For many who grew up in the collision repair industry, owning a bodyshop is a long-held dream. However, acquiring a bodyshop goes beyond securing capital; it requires strategic fi nancial planning, industry experience, and alignment with franchise or independent-shop owner expectations. At DSMA, we use our expert knowledge to guide prospective buyers (and sellers) through the process, preparing them for the expectations and challenges involved in the acquisition.
Below are the key factors to keep in mind when buying a collision repair shop:
1. Frequently Overlooked Additional Costs
Many buyers underestimate the additional costs involved in purchasing a bodyshop, including legal fees, environmental inspections, and permit requirements. Buyers must also budget for ongoing operational expenses such as management systems, equipment maintenance, and marketing.
These costs can add up quickly, and it is crucial to plan for them early in the process to avoid any financial surprises.
2. Financial Preparation and the Importance of Flexibility
Securing the necessary funds for an acquisition is an obvious first step, but the financial commitment doesn’t stop at the sticker price. Buyers must be prepared for various upfront costs, such as a down payment on the real estate (typically around 20%) and the goodwill of the business (which can vary.)
What many buyers overlook is the importance of having financial flexibility to handle the ups and downs of operating a bodyshop.
An essential consideration is how to manage cash flow, especially since there are often delays in receiving payments from either the insurance companies or franchises, which can extend the pay out period to a 60 or 90-day net term in lieu of the expected 30-day net term, which oft en comes as a surprise and leaves owners in a fi nancial bind until payment arrives. Many shop owners have struggled to make payroll in these situations, as they have been forced to dip into personal savings or take out loans just to cover basic operational expenses while waiting for insurance payments.
Without sufficient working capital, this cycle can become unsustainable, putting immense strain on the business. Fortunately, DSMA emphasizes the need for buyers to understand these financial dynamics fully so they can prepare adequately.
3. Staff Management and Replacement
Franchises will not approve a buyer without a solid staffing plan, regardless of fi nancial preparedness. A complete team is essential to execute the business plan and gain franchise approval. Staffing can be one of the biggest challenges, as the quality of your team—technicians, managers, and support staff —directly impacts shop performance. If key employees leave, particularly in smaller or remote areas, replacing them can be difficult, so having a contingency plan is crucial. For example, replacing aging painters and bodymen may require planning for long-term talent availability and a strategy for recruitment, so buyers must plan for long-term staff availability.
4. Reputation Matters
A strong reputation is crucial when acquiring a bodyshop. Franchises want to ensure the buyer has a clean record, with no involvement in insurance lawsuits or unethical business practices. While prior automotive experience can help, what matters most is a solid financial and business plan, along with effective team management skills.
5. The Role of Franchise Approval
When buying a bodyshop under a franchise, buyers will need franchise approval. DSMA helps buyers understand what to expect from the franchise approval process and provides insights into the franchise’s goals and expectations, ensuring they are optimally positioned for a successful acquisition.
Conclusion
Buying a collision repair shop is an exciting venture, but it requires thorough preparation. Financial planning, staffi ng strategies, understanding of franchise dynamics, and a solid reputation are all crucial components of the acquisition process. At DSMA, we help prospective buyers (and sellers) navigate these challenges and ensure they are fully equipped for success.
Interested in buying or selling a bodyshop? Visit dsma.com or contact Philip Payne at (519)-636-3508 or philip.payne@dsma.com.
