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.