Auto Repair Shops: How Do You Determine A Realistic Price?
Comments & Replies
These valuation multiples are not static though and can be different depending on certain criteria. If sales are over $1,000,000 than the calculated price should be raised to reflect that larger size, the same goes for an SDE (Sellers Discretionary Expenses) over $200,000.
Along with using financials, an auto repair shop's price should be based on other types of factors, including current employees and management, lease, utilization of software, client data, scope of owner's role, business ratings, equipment condition/depreciation, number of service bays, franchise or not, and what services are provided. Usually the larger the size of these factors, the higher the calculated price of the auto repair shop should be. Along with these factors, inventory is important to consider to when pricing an auto repair shop: where shops with inventory that is less than 10% of the calculated price, probably should include the inventory with that price estimate, but if inventory is larger than 10% of calculated price than the calculated price, then the total selling price should be calculated price plus inventory.
Lastly its important to consider the type of customers the auto shop works with and the type of services the shop does: an auto repair shop with fleet and commercial customers should have its price calculated with higher multiples than the median ones previously stated; the same goes for shops that do heavy line work.