Many tire dealers I have met are among the hardest-working business owners I know. They’re the first ones in, the last to leave and if a tire needs mounting or balancing or a customer needs attention, they’re not above jumping in to handle the job themselves.
That work ethic is admirable and often what it took to build a successful first location. This “whatever it takes” mindset separates the success stories from the operators who once had potential, but never achieved it.
But here’s the truth: if your business can’t run without you, you don’t own a business. You own a job.
While jobs are great for earning a living, businesses — true businesses — are how you build real wealth. True businesses command compelling multiples when it comes time to exit.
Jobs pay people, but businesses create value.
There’s also a massive difference between income and equity.
A job pays you for your time. A business pays you even when you’re not there because it’s built on people, processes and systems that continue operating in your absence. Businesses pay you while you sleep or while you’re on vacation.
Let’s say your dealership does $2 million a year in revenue with strong margins. If you’re there running the show every day, the business might be worth a 2x to 3x multiple on your earnings.
Why? Because the buyer knows the business depends on you.
Now imagine the same shop with a general manager in place, standardized operating procedures, clean financials and a strong brand presence. And because of these business fundamentals, you have multiple locations doing the same numbers. That same business could sell for a 5x to 7x multiple or more — same business, double the value.
Why? A business is an asset that runs on its own. A job is only as valuable as the person doing it. One of the quickest ways to diminish business value is over-reliance on the business owner.
If you’re thinking about the long-term — whether that’s a future sale, a transfer to family or simply less stress — you want to have a business that’s not owner-dependent. This concept is called transferable value — the idea that your business would still perform well without you. Buyers, banks and partners all value this highly. Here’s what that looks like:
- A strong management team that can lead without daily oversight;
- Documented systems and procedures for everything from sales to service;
- Clean financials and strong reporting;
- Diversified customer base and revenue streams, and;
- Scalable infrastructure, including software, processes and people who can support growth.
If your business doesn’t have these things, you’re not alone.
But this also is where the opportunity lies. If you want something bigger, it starts by shifting your mindset from operator to owner. Here’s what building a real business can give you:
- Freedom to take a vacation (or a week off) without the business grinding to a halt;
- Scalability, or in other words, systems that allow you to open multiple locations without burning out;
- Exit value, so when the time comes, your business can sell for a premium, and;
- Legacy in the form of building something that can outlast yourself.
So where do you begin? First, delegate and then document.
Start handing off responsibilities and document how they’re done. You don’t have to disappear overnight, but aim to make yourself increasingly unnecessary.
Number two, build your leadership bench. Hire or develop managers who think like owners, then empower them, train them and let them lead.
Third, systemize operations. Every repeatable task should have a process. Standard operating procedures aren’t just for big chains. They’re the key to freedom.
Next, know your numbers. Make sure you have clean books, regular financial reviews and are tracking key performance indicators that will help you make better decisions and build confidence with lenders or future buyers.
Finally, think five years ahead. What does your life look like if your business doesn’t rely on you? Start working backward from that vision.
If you’re still working in your business every day, ask yourself, “What happens if I step away?” If the answer is, “It all falls apart,” then it’s time to rethink your model.
In the world of mergers and acquisitions, competent buyers often ask sellers the following questions: “When was the last time you took a vacation? How did it go?”
If you don’t have a compelling answer, do you have compelling business?
You started your dealership to build something. Don’t let it become just another job — one with longer hours and more stress than you had before. A true business gives you the best of both worlds: income today and value tomorrow.
At the end of the day, the most valuable business is the one that doesn’t need you.
