Archive for December, 2014

It’s Official – Brandon Steele, CFA

Auto Dealership Valuations – Part 2

We left off this post with a mention of the “Blue Sky” factor and how it is measured and quantified with respect to dealership valuations.  One source of gauging this Blue Sky factor is reviewing broker transactions completed within the particular industry.  These transactions provide a range of multiples for a Blue Sky factor, however, that is only the beginning…consideration and further adjustments must be made for variables such as geographic location, local competition, market saturation and brand success.  Additionally, future expectations of the business are also considered in estimating a Blue Sky factor – i.e. profitability, demand, local economic conditions and fuel prices (for obvious reasons in this case). All of these variables and others will be considered and weighed before determining an appropriate factor.  An informed and supportable decision for a Blue Sky factor is derived from both qualitative and quantitative sources.  Ultimately, it is the appraiser’s best judgement utilizing his art and science knowledge, skills and experience.