Selling Your Salvage Yard - Part II
When the time comes to sell your auto recycling facility, it pays to be prepared. Last issue looked at how to understand the market, make a game plan for that market and establishing a price. Now, put the plan into action. Develop the marketing literature and sell your yard.
Developing The Marketing Literature
A comprehensive marketing package is the best way to convey the information about your yard. This is comprised of financial information, discussion of the business, pictures and deal terms.
It is important to state the facts. There are many full-service auto salvage and scrap yards available these days, mostly due to the difficulties in the industry. Buyers get approached all the time with offers. You’ll want to compare favorably with them, and be truthful and fair at the same time.
Most people are visually oriented. Pictures that give a clear understanding of the facility can be very helpful. You’ll want to tidy up the yard and warehouse first, and keep it clean until it is no longer yours. Show the sales counter and dismantling areas. Buyers want to know whether the operation is up-to-date, or if it needs work. Pictures are no substitute for a physical visit, but they are a good start.
Buyers also want to know that the ground is environmentally sound. Get your records together. If you don’t have an environmental consultant, you may want to consider getting that going right away so that there is a bit of history by the time of the sale. Include some reference of your clean yard in the literature.
You may take the opportunity to spell out the asking price and give financial information. Or you may decide to write this document in a way that requires a non-disclosure for those additional details. You want to convey enough information to get potential buyers interested, but not so much that you’re disclosing too much before you know the buyer is serious.
Selling The Yard
The person you’ve decided to do the selling must get prepared. It could be you the owner, a family member, your attorney or a business broker.
You may be the most informed about the yard, of course, but you may be an emotional negotiator and become impatient easily. You may also be busy running the operation, and cannot be distracted. A trusted family member could be a good choice if he or she has the right skills of presentation and negotiation. Attorneys tend to be stiff and conservative, but some of them have quite a lot of talent. A business broker has the advantage of having the perspective of knowing many similar businesses, and by hiring one you’re telling potential buyers that you are serious. Potential buyers also tend to be willing to point out what they don’t like about a deal to a business broker. In any case, deciding who will sell the yard is important.
You can imagine how the process goes. Potential buyers are contacted, confidentiality agreements are signed, presentations are made using your marketing materials and phone skills, and a fraction of them are interested enough to visit the yard. Honest feedback from potential buyers ought to affect your presentation, your valuation and your materials. Use this to refine the process.
Along the way, patience is the watch word. If you want to sell from a position of strength, you will continue to operate the yard as you always have. This is good for your emotional well-being as well as to indicate confidence to potential buyers. They can sense weakness, and this may cost you dearly. Low inventory is easy to spot, and buyers will wonder if they’ll have to invest into additional inventory in addition to the purchase price. If you badger these potential buyers, they will think less of you as well as the yard. Remember how certain salesmen or buyers have hounded you, and how that affected your view of them. Badgering will not speed up the process, but will cost you money.
Eventually you may get to the point of serious dialog with a potential buyer. This is a good time for your financial specialist to be re-engaged in the process to shape the structure of your deal to your advantage. This is especially true for taxes. If the deal changes late in the game because you got your professional advice late, you will offend the buyers, who will rightfully accuse you of changing the deal.
Some yard owners want to retain long term income by leasing the property to the buyer. This would be an annuity for the seller, or benefit their family members. Just be careful about environmental contamination done by the tenant. Buyers are many times happy to lease because it allows them to leverage their cash for inventory or another yard.
Expect to sign a non-compete agreement, based on a radius around the yard location. The parameters of this non-compete are negotiable.
There will be a closing date set, just as there is in the sale of a home. Any debts will be paid off at closing. Equipment and inventory will be legally transferred from seller to buyer.
Then you can go play, or do it all over again!
George Metos is a business broker specializing in full-service automobile salvage and self-service facilities. He owns and operates GM Consultants, and is based in Salt Lake City, Utah. He can be reached at 801-953-1003 or GeorgeMetos@aol.com.