killer I see is a surprise. A buyer checks the numbers, and they don't match what they were told. Clean records protect your price and your deal.
Want to know how your numbers would look to a buyer?
Get a free, private reviewYour team and payroll
Moving workers from cash to payroll usually costs 30% to 45% more. Buyers know this and plan for it.
If some of your team is paid in cash, a buyer sees an extra cost after they take over. They'll want everyone on payroll.
Here's an example. A worker takes home $1,000 a week in cash. On payroll, that same worker can cost about $1,300 to $1,450 a week. That's because you cover their taxes so their take-home stays the same, and then you pay your own share on top.
Buyers also worry about keeping your people. Some workers like cash for their own reasons. If things change too fast, a good tech might leave. And your team is a big part of what a buyer is paying for.
How this is calculated
Gross wage = take-home ÷ (1 − withholding). Withholding is the employee's Social Security, Medicare and income taxes combined, which depends on each person's situation.
Real cost = gross wage + 7.65% + 5%. The 7.65% is the employer's Social Security and Medicare. The 5% is an estimate for unemployment insurance, workers' comp and New York disability and paid family leave, which vary by shop. Benefits and payroll fees aren't included.
Thinking about moving your team to payroll? I can show you how a buyer would see it.
Let's talkDon't put all your eggs in one basket
A shop with lots of customers is worth more than one that depends on a few.
A big fleet account, an insurance company that sends you work, a dealer or a towing contract can be great. But what if that one customer leaves? Your sales could drop by 60% overnight. Your rent, insurance and payroll don't drop with it.
Buyers see that risk, and it lowers what they'll pay.
How this is calculated
Profit lost = revenue × customer's share × 40%. The 40% is an estimate of what you keep from each dollar of that customer's work after parts and the labor you'd no longer need. It's usually much higher than your overall profit margin, because rent, insurance, equipment and most staff costs stay when the customer leaves.
Big accounts aren't bad. A buyer just wants to know a few things. Is it in writing? How long has it lasted? Is the customer loyal to you, or to the shop?
Curious how your customers affect what your shop is worth?
Let's look togetherCould your shop run without you?
The less your shop needs you every day, the more it's worth.
Could you take two weeks off and the shop would run just fine?
In a lot of shops, the owner is also the top tech, the one who writes the estimates and the person every big customer calls. That shows how hard you've worked. But when you leave, a buyer has to fill all those jobs. They take that cost off their offer.
Buyers pay more for a trained team and a clear way of doing things, because those stay after you go. You don't have to step away completely. You just want a shop that doesn't fall apart without one person.
Want an honest outside look at how much your shop leans on you?
Book a private callYour building or lease matters
Whether you own or rent your space, it can raise or lower your price.
How long is your lease?
Say a shop makes $100,000 a year and sells for $500,000. But there are only 5 years left on the lease. In those 5 years, the buyer just makes back what they paid. They make no profit at all.
That's why buyers want about 10 years left on a lease. That could be a 10-year lease, or a 5-year lease with the option to renew for 5 more.
How this is calculated
Years to earn back = sale price ÷ annual profit. Profit left = annual profit × years left on the lease − sale price. Count only renewal options the buyer can use without the landlord's approval. It ignores loan costs and growth to keep the picture simple.
If you own the building
Lots of owners also own their building. Some charge the shop very little rent, or none at all. A buyer will fix that on paper by adding a fair rent.
Here's an example. Your shop makes $750,000 a year before rent. Fair rent for your building is $15,000 a month. A buyer will treat your shop like it makes $570,000 a year.
How this is calculated
Earnings a buyer uses = earnings before rent − (market rent − rent paid now) × 12. If you charge the business more than market rent, the adjustment works in your favor.
Owning the building can be a big plus, too. You could sell it with the business, sell it on its own, or keep it and collect rent.
If you rent
Check if your lease can be passed to a new owner, and if your landlord has to say yes first. It's much easier to sort that out early.
The smoothest sales I see are when the owner shares everything about the property up front: repairs it needs, parking, family who co-own it. A known problem can be solved. A surprise late in the deal is much harder.
Own your building, or is your lease coming up? We can help with the business and the building together.
Ask me about itPermits, equipment and paperwork
A shop with its paperwork in order is easier to buy, so more buyers will want it.
A buyer and their bank will check a few things. Is your shop registered with the DMV? Does the zoning let an auto shop keep running there? Is your paint booth permitted? How do you get rid of oil and other waste?
They'll also look at your equipment. If your lifts, tools, trucks or paint booth are getting old, the buyer knows they'll have to replace them soon. They'll take that cost off their offer.
Right now, we're working on a property with old tanks buried underground. They slowed down the sale and hurt the price. Owners rarely see this kind of thing coming. That's why it pays to check early.
Not sure about your zoning, your permits or what's under your lot?
Ask me before a buyer doesHow buyers decide what your shop is worth
A buyer looks at what you make, then multiplies it. The safer your shop feels to them, the bigger that number.
Buyers start with what the business really makes for you. That's your profit, plus your own pay and any personal or one-time costs that run through the shop. Brokers call this SDE.
Bigger shops, ones making $500,000 a year or more, often draw investors and groups that own several shops. They look at what's left after paying a manager to run things.
Same profit, different price
| Shop A | Shop B | |
|---|---|---|
| Yearly profit (SDE) | $600,000 | $600,000 |
| Records | All sales on paper | Some sales off the books |
| Payroll | Everyone on payroll | Two techs paid in cash |
| Owner's job | Runs the team | Top tech and estimator |
| Lease | 9 years left, with options | 2 years left |
| Loans | Bank or SBA loan possible | Cash buyers or owner financing only |
| Example multiple | 3.5x | 2.25x |
| Example price | $2,100,000 | $1,350,000 |
This is just an example. Real numbers depend on the type of shop, its size, where it is and the market. Nothing here promises a price.
That $750,000 difference didn't come from more sales. It came from getting ready.
What would your shop's number be? A free, private review will tell you.
Book a reviewWhere do you stand?
Six quick questions. Every yes is something buyers pay extra for.
Want to know what your shop is worth?
Grab a time to talk with me. It's free, it's private and there's no pressure.
Pick a time that works for you, or call me at (914) 980-7828.
Book a free, private callWill this stay private?
Yes. I never share your name or where you are without your OK. Buyers sign a privacy agreement (an NDA) before they see anything.
I want to keep it in the family. Is this still useful?
Yes. Clean books, a team that runs without you and a solid lease make a business easier to hand down, too.
Should I wait for a better market?
No one can control the market. But you can control everything in this guide. If you get ready now, you'll be set when the time is right.
Want a quick number first? Try our free business value calculator.
Matthew Barbaccia
Matt runs Mava Business Advisors. He helps people who own auto businesses across New York, New Jersey, Connecticut and Pennsylvania find out what their business is worth, and sell or buy one privately. He's also a commercial real estate advisor with Brix Real Estate Advisors, so he can handle the business and the building together.