What Most Dealers Don’t Realize About Valuing Their Dealership

When most heavy equipment dealers start thinking about selling, succession to family members, or simply understanding the value of their business, they assume a few key metrics will tell the whole story: annual revenue, net profit, EBITDA, and perhaps the value and age of their inventory.

But in reality, most valuations miss the mark, not because the math is wrong, but because the person doing the valuation doesn’t understand the key elements of what makes an equipment dealer tick. I call this a paper evaluation.  The nuances and aspects of a dealership don’t get applied. 

After acquiring dealerships myself, helping countless dealerships prepare for transitions, and being hired to value dealerships, here's what I find most dealers don’t realize:

1. It’s Not Just a Multiple of Earnings or an Asset Valuation

Many dealers assume that if they’re showing solid profits, the valuation will take care of itself. But heavy equipment dealerships are complex. Absorption rate, sales growth, equipment inventory, parts aging, and quality of the customer accounts all affect true profitability and sustainability. Most general business appraisers won’t know how to read those indicators accurately.  Many dealerships have owners who sell a large amount of the equipment. In a transition, will those accounts remain at the same level if the owner retires?

2. Is Used Equipment a Liability or an Asset?

Inventory is a perpetual item, which makes this more complex.  Hopefully, what you have today you won’t have tomorrow. A yard full of aging machines valued at “book value” is likely one of the biggest discussion points and areas of concern. How well you manage your used equipment pipeline says more about your operational health than how many machines are sitting on the lot.  Your inventory aging report will normally tell a story all on its own.  

3. Your OEM Relationship Impacts Your Valuation

A strong and consistent relationship with your key OEM is very important. The one thing that can put the damper on a transition is a denied approval from your primary manufacturer. Just because you find a buyer doesn’t mean they will approve the contract for the acquiring company.  This varies in each state. However, conditional approval will prevent a lot of frustration and wasted time once a letter of intent is drafted and signed.  

4. Buyers Want Systems, Not Just People

Many dealers have a great team, but they rely too heavily on key individuals. If your business can’t run smoothly without you, a buyer sees risk, not value. Having documented processes, a strong bench, and systems that outlast individuals is a critical (and often overlooked) driver of long-term value.

5. The Emotional Connection Can Cloud Your View

When a dealer calls me and says I want to transition or sell my dealership.  I normally start with 3 questions:

• What are you actually selling?

• What do you think you want for it?

• What is most important to you in the transition?

This is your life’s work. I get it. I’ve worked with family-owned dealerships and bought dealerships that span generations. But that emotional tie can make it hard to see blind spots or accept hard truths. The best thing you can do is work with someone who understands both the numbers and the culture of this industry. 

6. Preparing Your Dealership Today

One thing I encourage dealers to consider is whether they’re in a transitional phase. This doesn’t necessarily mean you have a successor in place, iit means succession is part of your 3–5 year plan. If that’s your future, there are steps you can take now to start preparing your dealership without disrupting current performance. Doing so can make the eventual transition and negotiation process much smoother and more successful.

So, what’s your dealership really worth? The answer goes far beyond the numbers. It’s written in the day-to-day operations, the culture you’ve built, the leadership you’ve developed, and the systems you've put in place. The better your story is, clear, consistent, and well-prepared, the more valuable your business becomes in the eyes of others. Start shaping that story today, because when the time comes to sell, transition, or grow, it’s the full picture, not just the profit and loss, that will define your worth.