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Top 5 Do’s When Negotiating the Sale of an Auto Dealership

You own a car dealership, and you want to sell it. Of course, you want to get the best price and terms possible. The question is, how? Here, I present five best practices to negotiate the sale of a car dealership and get everything (or nearly everything) you want.

Handing over the keys when selling an auto dealership.

1) Take an Honest Look at Your Dealership
Before telling anyone that you are thinking about selling your dealership, scrutinize it from the perspective of a potential buyer. You will be dealing with prospective buyers whose prime objective is to point out everything that is wrong with your dealership in an effort to justify paying less for it. Evaluate your dealership honestly and fix the problems or at least prepare a response to issues that will likely be pointed out during negotiations.

2) Know What You Want
Understand your ultimate objective. That’s easy, right? To get the most money. Well, price maximization is certainly a major consideration and is perhaps the most important factor for you, but consider other factors, such as your legacy in the community, and how you feel about the future wellbeing of your employees. These non-monetary issues may drive you to sell for less to a buyer who plans to operate the business according to a certain set of principles or to take care of your former employees. It may not be the highest offer, but it may be the best offer. What is important is that you consider everything you want — price and terms — so you have a clear idea of what you are willing to give up to get what you want.

3) Focus on Getting What You Want
Prospective buyers may distract you, intentionally or unintentionally, from what is really important: getting the price and terms you want. One very common distraction occurs when a buyer criticizes how something is done at the dealership; sellers often become defensive and try to prove that their way is the best or only way.

Let go of the need to be right. Keep in mind that other people have different ways of doing things. You may think your way is best, but someone else may prefer a different approach. That does not matter. Your objective is not to prove you are the greatest dealer in the world or even in your own community. You can certainly explain why you run your business the way you do and provide insight, but avoid the temptation to defend yourself and your way of business. Why? Because your objective is to get the price and terms you want and think are fair, not to prove to someone else you’re right or they’re wrong.

4) Consult Other Stakeholders
If you have partners or other people with a stake in the outcome, arrive at a common understanding before you initiate the sales process. Document ahead of time what your common objectives are and what are deal breakers for one or more members of the group.

Also, make sure the person in charge of negotiations has the authority to strike a deal and proceed. Nightmare scenarios arise when the lead negotiator on the seller side gets a buyer lined up only to have other stakeholders object and derail the deal.

5) Plan for Your Profit
Prior to initiating the sales process, agree with other stakeholders on a minimum acceptable price. To avoid nasty surprises and disappointments, have each stakeholder calculate their cut after taxes and any other costs. Tax issues can significantly reduce the amount of money each stakeholder receives. You cannot eliminate the risk of disappointment entirely, but try to reduce that risk as much as possible.

Also, have a plan in place for the money you receive from the sale. Typically, this is a significant amount of cash. Make a plan to deal with the proceeds in a thoughtful manner or it may go to waste or be squandered.

What Are the Five Don’ts? Now that you know my five do’s of negotiating the sale of a dealership, you are probably wondering what not to do when negotiating such a sale. Tune in soon for these cautionary insights.

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Disclaimer: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Stephen Dietrich, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

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About The Author: Stephen Dietrich is an attorney and author who has a passionate interest in the human side of business. His distinctive combination of legal and business knowledge, human insight, and dedication to clients makes him uniquely qualified to help corporate leaders and other C-level executives navigate high-value mergers and acquisitions, restructure transactions, and manage day-to-day operations. Through this blog, Stephen shares his extensive experience and unique personal and professional insights in the hope of stirring thought and dialogue that leads to ever deepening insights and understanding.

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Comments (3)

  • How to Avoid Zero Sum Thinking - Stephen Dietrich

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    […] In the many transactions in which I have been involved, I have noticed people often focus on only one thing —money or the current or future monetary value of whatever asset they are exchanging for money. However, transactions typically involve more value than what the money represents, as I point out in a previous post, “Top 5 Do’s When Negotiating the Sale of an Auto Dealership.” […]

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