179 -Ask Me Anything: The State of the Industry and Private Equity’s Impact - Featuring Cecil Bullard & Michael Smith December 10, 2025 - 00:57:47 Show Summary: Private equity and family offices are accelerating consolidation in automotive repair, and Cecil Bullard and Michael Smith explain what that means for shop owners. They break down valuation multiples by shop size, profit, and owner dependence, and why true scale commands higher returns. The conversation also covers shared corporate offices, cooperative style partnerships, and how structure and SOPs can reduce risk while improving consistency. They stress that pricing, labor rates, and leadership development are key to attracting talent and building an investable business. Operators who build teams and value propositions will thrive, while price focused shops will struggle or disappear in 2026. Host(s): Cecil Bullard, Founder of The Institute Michael Smith, Chief Strategy Officer Show Highlights: [00:01:10] – Cecil opens the discussion on industry consolidation and growing interest from private equity and family offices. [00:07:45] – Michael explains how shop size, owner involvement, and profit margins impact valuation multiples. [00:15:30] – The realities of small-shop valuations and why tools and equipment add little resale value. [00:23:40] – What it truly takes to reach higher multiples through scale, systems, and leadership teams. [00:32:20] – Why private equity is struggling to find enough well-run, scalable automotive businesses. [00:41:10] – The benefits and risks of shared corporate offices and co-op style shop groups. [00:52:00] – A candid discussion on labor rates, pricing fear, and the industry’s undervaluation of its work. [01:06:30] – Succession planning realities when selling to family members or key employees. [01:20:15] – Looking ahead to 2026: why opportunity favors shops that build value, not just fix cars. In every business journey, there are defining moments or challenges that build resilience and milestones that fuel growth. We’d love to hear about yours! What lessons, breakthroughs, or pivotal experiences have shaped your path in the automotive industry? Share your story with us at info@wearetheinstitute.com, and you might be featured in an upcoming episode. 👉 Unlock the full experience - watch the full webinar on YouTube: https://youtu.be/4Uq2lWjvxoc Don’t miss exclusive insights, expert takeaways, and real talk you won’t hear anywhere else. Hit Subscribe, drop a comment, and share it with someone who needs to hear this! Links & Resources: Want to learn more? Click Here Want a complimentary business health report? Click Here See The Institute's events list: Click Here Want access to our online classes? Click Here ________________________________________ Episode Transcript Disclaimer This transcript was generated using artificial intelligence and may contain errors. If you notice any inaccuracies, please contact us at marketing@wearetheinstitute.com. Episode Transcript: Cecil Bullard: Good morning in some parts of the country, I think. Um, my name is Cecil Bullard. I am the founder of the Institute, uh, and I have with me today, uh, Michael Smith, who is our chief strategist. And, uh, I would also say, um, presenter, extraordinaire. Um, Michael, welcome. Thank you, sir. Uh, this is an ask me anything. Cecil Bullard: So if you are online with us and you want to ask questions, please uh, um, put 'em in the comments and we will, uh, bring them in and do our best to get, uh, the answers. Um, today, I think, uh, I'd like to start us out. However, uh, kind of talking about this, um, this idea of the, the. Venture capitalists coming in and kind of taking over, uh, the industry. Cecil Bullard: Consolidation is, is what we, we have, um, you know, Michael, I think you and I have known each other now about three years, three and a half years, and I think you're coming up on two years with the institute. Michael Smith: Two, two Cecil Bullard: and a Michael Smith: half Cecil Bullard: already. Can you believe it? Cecil Bullard: Yeah. Oh, time flies when you're having fun, right? Cecil Bullard: When you're having fun when you get younger every day. Um. Let's, let's go back to maybe two years ago and, and compare, uh, you know, venture capital is definitely coming in to the, to the industry. Uh, I probably have, uh, five or six, um, inquiries from mainly at this point, uh, what they call, what they call 'em, a family practice. Cecil Bullard: Mm-hmm. Family, uh, family office, uh, four, uh. Potential purchase of the institute because they want to be in the vertical. Um, and they often talk about the vertical. Um, and then I also get, I don't know, probably somewhere between eight and 12, uh uh. Things from venture capital, uh, venture capital companies that are inquiries. Cecil Bullard: In fact, I think I have a conversation tomorrow with one of them. Uh, you know, hey, we're