Strandberg - Build Your Collision Repair Business with a Buyer in Mind Yoswick - Gerber Collision CEO Talks Parts,

with Cole Strandberg

Build Your Collision Repair Business with a Buyer in Mind

Most entrepreneurs start a business based on one or two of many potential reasons—it could be to exploit a unique skillset or access to talent, pursue a passion or simply meet a need otherwise not being met in the marketplace.

Most times, though, new entrepreneurs start businesses with the beginning in mind, but not the end, building a business that meets their immediate personal needs without giving much thought to the long term. As a result, many business owners fall into the trap of limiting their business’s growth, and subsequent options for the long term, based on short-term-minded decisions.

By contrast, many of the most successful people in the collision repair space have started their businesses with one goal in mind: to sell it. How can you build your business by thinking like a seller?

First, let’s discuss what buyers are looking for, and work our way backward.

What do buyers want?

Footprint and layout: As you might expect, the more space you have, the better. While each potential consolidator’s footprint desires vary, a safe sweet spot is 10,000 square feet of shop space or larger, though not a hard and fast requirement. Additionally, parking and storage is equally important.

If you fall short of that square footage, don’t fret. Maximize the space you have. Maximizing shop space via a well-thought-out equipment layout and shop flow allows for more revenue per square foot. If you’re just building a new location, or considering upfitting an existing location, reach out to one of the quality paint booth manufacturers, most of whom will offer a no-charge design consultation.

Revenue: You want to maximize your space because consolidators care about revenue, plain and simple. While most businesses I work with are valued based on a multiple of adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, the collision repair industry places significant importance on revenue as well. This is because, for the most part, if a consolidator can generate a certain amount of revenue within a footprint, they believe they can make that revenue profitable.

Again, while there is no hard and fast rule on revenue requirements for consolidators, $2 million in annual revenue seems to be an entry point, with $5 million being a common sweet spot. Anything over that, and you should have some compelling regional and national interest when you eventually go to market.

It’s important to note purchase price as a percentage of revenue typically goes up as revenue goes up, just as EBITDA multiples increase when EBITDA increases. Obviously, becoming a small multi-shop owner with two, three or more shops can help that revenue scale more quickly, and make you even more desirable to a potential acquirer. Valuation multiples vary significantly based on a multitude of factors, so if you’d like to discuss situation-specific valuations, feel free to reach out to me directly.

Community and relationships: While there is no quantifiable value placed on your shop being a pillar within its community, it certainly doesn’t hurt. Many consolidators are very charitable, so a culture of giv-

See Buyer in Mind, Page 52

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