Do You Know What Your Body Shop Business Is Worth?

Many smaller body shop owners have asked, “How do I appraise my body shop?” In the last month I have been asked to do two appraisals on body shops. The first appraisal was to assist in partnership dissolution; the second appraisal was for marriage dissolution. (That is what the attorneys call a divorce.) Would you like to know how to appraise the value of a body shop business?

Before we begin, I would like to make one comment. Whenever a CPA has done an appraisal of a body shop, I find that their opinion of value is much greater than the actual value the market place will pay. This is not because the CPA’s do not know what they are doing because they do; it is just that the market place places a much higher risk on buying a body shop than the accountants do. The following is an excerpt from one of those appraisals.

THE THREE WAYS TO APPRAISE A BUSINESS

1. The ASSET VALUATION METHOD. This method is basically used when a body shop does less than $400,000 a year in gross income and the seller is making wages, but no real profit above what he would be paid if working for another. On this size business, a buyer is willing to pay for the assets of the business but little or nothing for goodwill. The equipment is usually worth between $50,000 and $100,000, depending on how many frame machines the business owns and how nice a spray booth the business owns.

I have seen some specialized shops sell for more than the above number because they have a truck spray booth or another business attached to the main business. Examples of attached business might be an auto repair shop or towing operation. Also the location, size and real estate rental amount will influence the value of any business, to some degree.

2. The second method, I call the GROSS SALES METHOD. This is used when the sales are over $1,000,000 a year but the profit is unknown or financials are not available or reliable. Because of experience, a Body shop buyer can make reasonable estimates of future profits, if they have some basic information. The basic information includes rent, source of business (DRP, STREET, or a CAR RENTAL AGENCY), and the desirability of the location.

When this method is used, the value appears to be about 3 months sales or 25% of the last 12 months sales. This method is not very reliable on businesses with sales of less than $1,000,000, because the question of being profitable is very questionable. Why is this breaking point $1,000,000 in annual sales? Multi-store buyers will have well paid managers, so many figure their breakeven point is around a million.

Less than $1,000,000 in sales is not even worth their time. Of course we know that there are exceptions to the rules. Some of the exceptions are A. when a new location will be a satellite store to a bigger location. B. The buyer must have a location in a specific area to please a DRP. C. To get rid of a competitor.

3. The third and most used method of evaluating any business, including body shops, is the NET PROFIT METHOD. This method is based on the idea that a business is worth what it generates, in profit and benefits, for an owner. Body shops, like so many other small businesses, often do not show a profit, at the end of the year. Strange, how so many businesses of different sizes all just happen to end up with little or no profit. What I find really amazing is that the IRS doesn’t audit more businesses then they currently do.

As a result of showing poor profits, on the books, it becomes very difficult to use the NET PROFIT METHOD for appraising many small businesses. Luckily for me, I can quite often find hidden profits, of a business, by adding to the books, items we call owner’s benefits. These include: Owners salaries, if a corporation. Personal autos and all the related expenses used by the owner and his family that are written off against the business, fife insurance and health insurance for the owners.

Depreciation is also a hidden profit that is usually added back in to the taxable profit to help build up the total owners benefits. And lastly, personal utilities, phones, trips, etc. that are deducted on the tax return but are not really costs to run the business.

After saying all this, what is the value of a business based on the Net Profit Method? Automotive businesses, especially auto body shops appear to sell for between 1.5 to 2 years adjusted profit (book profit plus owners benefits added back in). Larger body shops doing over $2,000,000 in annual sales may sell for much more, because the owner is making much more money, than just his salary and a buyer will consider part of the profit a return on his financial investment.

Very large body shops that are being bought by public corporations are evaluated primarily on their return on investment (Percentage profit that is being made on the cash purchase price of the business.) These big buyers can afford to pay between 5 times and 10 times annual net profit, after deducting all officers’ salaries and perks.

Often these, public corporations, high purchase prices include two important restrictions, which is really why they are buying the business in the first place. First: The business is bought for little or no real money. They use restricted corporate stock that is not negotiable for two years. And second: The management is required to stay and run the company for some period of years.

The bottom-line, as I see it, is that you sold your soul, not your business. One last comment on selling to large corporations; heaven help the seller who sells his business for corporate stock or the buyers bonds and the buying company goes broke or the stock market crashes. I had a close friend sell his company for mostly cash and some seller carry back financing in Dec 1997. By Feb 1998 the buying company was in bankruptcy, making the paper my friend held worthless.

CONCLUSION: Appraising a business, especially body shops, is an art not a science. No two people will appraise the value of a business the same. I am amazed that the same thing one buyer thinks is a great asset is what another buyer thinks is a major negative. Differences of opinion are what make life interesting.

How to Select an Auto Repair Shop

Selecting an auto body repair shop can be a bewildering and confusing experience. There are hundreds of shops to choose from in any city and they all claim to offer the best prices, the fastest service, and the highest quality. Can they all be trusted? Or should you be on the lookout for scam artists and individuals trying to take advantage of unsuspecting customers?

Choose Value for Auto Body Repair

Low prices are an attractive promotion, but it is not always best to just go with the body shop that is offering the lowest priced repair. Though most body shops do honest work, there are some that cut corners or install used parts with informing customers just so they can lure people in with rock-bottom pricing. Getting value for car repairs is paramount – value is the combination of reasonable pricing and high quality work completed in a fair amount of time.

