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Most buyers, just like most of us, evaluate things from a perspective that's not as broad as it could be to make the best decision...the consequences can be costly...let me explain...
I called up my clothier, Dennis--a person I'd dealt with over the years--and said, "I would like to look at some sport coats," and he replied, "Well, come down at 4:00."
When I arrived, he had four sport coats positioned around the room, and he asked, "What do you think of these?"
My first reply was, "I don't like any of them!"
Then he asked about the coats I already had at home: When do I wear them? Where do I wear them? After evaluating what jackets I had at home and when I wore them, I looked again at what Dennis had picked out and realized he's made some pretty good choices for me.
He'd considered my current clothing, my preferences--all of my needs and wants--an had come up with his selection.
But I Don't Like them
Yet, my initial reaction had been, "I don't like them!"
It's the same way when it comes to car dealerships.
When we have a Toyota or Honda store listed, we get a lot of calls. But for many of our clients who have an interest in those brands, those cars are not necessarily the ones that are best suited for them. What is best suited for them is a store that capitalizes on their strengths.
For example, if a man has multiple dealerships in a single-point market of 50,000 it's difficult for him to run a Honda or Toyota store in Atlanta.
Apples and Hondas
But by the same token, if a man has a Honda or Toyota store in Atlanta, and he's looking at a Toyota or Honda store in a town of 25,000 people, it may not be a good match for him.
So, when we put ourselves into the position of a buyer, you and I--most of us--do not evaluate the opportunity with the peripheral information that will help us increase our wealth and give us some peace of mind. We just can't see the forest for the trees.
That's what we help a client do...
By asking questions--like the clothier did for me (What do you have at home?). For a dealer, it may be: What size of a store do you have? Who's going to run it? How do you operate it? What kind of experience do you have to be in that size of a market?
Metro or Rural?
A client may focus on buying stores outside of a metro market or outside of a single-point market where they pump in. Other dealers are more comfortable sitting inside the market and pumping out.
Marketing strategies are quite different for each type operation. We have clients who are looking for other franchises close to them for the purpose of selling over the Internet.
Question: How do you see the Internet affecting the dealer's or buyer's purchase and what they're looking for?
Well, certainly the Internet is educating the buyer on price, and that's where most buyers go for comparison information.
Some dealers are getting 10% to 20% of their sales through the Internet. There are also a few isolated cases around the country with very large Internet sales operations, but those are the minority.
"Wal-Martizing???"
Some feel that the more important change taking place in the industry is the "Wal-Martizing" of our businesses. If we're not becoming more like Wal-Mart, then business is probably going away.
If you have a process that's working, then you can duplicate that process in other markets. That brings us back to the idea of locating the sme kind of market, so that you can duplicate your process.
And you can't duplicate the Paducah, Kentucky, market in Atlanta. Those markets are probably not going to work in the same way.
When in Rome
There are also regional differences. Some clients may ask about a store in Charlotte, North Carolina. The Charlotte market is different from Columbia, South Carolina, even though they’re not very far from each other, or from Hickory, North Carolina.
They’re all different, and we strive to make a good match for our clients. We call it a win-win solution: when the seller is satisfied with where he’s moving and the buyer has something that suits his style and enables him to make a lot of money.
Question: You mentioned before that as a businessperson, you want to go ahead and look at why you’re buying a dealership—and the primary reason is to make money, to increase your assets or personal wealth. But are there some stores that, while they may sound attractive for one reason or another, are not going to give you the greatest opportunity to increase that personal wealth?
Each of us has a limited amount of resources.
And the most limited asset is not our money, it’s our emotional and mental energy.
If you have an operation that’s making money, you’ve got a good process. But I’m not saying that you can’t transfer that process into the exact opposite kind of a market that you’re in.
One of our clients, who has a lot of stores and a very successful operation, bought a store in a major metro market. What he told me summarizes the best way for us to approach this decision on market type.
Can You Really Figure It Out?
When he bought this metro store, he said, “I know that we can figure it out. I know that we can go in there and develop the kind of people and process that would be profitable in that market.” Then he said, “But I don’t need to, I don’t want to, and I’m not going to.”
He re-sold the store, and that’s a better approach than just continuing to spend your emotional and mental energies on overcoming something where the return on your investment is not going to be the same—and again, I’m not talking about the return on investment of your money … it’s the law of diminishing returns.
For most of us, the money is the easiest part to put into a deal. It’s the other resources that are more finite for us: our emotional and mental energy.
Question: Do you see dealers selling off unproductive or irritating stores?
Yes, this is a great example of maximizing your return on investment (ROI).
A client called me; he had a tier-one import store and a tier-two store.
Nationally, the sales of the tier one were probably five times higher than the tier two, but for him, he made the most money with the tier two.
He liked the factory people and enjoyed working with them, but the tier one was a constant aggravation.
So he called me and said that the tier-one factory was on him about building a new facility. After we talked, I suggested he sell that tier one.
A Failure?
He responded, “Oh, I can’t do that. I’d feel like a failure. I’d be defeated.”
But we talked, and I said, “Well, you know that’s what you should do. Whatever you do, it’s up to you.”
Well, a year later he had sold the tier one, taken the money, and built a new tier-two facility. Now he’s making more money. Everything’s paid for.
What a natural solution! But when we’re sitting there facing the problem, it just doesn’t make sense in our heads—it’s hard to figure out.
A philosopher once said that the mind that created the problem is not the mind that can figure it out … and that’s what happens.
When I’m facing a problem in my business, I go outside to get someone to help … and it’s the same way when a person’s thinking about buying a store.
You get a much better solution when you’re presented with different options from a specialist who has experience in a certain area.
Question: What would you say is another trap for buyers?
Many of us want to own the guy next door.
Clients who have two stores in the same market find that if they’re a strong used car dealer and they buy the guy next door, their used car opportunities do not double.
Generally, you can do that with new cars—so if your operation is centered on new cars, it works better. But if you’re centered on used cars, you probably won’t double the used car market.
That’s the concept—that’s a very small piece of peripheral information that most of us wouldn’t consider. We’d try to buy the guy next door and then struggle through with the results.
Those are the kinds of things we would talk with you about to help identify the right opportunity for you.
Your conclusion may be right on, but there may be some other factors to think about that would help you maximize your personal wealth and minimize the aggravation factor in your life.
Both of those goals are a real important part of adding another deal to your portfolio … remember, you don’t want to buy a bunch of headaches—at any price!
Question: What other kinds of traps do you see buyers falling into?
A buyer who has multiple operations, but all of his stores are single-franchise, single-facility operations.
Then, when he buys a multiline, multifacility operation in a single market, he may have difficulty with it.
Question: So Pat, what would you recommend to somebody reading this article who’s a buyer and thinks he knows what he wants, but he’s open to the idea of taking a fresh look at that?
If you’re a dealer and serious about learning, I’d be pleased to offer some of my time to visit with you on the phone.
We’ll go over some of the questions you’re probably already asking yourself. And after that, if you have an interest in moving forward, we’ll see if there’s a match with any of the stores we have available throughout the country … at the very least, you’ll have a different outlook than you had before we talked!
If one of our current stores fits, fine. If not, we work with many of our clients over a number of years to come up with the match that’s just right.
I also work with clients on stores that we don’t have listed.
And a good match is better than a pile of trouble … even if it does take a little longer to find.
So, you can call me at 800-800-4728. We’ll spend some time exploring your strengths to discover your options.
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