Industry advisors delivered business-selling insight and advice through a webinar held Wednesday. The “Thriving in Challenging Times: Maximizing the Value of Your RV Dealership” webinar was hosted by Morgan Stanley, an investment banking company.
Little Dealer Little Prices President Debbie Brunoforte provided insight into her experience selling her business to Camper’s Inn in 2022. Stanek Group Financial Advisor and Executive Director Brad Stanek and Performance Brokerage Services co-owner and RV Division Director Jesse Stopnitzky delivered insight from their experience guiding dealers through acquisitions. CBIZ Somerset Managing Director Jane Saxon shared tax knowledge and best practices for dealers looking to sell.
What to Expect
Stanek began the webinar with a base for dealers to understand how to sell their business. He said understanding various numbers will affect their experience. Stanek said interest rates are expected to decrease around 1% this year but the continuing high rates will affect dealers’ businesses. He said how much interest rates affect the company will reflect whether or not the dealership is valuable.
Stanek said dealers considering selling should produce projections for three to five years, detailing what they anticipate a selling price to be in the time period.
Stopnitzky said two areas to review when discussing the buy-sell environment are market and value. The market includes buy-sell activity, acquisition demand, dealerships on the market and the overall sale likelihood. Value is the business pricing. Stopnitzky said these areas interact, similarly to supply and demand. He said buyers are looking for acquisitions that complement long-term growth objectives.
Stopnitzky said Performance Brokerage found four trends in the 176 dealership acquisitions the company worked the past two years. The first trend was a decrease in buyers. Rather than buying stores, acquiring companies reinvested in their business, he said, using Blue Compass RV’s year-long rebranding campaign as an example. The second was increased interest rates, raising the buying cost. The third trend was an increase in acquisition opportunities, with more RV dealerships seeking a sale. The fourth was an overall sentiment of uncertainty regarding the economy, RV industry and the presidential election.
Dealer to Dealer
Brunoforte discussed her own selling experience. She said she chose a buyer she trusted and who had integrity. She said she trusted Camper’s Inn’s expertise in the acquisition business, an area where she had less experience. Brunoforte said she wanted her dealership’s family legacy to be maintained. Camper’s Inn’s integrity made her comfortable selling, she said.
When Brunoforte began considering a sale, she called Stanek, who helped her determine the best time to sell. A sale’s timing varies based on a dealer’s situation, Stanek said. Brunoforte
recommended solidifying a timeline to begin the process.
What Does an Evaluation Look Like
Stopnitzky explained Performance Brokerage’s evaluation process. He said an earning value method is the most common method to use. The method analyzes a business based on its earnings.
Normally, the past three years’ performance would be taken into consideration. Because the 2020-2023 period in the RV industry has been unusual historically, Stopnitzky said his company looks as far back as 2018 numbers to get an estimate of a company’s value.
The evaluation takes into consideration several variables. Brands, market size, competition, location, facility, acreage, number of service bays, number of employees and reputation are a few factors evaluated. Assets and value components, such as furniture, fixtures and equipment, are factored in based on the company’s situation.
The evaluation combines these variables and historical adjusted earnings, the earnings of a buyer’s pro forma or a buyer’s projections, and a buyer’s investment desire.
Stopnitzky suggested using financial statements to construct forecasts and projections to satisfy investment criteria.
Preparing Documents for Evaluation
Saxon advised many ways to organize a business for a sale.
“A planned exit results in maximizing the value to dealerships, maximizing your satisfaction,” Saxon said, “… and maximizing your personal life.”
To generate an accurate financial statement, Saxon recommended cleaning up financial reports.
Saxon suggested reviewing and updating financial documents.
“It is much easier to present clean financial statements to a buyer,” Saxon said. “Do not make them dig through muck to try to understand the performance of your dealership.”
Discretionary expenses a new owner will not incur should be noted on the financial results. Fixed assets should be set at a fair market value. Saxon recommended using a GAAP (generally accepted accounting principles) accounting for depreciation. Saxon said a GAAP basis will provide a better result for a potential buyer than non-GAAP.
“We want to expense and therefore devalue those assets as quickly as possible,” Saxon said, “because we get a better tax answer because you are operating a business.”
The seller’s business structure should be analyzed. The structure could remain the same or can be changed to aid in the sale.
Compliance, regulations and laws should be reviewed and documents should be updated. If a dealership is co-owned, partner documents should be complete.
Processes and procedures should be documented for future owners. Contracts, vendor and employee documents should be reviewed. Fixed asset lists and all inventory should be listed.
“A business that can transfer easily,” Saxon said, “is going to have more value.”
Saxon advised transferring value and making charitable donations early in the process, before receiving a letter of intent, to create a better tax result.
In closing, each participant spoke about the collaboration’s value, using a skilled team to guide a dealer through the sale process.
Stanek ended the webinar quoting author and motivational speaker Tony Robbins’ advice to take one small action and one small step forward based on what was learned. Stanek followed with his own question to dealers: “What action today will you take for your situation?”