It’s always true that the owners of a tire-related business know everything about their particular business, while the parties looking to buy it know very little. Whether you are a tire retailer, a commercial tire dealer or a wholesaler, it helps to treat potential buyers as if they were your customers.
Darren McLea was perplexed. As the third-generation general manager of his family’s five tire stores in Sonoma County, Calif., he was feeling the pressure to open his company, McLea’s Tire, on Sundays. But he was already struggling to staff his high-volume stores the six days they were already open.
This year and the last one saw continued growth among many large, strategic players like Monro Inc., GB Auto Service Inc. (now Sun Auto Tire & Service Inc.), Mavis Tire Express Services Corp. and others. With all of this activity, one wonders if these and other big operators will ever run out of acquisition or greenfield opportunities.
As commercial tire dealers look to enhance their business values into the same stratosphere as retail tire dealers, some are looking at integrating the more profitable elements of retail business into their commercial operations. From a customer retention and profit perspective, this makes perfect sense.
As compared with the public markets, the private capital markets are like the wild west. I liken it to a frontier town where there’s no sheriff, plenty of gunslingers and news travels slowly by stagecoach.
In my March MTD column, we reviewed some of the proposed changes to federal taxes on the horizon. Since this is the April edition, let’s continue with the tax theme and investigate how sale transactions are taxed under today’s laws.
Elections have consequences. The Tax Cuts and Jobs Act of 2017 was passed by the slimmest of margins in the Republican-controlled Senate and House through a budget reconciliation process that needed only a majority of votes to pass. We find ourselves now with the situation having flipped.
The wealthiest independent tire dealers I’ve met always owned most of their own real estate. They lived in and around the market areas that their stores were in, so they knew the good locations with the best demographics and highest traffic patterns.
Last month, I wrote about how commercial tire dealer profits can sometimes be lower, on average, than retail tire dealers’ profits. I boiled it down to the fact that whoever owns or controls the customer relationship has the power to call their own shots.
In times like these, we learn the business lessons that stick with us for the rest of our lives. One lesson I think we’ll see is that the tire dealers who kept all of their technicians and best sales people employed during the pandemic will recover faster than those who did not.
I run across a lot of 50-year-old tire dealerships that have a mix of businesses, like the retail tire dealership that opened a warehouse to deliver tires to its stores and then started wholesaling to get more volume, better pricing, and more cash profit.