5 Ideas for the Next 5 Years
The Trend: Consolidation
Why it Matters:
According to Jim Lang, president of Lang Marketing, the number of non-dealer light vehicle repair outlets fell by 2 percent between 2013–2018 (information gathered from the 2020 Lang Aftermarket Annual). Within this number, the number of chain outlets remained roughly the same, while independent outlets fell nearly 4 percent over this time period, resulting in a decline of roughly 5,000 service stations and garages. This shows an increase in chain outlets and decrease in the presence of independents.
How to Prepare:
Dan Bauer, managing partner of Murphy Business Sales, has been working on business transactions for 22 years and during this time, the biggest mistake he sees business owners make is not preparing for the day that they sell.
“They leave a lot of money on the table,” Bauer says.
Most business owners don’t prepare because they have the mentality that they’ll be there forever—that’s not the case. Bauer encourages shop owners to prepare for the future today no matter what they decide to do with their shop after they retire. Be it passing it to a family member, leaving it to a shop manager, going through a private buyer or consolidating, shop owners will have the most success if they get their ducks in a row ahead of time:
Talk to an accountant.
According to Bauer, this is the most important step. Sit down and explain your plan. Let the accountant know your timeline and set up and prepare for taxes.
Keep an eye on everything.
Bauer says shop owners should prepare for the day they sell on the daily, keeping an eye on key numbers by watching the books. Staying on top of equipment and staffing is also key because that will help earn more money in the actual sale.
Get team together.
Bauer advises getting an investor, broker, accountant and anyone else necessary to get your selling plan in order.
“You should have everyone looking at what your best interests are,” Bauer says.
Consider your options.
Consolidation is not the only route to take. If a shop owner decides to sell to an outside buyer instead of leaving the shop to someone internally, the choices are a private buyer or a consolidator. The benefits of going with a larger company, Bauer says, are that the transition is minimal as they’ll usually bring in their own management.
Future Outlook: Bauer does not think consolidation will be the death of the independent. He believes there’s still major opportunity for indys, they just need to prepare for the future of their businesses today so they’re not stuck doing something they didn’t want to do or leaving money on the table.
More Information: To learn more about the state of the automotive repair landscape, including trends in consolidation, request your copy of the Lang Aftermarket Annual 2020 at bit.ly/langaftermarketannual2020.