Chris Collins explains what it takes to buy a car dealership. You need financing for the building and inventory, plus "blue sky" goodwill priced on what the dealership earns. Banks rarely fund first-time buyers, so you'll need a partner or investor backing you.
8333 Ask SDR (spoken as 'call 8333 Ask SDR').
offers.chriscollinsinc.com
So what do you think? Should we talk about those comments? Yeah, I've been. I've been hitting it for a little while right now, so I think we're ready to go.
But what do you mean by hitting it?
Hitting it. Suggesting it for a few minutes. See, this is what happened. So now I'm a TikTok addict and I've got lingo. It's crazy. I'm talking like I know what I'm. I've got swag.
What is. What is the. The girl we love on TikTok. What's her name?
The.
Feminist.
Yeah, her.
Yeah.
And you're saying that she left her job?
I think so. If I understood the tick tocking right. Is there like a ticklock tick tock timeline? Is that too much alliteration?
I don't know, but I don't know that much about TikTok.
Yeah, I don't sleep anymore. I just watch TikTok.
I'm thinking about doing bulldog motivation on there, like in the morning with my bulldogs. Like, do you like a positive quote or something? Every morning. But I haven't done it. But I think about doing it. Yeah, I haven't done it.
It's where it starts is with the thought.
I did one for like a couple days and it was getting a bunch of views, but then I took it down. A little scared of the TikTok. But anyways, I would love. I know that we're trying to get her on the show, but if she really is in between jobs, we should talk to her. She's great at making videos.
Yeah, we could. We could do a thing.
She's funny. Should we do some questions from the audience or. A question always. I think we have time for a question. Remember, if you call in and submit a question and we play it on the air, we're going to send you service. Drive revolution. Swag. A hat, T shirt, coffee mug. Yep, everything.
Love these voicemails. These are fun.
Yeah, it's fun. Now that people are calling in and listening to them, can we, can we play one?
Hey, Chris, My name is Dan. I work over at the Taylor dealership here in Bakersfield. I started watching your show to get a little more understanding about the service side of everything. I watched the episode where you talked about how you had became a GM and actually owned a couple stores. And question I had was, you know, aside from becoming a GM and going through dealer school, what else do you need to buy your own dealership? Who puts up the money? Does the manufacturer give loans for that? How do you do that my story is like yours. I started as a detailer and climbed the ranks. I'm an F and I now doing pretty good at that. Hope to hear the answer on the show. Thank you, man.
Hey, ma', am, thanks so much for the question. Great question. So when you, when you're buying a dealership, you, you have a couple different things that you're going to have to finance. So the first thing you're going to have to finance is just the basic assets of the business, which means the inventory and parts, the desks, whatever. Whether you're buying the building or not, you're going to buy the assets, the computers, lifts in the service department, phone system, all of that. So there's, there's going to be an asset purchase. And with the asset purchase, you're going to have a working capital requirement. In the working capital, you're going to have your parts and, and payroll and lots of other things. Usually you can't finance that. Usually you got to come in with that money. And that, that money is.
You know, I don't know, you're going to have to have probably, I would guess, 50% down on that more than anything. And then the next, the next thing you're going to have is what they call blue sky. And so let's say you have a Chevy dealership that is making a million dollars a year in profit. And let's say, I'm not a broker, but let's say Chevy dealerships are selling for five times or six times earnings. So you're going to pay five or six million dollars in blue sky. So you're gonna have a couple million in working capital and assets. And then you're gonna have 6 million, 5 million in blue sky. And then the next line of credit you're gonna have to have is used cars and new car inventory, which it will be, you know, $10 million in a second. You can usually do that through a flooring line of credit. The depending on how, how financially stable you are in the deal you make the used cars, you might have to have some cash down. You might not be able to floor all of them, but you don't have to start with a ton of used cars either. The new cars, usually the factory will let you floor them and you'll have a flooring line of credit with, with whoever the manufacturer is. So oftentimes you can get a bank to loan on the business to an extent, but somebody's going to have to come in with a pretty good chunk of change to make it happen. And so oftentimes there's dealer groups out there that will let you become a general manager and then buy the dealership from them and they will just retain a certain part of it. And there's also investors out there that will invest. In my experience, most banks don't like to touch first time dealers. And so you're going to need a partner or another dealer that will invest in you. So probably finding a dealer that wants to expand and wants talented people around and saving your money and then, you know, doing some sort of buyout over time is usually the best path for that.
I think it's the most common right now too. For those that don't come with a big nest egg to get into it, it's really about the only day in town. I mean, the days of getting a dealership off of a handshake and a smile are gone. I mean, it used to happen 50 years ago, but it's very different right now.
Yeah. And then the joke was always like the quickest way to lose a million dollars is to buy a dealership.
Yep.
And so banks are very shy because there's a lot of moving parts and it's hard.
So. Yeah.
But good question. I hope that that helps you. There's kind of three parts to it and you. Somebody's got to come in with a pretty good chunk of change in order to make it go.
The big question I want to ask is why do you think blonde jokes are so short?
Why do you think blonde jokes are so short? I don't know.
So men can remember them.
So you thought it was a blonde.
Joke, but nope, it was a. I like it. Thanks so much for watching this clip of Service Driver Revolution. We're uploading new stuff every day, so make sure you subscribe and click the bell icon so you don't miss out. If you have a question you'd like us to answer on the show, call 8333 Ask SDR and we'll answer your question on the show. That's 8333 Ask SDR. For special deals on our books and training, head over to to offers.chriscollinsinc.com now that's offers.chriscollinsInc.com I'm Chris Collins and I'll see you in the next video.
