Preparing a truck dealership for sale involves more than just financial and operational streamlining — it also requires taking a hard look at inventory and assets.
Excess, outdated or otherwise undesirable inventory can deter potential buyers and decrease the overall valuation of your dealership.
This article will guide you through the process of cleaning out your dealership's inventory and assets, ensuring that your business is as attractive as possible to buyers.
Understanding inventory’s impact on valuation
Your dealership’s inventory plays a significant role in how a buyer perceives its value. Buyers are primarily interested in assets that can be quickly turned into revenue. Outdated, slow-moving, or otherwise undesirable inventory can raise concerns and complicate the sale process.
Here are key questions to ask:
- Do you own parts that are significantly outdated or obsolete?
- Are there vehicles, equipment, or other assets that have been sitting unsold for an extended period?
- What does your used inventory look like? Are there items priced unrealistically high?
- How much of your inventory is depreciating faster than it can be sold?
Evaluating your parts and equipment inventory
Aging parts: Sell or dispose?
Many dealerships hold onto old parts with the hope that they will eventually sell. However, a potential buyer will likely not want to inherit outdated inventory that has little to no market value. Key steps to address outdated parts:
- Review your dealer agreement:
- What does your manufacturer’s agreement say about returns?
- What are the laws in your state regarding inventory buybacks?
- Liquidate unwanted parts:
- Offer discounts to move slow-moving items.
- Bundle outdated parts with fast-moving inventory to encourage sales.
- Consider selling to secondary markets or parts resellers.
- Dispose of unsellable inventory:
- Items that have no resale value should be written off and removed from your balance sheet sooner rather than later.
Used inventory: Realistic pricing for quick sales
Used inventory, including vehicles and equipment, can present challenges during a dealership sale. If your books show old inventory at full price, it can misrepresent the business’s true value.
Here are strategies to clean up used inventory:
- Conduct an in-depth assessment of all used inventory.
- Price aged inventory competitively to move it before the sale.
- Consider auctioning or wholesaling outdated or difficult-to-sell items.
- Remove obsolete or non-functioning equipment from inventory lists.
Facilities and fixed assets: Addressing old equipment and tools
A dealership’s physical assets, such as tools, lifts and other equipment should also be reviewed. Ask yourself:
- Are there old or broken tools taking up space?
- Do you have outdated machinery that a new owner would not use?
- Are you missing any required special tools or equipment per manufacturer standards?
Steps to streamline fixed assets:
A critical component is cleaning up your assets, inventories, and liabilities.
- Clean up your balance sheet and depreciation schedule.
- Remove assets that have been sold or disposed of.
- Remove any personal assets that are excluded from the sale.
- Many dealers take advantage of section 179 allowances to expense equipment as opposed to capitalizing them. Reclassify those assets to reflect a more appropriate book value.
- Any assets that are intended to be part of a sale, but are not booked, add those to the schedule or prepare a separate list of those assets.
- Dispose of or sell outdated equipment:
- Remove broken or obsolete tools and machines from the books.
- Consider selling functional but unnecessary equipment to a used equipment dealer.
- Ensure compliance with manufacturer requirements:
- Confirm that all required tools and machinery are present and functional.
- Address any missing equipment to avoid last-minute issues with a sale.
The importance of a clean and organized dealership
In addition to inventory and assets, the overall presentation of your dealership matters. A cluttered and disorganized space can create a negative impression on buyers. Here are actionable steps:
- Declutter: Ensure service bays, storage rooms, and showrooms are clean and well-organized.
- Improve curb appeal: Address minor repairs, clean signage, and refresh the dealership's appearance.
- Review storage areas: Remove or organize miscellaneous items that may be collecting dust.
How buyers will view your inventory and assets
Buyers want to step into a dealership with a clear and accurate understanding of what they are purchasing. A dealership with excessive or outdated inventory can cause hesitation or lead to a lower offer.
The cleaner your balance sheet and physical space, the stronger your negotiating position will be.
Final considerations
Cleaning out the closet is an essential part of preparing your dealership for sale.
By taking the time to evaluate and streamline your inventory, fixed assets and overall organization, you position your business as a more attractive and efficient operation for potential buyers.
Here are our key takeaways:
- Outdated or excessive inventory can negatively impact the sale process and valuation.
- Conduct a thorough review of parts, used inventory and equipment to remove unnecessary items.
- Clean up the fixed assets and allocate proper book values for each asset.
- Ensure compliance with manufacturer requirements for tools and machinery.
- Declutter and improve the dealership’s appearance for a stronger first impression.
- Present a clean, organized and well-documented business to potential buyers.
By proactively addressing these areas, you increase the likelihood of a smooth transaction and maximize the value of your dealership during the sale process.
