What do you plan to do with your workshop when it’s time to retire or time for a change?

According to Capricorn’s State of the Nation Report 2021, 46% of Members plan to put their businesses up for sale.

Selling your workshop is a great option, as it allows you to realise the value of the asset you’ve built up over a number of years, including the goodwill you’ve created. That’s a much better handshake to yourself than simply closing the doors forever (which eight per cent of Members plan to do).

But how do you give yourself the best possible chance of attracting the right buyers and maximising your sale price?

In this article, we’ll speak to two experts — longtime workshop owner and respected industry figure Maurice Donovan and Workshop Whisperer Rachael Evans — and get their advice and insights on preparing your workshop for sale. Maurice has recently sold his workshop (in Geebung, Queensland) after 20 years, and Rachael has helped dozens of workshop owners prepare their businesses for sale.

Here’s what they told us.

Exit planning starts on day one

“Shop owners should start working on their exit plan as soon as they get into business,” Rachael said. Chances are you’re reading that and thinking “whoops”. Don’t worry; you’re not alone. “It almost never happens,” Rachael said.

It’s never too late to start (but it’s a good idea to start now).

“We should always be aiming to have the business in a ‘sale-ready state’, as this will assist with unexpected events like sickness, incapacitation or the death of the owner, a sudden change of mind about wanting to be in business, or an unexpected offer from another party to purchase the business.”

Have all your paperwork in order

Rachael said being in a sale-ready state means having your tax returns lodged for the previous year, and having all your accounting up to date.

“There should be no payment plans in place with the Tax Office if your business is healthy,” she said. Having payment plans in effect means your business can’t afford to run the way you are running it, and that’s not attractive to a potential buyer.

“If your accountant is doing your tax returns to show minimal income in order to pay minimum tax, ensure financial reports can easily show any ‘add backs’ that the owner is benefiting from.”

Know what your goal is for exiting the business

“Have a long-term goal in mind,” Rachael said. For example, “I want this business systemised and under management by 2035” or “I want to sell the business for $XX by 2030”.

“Start working towards it now,” Rachael said. “Don’t think you can just all of a sudden put it on the market in 10 years, without any document systems or processes, and have someone pay big money for it.”

Be realistic about your sale price

“Be realistic about your sale price and who you can set it up to sell to,” Rachael advised.

“A potential buyer isn’t going to pay for all the emotion you have attached to your business. They don’t care how hard and for how long you have worked. This is a business proposition and therefore a logical decision for them, not an emotional one.

“Is your ideal buyer another mechanic, or an investor looking for a return on investment?”

Getting a business ready for sale is a two-year proposition

Preparing a workshop for sale from scratch (that is, without any systems and processes in place) will take a couple of years.

“Two years gives your accountant time to lodge tax returns that are behind, and switch from a ‘tax minimisation method’ to a ‘making your financials look healthy for sale method’.

“Your aim is to be showing more than $100,000 in salary to the owner, then your business can be sold for a multiple of its profits, plus equipment. If you can’t show that, your sale price will likely be your salary, or less, plus equipment.”

Prepare an operations manual for the new owners

“The reason people like buying franchises is because they buy a ‘business in a box’,” Rachael said. “They are buying a business that comes with an instruction manual.

“With some focus and dedication, we can set up our independent shops the same way by documenting how things are done.

“At sale time, a business with an operations manual is more valuable than one without. The new potential owner can see exactly how things are done to make the business a success.”

Use a broker to sell your business

Rachael’s last piece of advice is to invest in a broker.

Yes, a broker will take a percentage of the sale, just like a residential agent; however, their knowledge and expertise on how to value your business, and then market it to their databases of ideal clients around the country, will prove to be priceless.”

That’s exactly what Maurice discovered when he decided to sell his workshop.

“You may say ‘why use a broker when anyone can just go and list your business on the internet?” Maurice said. “Well, I am very good at running a business, but I know nothing about selling a business.

“Knowing what I know now, I would never try and sell a business without engaging a broker,” he said.

“(The broker) was very professional and knew exactly what to say and not to say to all the potential buyers that showed interest. He worked with my accountant to set up a well-prepared presentation of my business. He took care of all the nitty-gritty things of dealing with the potential buyers, right up to the end.

“He never gave up until he found the right buyer.”

So, what other advice does Maurice have?

Don’t take your foot off the accelerator

“My wife, Sandy, and I put a lot of effort into building a profitable business that continued to grow,” Maurice said. “Without profit and a strong clientele, we would not have had a saleable business.”

Make business decisions and investments with one eye on the impact on any future sale. Think about what will make the business more attractive and saleable. In Maurice’s case, he became a Repco Authorised Service (RAS) member and an RACQ authorised service member.

“The advantage of being an RAS member was that it was not a franchise and it gave me a reputable and well-known brand name that was not only recognised in the industry, but also known in the public,” he said. 

“Becoming the RACQ authorised service member for my area gave my business another credible brand that I could use to continue to grow my business and to become more attractive to my customers and any future potential buyer.”

(While the new owners will have to reapply for these memberships, they will be well positioned to secure them.)

Have the right staff in place

Potential buyers want to see a strong and dedicated team of technicians and other staff who will continue to work in the business.

Three years prior to selling, Maurice actually lost key team members and struggled to find replacements. It meant the retirement plan took a little longer than originally expected but “I needed staff that would continue to maintain the same level of loyalty and service, both to my customers and to the new owner.”

Be prepared for some ups and downs

Selling a business you’ve put your heart and soul into for years can be an emotional experience. It also comes with a lot of bumps in the road.

“It is hard to run a business as normal when you have no guarantee if a sale will go through or not,” Maurice said. “My emotions were all over the place, but I had to run things as normal as possible.”

Then, once the sale had gone through, things got even harder.

“One of the hardest things my wife and I felt after handing over my business to the new owner was telling my customers that I was retiring,” Maurice said. “I am going to miss them.”

Remember, you don’t have to do this alone

Maurice’s last piece of advice is to start looking at your retirement planning now, even if that retirement is potentially decades away.

“Even if you have no desire to sell at this moment, find a business broker that has experience within the automotive industry and start to build up a relationship with them,” he said.

“Learn from them what you need to do to make your business more saleable in the future. Also, look for advice from some of our leading automotive business coaches, who will also be able to offer you some individual advice that could potentially make your business stand out from all the other workshops currently on the market.”

Download your free copy of Capricorn’s State of the Nation Report 2021.