The Key to Dealer Success in the Midwest A Strategic Perspective on a Market in Transition By DSMA In today’s complex automotive landscape, dealership owners face rapidly shifting factors that affect their business’s value. From evolving U.S. tax policies and tariffs to changing manufacturer distribution models, the Midwest market is experiencing significant transformation. Subsequently, understanding the real worth of a dealership has never been more important for strategic planning and growth. According to Jennifer Rafael, Vice President and Partner of DSMA Midwest, USA, a common misconception in the retail automotive space is that valuations are only relevant at the point of exit. In reality, she shares, “Market trends, performance KPIs, brand strength and consumer behavior all play a role in shaping goodwill.” Jennifer explains that many dealership owners still rely solely on their accountants for this type of information, often unaware that typical accounting reports overlook intangible assets. “Your accountant is focused on taxes and financial statements,” she says. “They’re not assessing what your business is worth in the market right now. And they’re definitely not calculating goodwill.” She compares an annual valuation to a health check for a business. Just as owners meet with lenders for credit reviews every year, Jennifer emphasizes that a valuation should be part of a routine business process. “Smart business operators do this regularly. In our industry, it’s still not common enough,” she notes. Looking specifically at the Midwest market, Jennifer points out that retail car sales slowed in June due to lower consumer confidence. Despite this, she observes that “service departments are performing well, used car prices remain strong, and inventory is lean because of ongoing trade-related constraints.” She adds that dealers are adapting by shifting focus to the strongest departments, especially fixed operations. “We’re seeing dealers pivot to where there’s strength,” she says. “There’s still a lot of opportunity, especially compared to last year.” An up-to-date valuation provides dealers with insight into where revenue is coming from and where improvements can be made. Jennifer stresses that year-over-year analysis of KPIs by department reveals areas of growth and untapped potential. “Every opportunity you uncover is more value added to your business, and more money in your pocket.” Jennifer also highlights the impact of manufacturer-driven shifts on dealership value. “Some brands have seen their trading multiples drop from four to three and a half, while others have gone from three to two and a half,” she explains. “These changes directly affect goodwill, and at DSMA, we track these numbers in quarterly intelligence reports that break down trends by brand.” (They are available for free on DSMA.com.) This data allows dealers to stay informed and make better capital and growth decisions. In regions like Chicago, where dealer groups are expanding, Jennifer emphasizes that valuations are critical tools. “Whether you’re growing, diversifying or divesting, knowing your accurate, current value helps guide your strategy.” She also points out a frequently overlooked area: cash-on-cash return on investment. “Dealers often have capital frozen in their business that could be better used elsewhere. We help owners model ROI so they can decide if reinvesting, restructuring, or selling is the best option.” DSMA’s valuation service includes a complimentary 24-month review period, during which Jennifer’s team of expert M&A CPAs provides ongoing support. “It’s not just a one-time report,” she says. “Our clients can update their valuation as market conditions or performance change, ensuring their decisions are based on the most current information.” This approach has helped several dealer groups make strategic pivots, such as growing into stronger platforms while divesting from brands they no longer believe in. Jennifer describes this as a form of brand diversification and capital optimization. “In the end, knowing your value isn’t just about preparing for a sale,” she concludes. “It’s about running your business smarter and making informed decisions every day.” To receive a valuation or learn more about DSMA’s valuation services, contact Jennifer Rafael at (312) 927-9561 or jennifer.rafael@dsma.com, or visit www.dsma.com. 22 CATA UP TO SPEED
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