Let’s assume that you own an auto salvage yard, whether full-service or self-service. Think about your biggest, most profitable transaction in parts sales. Maybe you were clever on some vehicle purchases, and willing buyers quickly snapped up the parts at a good price.
Your biggest transaction of all is probably going to happen when you sell your business. It is when you wrap up your business and sell it. This could be a planned retirement, a sudden need, or a good time to cash in. Whatever. It should be your biggest deal in this business.
What is the marketplace like for selling an auto salvage business? As a business broker with auto salvage and towing as a specialty, I get asked this question quite a bit. I thought I’d share some stories.
As you might expect, the stories are quite different for the super successful yards doing $1 million in profit, versus the up and comers, the yards that are just getting by, or unlucky yards in this industry. Let’s take a quick look at each of them.
The super successful yards would usually be located around lots of people needing parts, in an area where there are plenty of vehicles to buy, have smart management and a talented crew, who are running it like a business. They come in all shapes and sizes, but they figure out how to earn money. They may be sharp at dismantling and preparing the major parts, or have a great sales staff, or plenty of cash to operate, or all of the above.
These A-grade yards are targets for the chains, the regional operators, and any individual wanting a good investment. When you can demonstrate to a buyer why their investment makes sense, you obviously have a better chance of selling your company. LKQ has bought many good yards since 1998, and you can bet the A-grade yards were their frequent target. Or they might be a yard that could be turned into an A-grade yard with some work.
The up and comers might need a few years to grow into A-grade yards. Some will never get there, possibly because they lack the right location, skill, or the cash. Maybe they are good but not great in several ways. For whatever reason, they are doing pretty well, but not a target of the regionals or chains. A regional is an operator with 2-5 yards in a state or geographic region. There are examples in Texas, North Carolina, Arizona, Oregon, Michigan, Maryland, and many more.
When these regionals want to grow, they have a territory in mind, and your yard would have to be of interest to them, or they might just build a yard themselves, exactly the way that they want it. You must have something to offer them strategically. Your yard may need to be improved in several ways before it is sellable.
When a yard is just getting by, the owners may just be relaxed personalities who are reasonably happy providing for their families. They may not envision themselves as empire builders, and are content. Or they may not be enjoying it at all and are looking for a way out. Many of these operators have yards that are off in a beautiful part of our country, but not near population, and for that reason alone are not targets for buyers in the foreseeable future.
Possibly they have too small of a warehouse for a buyer to feel they could compete. Some can be turned around by implementing changes that one of industry’s half-dozen consultants (not me) could identify. If they are fortunate enough to have industrial or commercial zoning, and are of good size, they may be able to sell the real estate to a buyer from another industry.
The unlucky could be in their situation because they are not dedicated to their work, or maybe they never could get the funding to establish their business. They may also be sloppy business operators, with a weak staff, and have an environmentally un-fit yard. This is going to be a difficult situation. The worst-case scenario is a small yard, nowhere near population, and dirty.
These four groups have a certain pattern to them. To be continued….
George Metos runs GM Consultants, a business brokering agency specializing in representing owners of full-service & self-service auto recyclers, and towing companies. He represents yard owners to dozens of national and regional recycling companies. For several years, he consulted with CRUSH Software, to help them become the standard yard management system for U-Pull-It auto recyclers. He can be reached in Salt Lake City, Utah at 801-953-1003 or GeorgeMetos@aol.com, www.BusinessBrokerGeorge.com