In an insightful conversation focused on Succession Planning and Strategic Considerations in Automotive Retail moderated by Jason Stein with Flat Six Media, George Karolis from The Presidio Group and Champ Rawls a succession planner with The Rawls Group, the conversation delves into the intricate world of business valuation, succession planning, and strategic growth within the car businesses. The discussion revolves around the auto industry landscape, pricing dynamics, and the future direction of businesses. A key concept introduced by Karolis is the notion of “thinking green, not blue,” which challenges traditional valuation approaches and emphasizes the importance of considering return on investment (ROI) rather than solely focusing on intangible business value, often referred to as “blue sky.”

The Pitfalls of Blue Sky Valuation

Karolis sheds light on the limitations of valuing businesses solely based on intangible value or blue sky. Blue sky encompasses factors like brand reputation, goodwill, and potential growth opportunities, but it represents only a fraction of the overall business value. Relying solely on blue sky multiples can lead to ill-informed decisions and missed financial opportunities.

Embracing the ROI Mindset

The “thinking green, not blue” approach advocates for a comprehensive consideration of the return on investment. Business owners must shift their focus from intangibles to the tangible aspects that contribute to ROI. Karolis highlights that a successful valuation requires a holistic assessment of factors such as current earnings, market forces, geographic influences, brand growth, competition, and facility assets.

The Uniqueness of Each Dealership

Karolis underscores the uniqueness of each dealership and the need to evaluate it based on its individual characteristics. Valuation should account for the specific circumstances and dynamics that shape the business’s performance and potential. One-size-fits-all approaches fail to capture the intricacies and nuances that define the true value of an automotive dealership.

ROI as the Complete Picture

By focusing on ROI, business owners gain a more comprehensive perspective considering the full spectrum of value drivers. ROI-based valuation acknowledges the business’s entirety, including real estate assets, liabilities, intangibles, and more. This approach ensures that crucial elements of the valuation puzzle are not overlooked and that potential financial gains are maximized.

The Strategic Implications

Karolis stresses that embracing the “thinking green, not blue” philosophy has strategic business implications. Owners and stakeholders can make more informed decisions regarding succession planning, growth strategies, and capital allocation. By broadening their perspective beyond intangible value, they gain a deeper understanding of the factors that drive profitability and long-term success.

In the ever-evolving auto industry landscape, understanding the true value of a dealership goes beyond the intangibles. George Karolis’s “thinking green, not blue” approach challenges traditional valuation methods and highlights the importance of considering return on investment (ROI). By shifting the focus to tangible factors that drive ROI, business owners gain a more comprehensive understanding of their business’s worth. This approach enables informed decision-making, mitigates risks, and unlocks the full potential for growth and success in the dynamic world of automotive dealerships.

How We Help You

Are you struggling with accurately valuing your automotive dealership and making informed decisions for succession planning and strategic growth? The traditional approach of relying solely on intangible values may be limiting your perspective. Let us help you embrace a new mindset—thinking green, not blue. Our team can provide insights and resources to shift your focus towards considering return on investment (ROI) as a key factor in valuation. By understanding the tangible drivers of ROI, you’ll gain a more comprehensive understanding of your dealership’s true worth and unlock opportunities for growth and success.

Contact us today, and let’s explore how we can assist you. In just 30 minutes, you could gain valuable insights to apply immediately to your business.

For more insight:

Visit the “Strategic Considerations in Automotive Retail” discussion page or select one of the additional episodes of the series below:

Resources

  • The Presidio Group: an independent merchant banking firm focused on mergers and acquisitions, capital raising, and investments in the automotive retail and consumer mobility sectors.
  • Succession Readiness Survey:  A 7-minute investment in time will put you in an informed position of opportunities many business owners overlook, impacting business value, growth, and lifestyle, and ultimately achieving your vision.
  • Contact a Succession Planner: The Rawls Group can help you with insights and other resources and see if it makes sense to work together. At the very least, in 30 minutes, you may get some ideas you can apply to your business immediately.



Business Performance

Business value is tied to performance. Top talent, strategic vendors, and creditors will be influenced by the organization’s competitive advantage in the marketplace. Traditionally, transitions generally bring with it a drop in profits.  It is crucial that your business is operating at peak performance in order to fulfill cash flow needs and expectations during times of transition.

Click the following links for more drill-down resources on Business Performance.

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We can provide insights and other resources and assess whether it makes sense to work together. In just 30 minutes, you may gain actionable ideas that you can immediately apply to your business. Contact us via phone or email below, or fill out the “Ask An Expert” form.