Protecting Yourself and Getting the Most out of an Auto Repair Shop

Before deciding on the low bid, or any price quote, find out more about the body shop. Do some research on the Internet and ask around for any reviews and testimonials. There are great online review sites on which people give unsolicited opinions about their experiences with local businesses. Any auto body shop you are considering should have mostly positive reviews – don’t let a few negative ones scare you away as almost all businesses will have a few dissatisfied customers from time to time.

A recent trend in the industry are the use of auto accident consultants. These individuals or companies have established relationships with a network of auto repair specialists and can offer understanding and insight into the workings of the industry. Car crash consultants are often able to offer connections to legitimate repair specialists and may even be able to save you money on a car repair.

The other way to protect yourself is to ask your insurance agent or carrier. Though you are not required to use a body shop they recommend, they do work with a variety of different legitimate repair shops. Using a recommendation from your insurance company may not mean you will get the lowest price, but it will ensure that your insurance company will not balk at paying the balance due.

Finding the right auto body shop can be frustrating, but the frustration level can be reduced with a little research and effort. Spend some time on the Internet, and talk to family, friends, neighbors, and peers. One last piece of advice – get at least three quotes before you select a shop. Shopping around may take a little extra time, but it is often worth the effort.

The Ins and Outs of a Good Auto Body Shop

Quite often people may get the wrong impression on just what an auto body shop does. Some individuals believe that they are strictly for working on the body of the car only. It is surmised that if a car has been in an accident it must first go to a mechanics shop for repair then go to the auto body shop. This may very well be the case but not always.

In fact now it is not uncommon for a auto body shop to have on staff a whole selection of experts. They may be mechanics, electrical technicians as well as the body experts. These too can come under various areas of expertise. Such as some specialize in restoring the original look of the car with replacement parts, then it goes to another section to prime it and prepare it for painting. From here it goes to the paint department and finally onto the finishing section. In other shops there could be one individual that does all of these duties.

When it comes time to pick an auto body shop, it will depend on the circumstances. If the vehicle has been in an accident that is being covered by, Insurance then you will have a little more selection of which shop to use, maybe. Some insurance companies will ask for 2-3 estimates and then will make you choose the lowest estimate. Other insurance companies have a specific body shop that they use and your vehicle must automatically go there.

If your requirements of a body shop is for a job that is not covered by insurance then you may have different expectation.

If you have extensive bodywork that needs doing then obviously you are going to want to seek out a shop that has a lot of experience in this area. On the other hand, if you just have a few minor body repairs but it is the painting that is important then you needs are different.

When seeking out these types of services make it a point to visit two or three shops for estimates on the work you require. While there take a good look around, see what the work standards are, and see if you are able to identify some completed projects. If they are to your liking and the price is right then your problems of finding a good auto body shop are over.

Where to Find Safe Auto Shops

Finding the right auto body repair service in Fort Worth, Texas is an important decision when needing auto body shop services for any type of damage repair to your car or truck. Whether you have been in a car accident and need major body repair or you just have a few dents, you need to be confident that you have found the best repair shop for your needs. You can gain this confidence through research by finding out what others say about the shop (reviews) and also what the repair shop says about itself.

One of the first things you will want to do is look up reviews or ratings on different shops in the Fort Worth, Texas area. The Better Business Bureau in Fort Worth is a great place to start. It has ratings on auto body repair companies in the Fort Worth area. The website gives the company a letter grade and then explains why it got that rating. This site also lists the number of customer complaints and the types of complaints. In addition, you can search for a company online using a major search engine website. There you will find different companies websites and reviews of the businesses. When visiting a website of an auto body repair shop in the Fort Worth area, check to see how long a company has been in business and if they accept insurance or not. Be sure to research different shops information on what insurance they accept and for what kind of damage.

The other thing you can look at is what the company says about itself. You can do this by calling them or looking up their website online. One thing you can look for is what services they offer. Make sure they offer what service/services you are needing. Some shops may not have incorporated the newer techniques for things, so if their services are not listed on the site, then call and ask if they can fix whatever it is you are needing. Also, look to see if the site states anything about only servicing certain makes of cars or trucks. Information gathered about auto body repair shops in Fort Worth can play an important role in making important decision about your vehicle.

By calling or checking the website you can also learn about a companies prices. Do they charge reasonable prices? Or is there a large difference between them and other shops you are looking at? If different shops use different techniques, then compare the prices with the other locations as well. For instance, with auto dent repair, there are a couple of ways to repair the dents, and they are dependent on how big the dent(s) are and where on the vehicle they are located. If one shop will repair you car or truck with body filler and paint and the other shop will repair it with paintless dent removal, then compare prices among the shops to determine which one will fit your needs the best. Generally, calling a company before they work on your car is a good idea. It gives you an opportunity to ask specific questions, but it also gives you an idea on the customer service you will receive.

So, as long as you research what others say about an auto body repair shop in Fort Worth along with researching the companies information, you should have no problem finding a repair shop that you can trust to work on your vehicle. No matter how small or large the damage you need repaired is, utilizing basic information about a local business through researching the business with the Better Business Bureau, using search engine results to find local businesses in Fort Worth and company reviews, and speaking directly with the auto body repair shop will help you make the best determination on which company to entrust your vehicle to be repaired.