in Canada and we're trying to consolidate up here in Canada, and uh, you know, we've kind of looked you up and we think you know a lot of stuff, so we'd like to talk to you. Um, often that leads to a, um. A quote unquote job opportunity on either on the board or as some kind of a, um, uh. Cecil Bullard: Consultant to them, uh, you know, for the marketplace. So go back two years ago and, and, uh, think about, you know, where the industry, we thought the industry was going, where the industry is going, and then now look at it today. And, and tell me your thoughts on Cecil Bullard: Sure. Cecil Bullard: You know, on, on that. Michael Smith: Yeah. It's very interesting and in fact, if you'll indulge me, I wanna back up about a decade just for the start if we can, and go back to the very first private equity guys that showed up, um, at the table. Michael Smith: And they were, they had a vision. Knowing in this industry, we were headed in the direction of what 50, 60 other industry verticals have gone down. The first one's on the ground, maybe the one we all know best, is Sun Automotive out of Phoenix. Put a stake in the ground, decade ish ago, something in that neighborhood. Michael Smith: Mm-hmm. Cecil Bullard: 10, 12 years. Yeah. Michael Smith: Yeah, something like that. And they bought a, you know, reasonably smallish local shop that was underway and had some local presence and, and started, and the idea was to add to, to, those are, those are called the, uh, the, the baseline or the, uh, the, the platform companies that you start with. Michael Smith: And then they make investments from there. And the idea is to just add scale. Scale, uh, takes your multiple up on an exponential basis when you go to sell the business. So there's a game afoot where the mom and pops and I hesitate to call us that 'cause I don't want to offend anybody with that. But from an investment perspective, we are a mom and pop industry, meaning we're mostly small, mostly privately held, mostly owner operated. Michael Smith: And then the idea is to come sweeping in, buy up some kind of a regional. Starting presence of five to 10 to 15 shops and then sell it to a bigger fish who then rolls up four or five of those and goes on. So that started decade ish ago with Sun. We knew it was coming. It's not a big surprise. Part of the reason I'm in this industry at this point was a decade ago, I got introduced to a three shop company that wanted to do something different. Michael Smith: And so I kind of watched it coming. And so what happened was there was this great expectation that our industry was gonna roll up quickly. And it hasn't gone as quickly as we thought. And Cecil, now I'm gonna kind of jump into the next five to two years to kind of where we are today. Yeah, brother, go ahead. Michael Smith: Yeah, Cecil Bullard: before you, before you go there, I want to clarify a couple of things. Okay? Sure. So you talked about the multiple. And so if I have one shop. Uh, net, uh, 10 or 12%. Um, and I am involved in the business day to day, uh, and, uh, business isn't really growing much, et cetera. Mm-hmm. Uh, what's my multiple? Okay. Cecil Bullard: And I know that I know that answer, but. You know? Yeah. Michael Smith: Yeah. It depends on where your shop is. First of all. If you're in a geographic region where there's immediate distance, uh, geographic growth available for expansion is different than if you're rural. But let's just say you're in sort of the middle of all that. Michael Smith: Um, you would get, maybe if it's, you know, I'm gonna say this, and this is part of what's surprised private equity in any industry vertical, you would imagine that may be the middle of the bell curve. Would be a seven to 8% profit margin. Maybe this 80th percentile would be a 12 to 15% profit margin in the top shops or top companies in that industry. Michael Smith: Depending on the industry, if you're in the retail, groceries, margins aren't that high, but an industry like ours, in the trades that are profitable, you could expect a 25, 30% profit margin, top 10%. Ours is a harder business than that. So I'm, I'm, I'm gonna get to the answer to your question, the middle of the bell curve. Michael Smith: So when I, I guess what I'm saying is when you're saying a 10 to 12% profit margin, you're not talking about a 50th percent company? No, that's on the, that's on the higher end. It's on the way higher end of our bell curve. And so when, my, my point is when they look in, the average shop will get a two and a half to two and three quarter ebitda. Michael Smith: Or, um, let's, let's use net and EBITDA interchangeably. They are different numbers. EBITDA is a financial net number, which is more pure, if you will, but we use net. So let's talk nets, right? The average company at the top of our bell curve, halfway through the 235,000 companies, is a two to 3% profit margin. Michael Smith:
