Has your automotive business been impacted by the economic downturn? Have you considered putting it on the market, but recent events have you second-guessing yourself? Though the automotive service industry is considered fairly recession proof, tough economic times can impact it in certain cases. For business owners looking to sell, an economic downturn can prove a confounding time to do it. Will you find prospective buyers? Does anyone buy businesses during a recession? Should you just hang onto it until the storm passes?
At Auto Center Sales, we know buying or selling an automotive business can be perplexing — even when the economy is roaring. To help you make a more informed decision, below, we’re discussing whether or not it’s a smart idea to sell during a recession.
Selling an Automotive Business: Is There a Good Reason to Do It Now?
First and foremost, why are you considering selling your automotive business? Is it because the economy is on a downward trajectory, or were you considering selling prior to the downturn? Even in the face of a recession, if your initial goal was to sell the business, start a new venture, or retire, you still have an excellent reason to put your business on the market. After all, that was your long-term plan anyway, right?
Looking at it from a financial point of view, automotive service businesses typically stay afloat (and even do well) during recessions. People still need their vehicles repaired, and they’ll still pay a premium for quality service. It’s non-essential business niches — things like luxury products, travel, furniture, etc. — that tend to struggle the most during tough economic times. When money is tight, if people don’t absolutely need it, they won’t pay for it.
Think about it: Oil changes, brake service, new tires, alternator service, A/C recharges — whatever it is that your business specializes in — people still need it. As long as people are still driving, your business is essential. Prospective buyers are well aware of this fact. More importantly, they’re well aware of the potential to make money from these services even in the midst of a recession.
Some Believe a Downturn is the Best Time for a Venture While some people may view a recession as uncertain, others view it as an optimal time to invest in a new business and offer a unique opportunity for individuals willing to take a risk. The buyers may be more motivated to purchase and have a greater incentive to find solutions to help the business succeed.
Furthermore, because many high-level (highly compensated) employees also lose their jobs, they often look to invest in recession-proof businesses rather than seeking new employment. Essentially, the current market presents an entirely new pool of prospective buyers.
Considering the essential nature of your automotive service business, selling it is more than possible during an economic downturn. Keep in mind, though, that as the economy continues to dip, the price tag on your business may fall, too. If you’re considering selling, the sooner you list your business, the better.
Who Shouldn’t Sell an Automotive Business During a Recession?
Though most automotive service businesses are fairly recession proof, that doesn’t necessarily mean yours is. And if you fall into this category, you likely already know it. That said, though your profits may dip for awhile, the economy has a long history of recovering from recessions.
These economic situations are inevitable; they’ve been occurring for decades, and research clearly demonstrates they typically endure for a period of 6-16 months. As the economy recovers, so will your profits — if you can weather the storm, it’s probably best to take that route.
However, if your profitability wasn’t great before the downturn and you’re currently unsure whether you can wait it out, it’s best to consult with an automotive business broker — like our team at AutoCenter Sales — concerning your options.
One thing to note: In the midst of a recession, layoffs and job losses are at an all-time high. This reality, though unfortunate, offers you a unique opportunity to better your business. When millions of people are out of work, it’s possible to bring on highly qualified employees with less effort and a lower overall cost.
Being Prepared to Sell
One of the key takeaways is understanding how to be prepared, so your business is attractive even in a recession. Buyers will, of course, try to pay less, but if you can show that your business is well established and likely to continue thriving even in a challenging economic time, this can increase the enterprise value.
The fact is your business may be worth more than when the recession first started, and resiliency can be a crucial factor for businesses like the automotive industry. And while it is no secret that selling in a recession can be challenging, if you have determined why you want to sell, you need to build incentives to produce the outcomes you are looking for; this means having:
● Formalized business processes
● A strong team of employees
● Growing customer base
● A strong reputation through positive experiences for your customers
The main outcome is to have a smart exit strategy from a profitable and streamlined business regardless of what's happening in the market.
And if you are already looking to sell or are worried the business might suffer due to a recession, consider doing it while there are interested investors. The biggest consideration is not to make any decisions without talking to a professional and consider hiring a broker instead of trying to do it on your own to get a result that works best for you.
Considering Selling an Automotive Business? Contact Auto Center Sales Today
If you’ve been thinking about selling an automotive business during this challenging economic period, it’s time to get in touch with our team at AutoCenter Sales. For over 25 years, we’ve been facilitating both sales and acquisitions for business owners across the United States, and we’re here to help you navigate this challenging time, too.
Whether you’re ready to take the next step in your business sale or you’d like to learn more about your options, feel free to give our team a call at 800-874-5793. You can also get in touch with us by filling out our contact form, and a member of our team will reach out to you promptly.