Welcome Back! 🚗

Today, we’re popping the hood on an industry that keeps Canadians moving - the auto repair sector. With the increasing number of vehicles on the road and the complexities of modern cars, there’s never been a better time to consider steering into this market.

We know what’s going through your mind. Gas prices are skyrocketing, electric cars are taking over the roads, Mr. Elon Musk seems to be consuming the automotive market… So what does that mean for the auto repair industry? Are gas cars going to be relevant in a few years?

Take a deep breath! We’ll cover it all in this edition.

INDUSTRY BREAKDOWN

The Canadian Auto Repair Industry: Is It Driving Forward?

Auto repair shops are the unsung heroes of the Canadian roads, ensuring that millions of vehicles stay safe and operational. From routine oil changes to complex diagnostics, this industry is a cornerstone of the automotive landscape. With over 23,000 auto repair shops scattered across the country, it’s clear that Canadians rely heavily on these services to keep their wheels turning.

Considering the increasing number of vehicles on the road and the growing complexity of modern cars, there’s never been a better time to dive into this sector. Whether you’re dealing with a trusty old gas guzzler or the latest electric marvel, the auto repair industry has something to offer. The industry is evolving, and for those with the right mix of technical know-how and business acumen, the opportunities are vast and promising.

Industry Trends

The Canadian auto repair industry is experiencing steady and healthy growth. Despite the rise of electric vehicles (EVs) and hybrid cars, traditional gas-powered vehicles are still prevalent and will remain so for the foreseeable future. In 2020, there were over 35 million registered vehicles in Canada, with a significant portion being older, gas-powered cars that require regular maintenance and repairs​​.

Electric vehicles, while growing in popularity, bring their own set of challenges and opportunities. Repair shops are beginning to invest in training and equipment to service EVs, preparing for the inevitable increase in demand​​. This shift towards EVs and hybrids is driven by both environmental concerns and government policies aimed at reducing carbon emissions​​. 

The Finances 

Financially, the auto repair industry in Canada is robust. The market size was valued at approximately CAD 14 billion in 2021 and is expected to grow at a steady rate. The increasing complexity of modern vehicles means that repair shops need to invest in advanced diagnostic tools and continuous training for their technicians. This investment, while initially costly, can lead to higher revenue streams as specialised services often command higher prices​.

The push towards digitalization within the industry - such as online booking systems, digital diagnostics, and customer relationship management tools - enhances operational efficiency and customer satisfaction, driving repeat business and steady financial growth​​.

Buy or Bust?

The market is growing, driven equally by technological advancements and our increasing addiction to our phones. With one click of a button, we can have whatever we want, whenever we want it. The rise of electric and hybrid vehicles presents new opportunities for businesses willing to specialise in these areas. Additionally, the ongoing trend of vehicle longevity ensures a consistent demand for repair services​​.

So, gear up and get ready to drive your business to success in the Canadian auto repair industry! 🚗🔧

Check out these Automotive Repair businesses for sale:

1. High Quality Automotive Service Business for Sale in Vaughan, ON - $350,000

2. Thriving Car Repair Business in the GTA, ON - $1,100,000

3. High RIO Automotive Franchise in Calgary, AB - $6,500,000

4. High Margin Automotive Service Franchise in Edmonton, AB - 7,400,000

Interested in a particular industry? Reply to this email with the industry you are curious about and keep your eyes peeled in upcoming issues. 👀 

DEAL REVIEW

Turnkey Auto Repair Business

This week’s deal is a Well-Established and Profitable Automotive Repair Centre located in Calgary, Alberta.

Deal Facts 🔥

Green Flags 🟢

• Loyal Customer Base: The business has a dedicated customer base, primarily aged 40-60, along with many seniors from a nearby mobile home park, ensuring steady demand for services.

• NAPA 'Autocare Centre' Certification: Being part of the NAPA network provides credibility and access to a North American warranty, which can attract more customers seeking reliable service.

• Consistent Financial Performance: The business shows steady growth and strong performance, indicating resilience and potential for continued success.

• Strategic Location: Situated in a prime area in Calgary with convenient access and ample parking, the location is ideal for attracting and serving customers.

• Turnkey Operation: The current owner is committed to a smooth transition, making it easier for the new owner to take over and continue operations without significant disruptions.

Red Flags 🔴

• Limited Employee Count: With only two full-time and one part-time employee, the business may face challenges in scaling or handling increased workload without additional hiring.

• Dependence on Current Owner: The success of the transition may heavily rely on the current owner's involvement, and their departure could impact the business if not managed properly. Ensure to structure this deal with a longer owner transition, potentially using a 2-5 year seller financing note to have the owner keep some ‘skin in the game’. 

• Potential Market Saturation: The automotive repair industry is competitive, and the market in Calgary might be saturated, requiring strategic efforts to stand out.

• Expansion and Investment Needs: Significant growth opportunities exist, but they require investment in new services, technology, and staff training, which could be a financial and operational challenge.

• Economic Sensitivity: Despite being considered recession-resistant, the automotive repair industry can still be impacted by economic downturns, which might affect customer spending on vehicle maintenance.

Watch Our Video Breakdown 

For a more in-depth analysis, check out this video deep dive of the deal by our Founder, Morgan Tate:

Possible Deal Structure: A 2.38x SDE multiple for this business is in alignment with industry comparables. That said, the devil’s in the details. For this deal, we would recommend a deal structure that incentivises the owner to stay involved in a 12-18-month transition. You can structure this by using a mix of both an earn-out (pay-out based on business performance) and seller financing (loan from the business owner) over a 24 to 60-month period.

We were shocked to find out the over 50% of you were not sold on a business in the e-commerce industry. Guess we can leave Jeff Bezos to dominate the online sales industry - for now! 😉

Want to learn more about this deal? Reply to this email with a “send me more details” and we will connect you with the broker!

ADVERTISE

Let's chat! 🗣️

Looking to get your ad in front of 5000 active readers? Look no further. Reach out to us about advertisement or sponsorship opportunities.

TWEET HIGHLIGHT

It can be scary if your dream competes with one of the big guns in your industry. But don’t let that stop you from trying!

Will a company like Simple Modern come in and overtake Stanley, making them irrelevant? Probably not. But if your business is able to identify what the competition is doing wrong, AND are able to fix that problem in your own product… then you may still be able to strike gold.💰 And who doesn’t love a little friendly competition!

GOOD READS

Recommended Resources 📚

Below is a list of articles, books, and other resource we recommend for buyers or operators of small businesses!

1. Now, this would have been a perfect resource in our last edition about the e-commerce industry… but alas, it was two weeks behind our schedule. Nevertheless, this video about a e-commerce camper van business making $6.4M in revenue is a must watch!

2. For entrepreneurs looking to buy a small business, there are several ways to finance a business acquisition. One of the most popular financing methods is through the resources provided by the Small Business Administration (SBA), an agency that supports small business. Find out how SBA is streamlining processes here!

3. We don’t talk a ton about marketing and advertising on here, but this is an interesting take on creating a simple and effective brand. Lego is not recreating the wheel or tapping into maximalism advertising, they stripped out the unnecessary for clean, simple, (and most importantly) effective branding.

THANK YOU

Loving our newsletter? Share the love! 💌 Send it to your friends, family, or enemies - we don’t judge! 🫶🏼

See you next time!