In early October, Berkshire Hathaway announced it had agreed to buy Van Tuyl Group, the nation’s largest privately held auto dealership group. Warren Buffet, having dipped his toes into the automotive industry by taking a stake in GM, sees the opportunity to replicate Van Tuyl’s success by consolidating dealership groups throughout the Sunbelt.

At a time when auto industry big wigs are talking about radical changes that need to take place in automotive retailing, Buffet has chosen to support the traditional dealership model. In an interview, Buffet noted, “I fully expect we’ll buy a lot more dealerships over time. This is just the beginning for Berkshire Hathaway Automotive.”

This is good news for large dealers who have their act together, as we may see an uptick in valuations with another major player in the market looking for acquisitions. Keep in mind, though, rarely are buyers looking for turn-around opportunities where they have to invest time and resources to improve performance.

What Berkshire Hathaway found with their acquisition was undoubtedly a high-performing dealership group with highly capable managers and ownership. While the public companies generally target the larger auto groups for acquisition, there is still an important lesson to learn for stores of all sizes: a well-run company with high-performing managers and employees who deliver peak profitability bring the highest multiple. While this would appear quite obvious, some stores struggle to get the formula right. And if you are a family-owned company with no plans to sell, you may ask why this is important. To illustrate the importance, let’s examine the lesson above and change the sentence a bit:

A well-run company with high-performing managers and employees who focus on value, deliver peak profitability, and can be run without the owner’s direct involvement will bring the highest multiple.

Whether you plan on selling at some point or you have a future family successor, the same point holds true – getting the business operating at peak performance without your daily involvement will ease the transition while improving the value of the business. This last point is one that is often lost on owners when they think of business succession. Instead, they generally think of wills, trusts, buy/sells, and tax issues. While these are critical components, there are also people and performance issues to be addressed that impact the ongoing success of the business.

It’s easier to continue a successful operation under new management or ownership when the business is running on all cylinders. Due to some of the unavoidable distractions a transition brings, companies can expect a noticeable dip in profitability when a business changes hands, whether through a sale or a transfer. The more focused and practiced a business is in operating at peak performance, the more successful they will be during and after transition.

Regardless of whether your long term plans include selling to an outside buyer, a management team, or passing the baton to the next generation, be sure to plan, execute, and operate your business like it’s always for sale. Who knows, you may just get that killer offer you simply can’t refuse.