By Kenneth R. Rosenfield, Rosenfield and Co. PLLC
One of the most important and yet difficult aspects of putting the best foot forward to sell a dealership, is the “Pitchbook”. Now why is a CPA writing about a selling tool? Well, a Pitchbook contains a lot of figures. While it might sound a bit self-serving, a Pitchbook that is compiled and presented by a CPA firm does add a certain level of credibility.
Pitchbooks need to do just what their name implies, be the first expression of the dealership to a potential buyer. A good pitchbook can greatly boost a dealership’s value.
Take Goodwill. It is more than just a monetary number, so a good Pitchbook will include the history of the dealership, an important aid for arriving at a Goodwill figure. Although well-presented historical financial data is expected, other numbers should be included in the presentation, as well. Adding high loyalty and repeat customer figures is important. If the lost souls report states a low number, that should also be included. High customer satisfaction and repeat customer reports should be proudly touted. A great staff is a huge asset.
If the dealership is a high performer compared to similar dealerships, add some peer group reports to the mix. Some department-level metrics could also be included. For example, if service technicians perform at high levels, consider adding some of their productivity reports to the pitchbook. Consider sprinkling in some graphic representation as too many numbers can get boring. This is the type of information that helps much in the due diligence process and helps support a higher Goodwill figure.
Parts performance indicators would also be a good addition. High turn, fill rate and gross profit figures can be impressive if presented well. If the department has a high amount of wholesale activity, consider including a geographic map of wholesale customers. This demonstrates a dealership doesn’t just sell to local shops. If a scatter map reveals that the wholesale customers are not just a short distance from the dealership, this sends a message the wholesale operation is a winner.
When presenting financial data, emphasize positive trends such as outselling the market, higher grosses than same-brand dealership competitors, better inventory maintenance, and higher than average key performance indicators. Include high pump out figures and low pump in figures if they exist. Any items that can differentiate your dealership add value. Use graphics to tell the story whenever possible, saving rows of numbers for the accountants.
Any favorable items of interest should also be pointed out. If certain zoning laws or grandfathered provisions to real estate titles exist that add value to a buyer, show them off! This is what a pitchbook is for!
Sometimes, dealers like to throw in additions to income, popularly known as “add backs.” These can sometimes be helpful in computing cash flow available to owners but keep these to a minimum. Better yet, try to avoid them by getting rid of them a couple years before you are ready to sell because, basically, they are distractions. If some compelling reason exists for paying more or less than a market rate of rent, then disclose that reason. However, in the long run, it is wise to make your financial statements look their best from an operational standpoint.
Including general market demographics is also necessary and great for a buyer outside the market area. When displaying that information, add key data as to how those market demographics match the best buyer of your dealership’s products and their proximity to the dealership.
Is the dealership in the best geographical area to reach its customers? If you can, obtain projections as to population changes, additions of new industries or businesses coming to the area, and very importantly, stability during economic changes. This information would be very important for a prospective buyer to know.
In the end, a pitchbook needs to flow and read well. Mixing up words, numbers, photos and graphs is an art form. A good blend will keep the attention of the reader if it flows well and is interesting to read and easy on the eyes. One criterion when choosing firms to work with when selling your dealership should be the quality of Pitchbook a firm can produce. The best will custom-tailor Pitchbooks to show off the best attributes of each client’s dealership.
Ken Rosenfield is the managing partner of Rosenfield and Company PLLC, a CPA firm of “car guys” with offices in Orlando, Florida, and Manhattan. The firm has one of the largest automotive practices in the country, with a nationwide client base. He can be reached at email@example.com and 407-849-6400