'Blue-Sky' value is calculated as pre-tax income multiplied by the 'Blue-Sky' multiple which is typically derived from industry publications and informed by precedent transactions. 'Blue-Sky' multiples vary by vehicle brand and are usually higher for luxury brands.
The blue sky value refers to an intangible market value exceeding the sum of assets and liabilities. It represents the worth of a company's goodwill, brand reputation, and customer loyalty, among other non-quantifiable assets.
What is Blue Sky value? Any intangible/goodwill value of the automobile dealership over/above the tangible book value of the hard assets is referred to as Blue Sky value. Typically, Blue Sky value is measured as a multiple of pre-tax earnings, referred to as a Blue Sky multiple.
Add up the value of everything the business owns, including all equipment and inventory. Subtract any debts or liabilities. The value of the business's balance sheet is at least a starting point for determining the business's worth. But the business is probably worth a lot more than its net assets.
To find the fair market value, it is then necessary to divide that figure by the capitalization rate. Therefore, the income approach would reveal the following calculations. Projected sales are $500,000, and the capitalization rate is 25%, so the fair market value is $125,000.
The Revenue Multiple Method
This rule attaches a value to several types of businesses based on their annual revenue or sales. The revenue multiple used often falls between 0.5 to 5 times yearly revenue depending on the industry.
As mentioned, the most typical rules of thumb are based on a multiple of sales or earnings that other similar businesses have sold for. For example, an accounting firm generating $200,000 in revenues that should sell at 1.25 times (125% of) annual sales would have an asking price of $250,000.
Blue sky, or goodwill, is the excess purchase price over the market value of the tangible assets recorded on the balance sheet.
Blue sky thinking means out-of-the-box thinking or creative brainstorming. It refers to finding completely new ideas or solutions to a problem. For example, a few years ago, sending someone to the moon was unimaginable, but with visionary scientists and engineers, it became a reality in 1969.
Blue Sky Valuation refers to a hybrid business valuation method which is used to estimate the fair market value of automobile dealerships or franchises. The hybrid method involves a combination of the asset method and the income method to determine the fair market value of the dealership or franchise.
A classic example of blue sky thinking in action is Apple: their slogan 'think differently' sums up how they have founded their success. Their founder, the late Steve Jobs, was full of innovation and ideas based on thinking with a vision not initially limited by commercial or logistical considerations.
The Value of Goodwill as “Blue Sky”
If you've heard the term “blue sky” in conjunction with a business acquisition, it usually refers to the value of goodwill. It's a term that carries a somewhat negative connotation indicating that the value of the business is not supported by significant tangible assets.
Blue-sky thinking involves a group of people looking at an opportunity with fresh eyes. As a group, you could write down everyone's ideas on a flip chart. Alternatively, people may be given sticky notes and asked to write down as many ideas as they can on each note before displaying them on a wall.
Brand Positioning and Community Engagement
Bluesky offers a community-driven experience that prioritizes authentic interactions over traditional advertising. Unlike mainstream platforms where brands can rely on paid ads to gain visibility, Bluesky emphasizes organic reach and user-generated content.
Blue light is scattered in all directions by the tiny molecules of air in Earth's atmosphere. Blue is scattered more than other colors because it travels as shorter, smaller waves. This is why we see a blue sky most of the time. Closer to the horizon, the sky fades to a lighter blue or white.
The best Bluesky banner size is 1500 x 500 pixels. Your Bluesky cover photo should be a JPG or PNG file that is under 1MB in size. Similar to LinkedIn banners and Facebook cover photos, Bluesky banners will display at a different size depending on the type of device you're using.
Blue Sky laws, which vary among states, target companies, and seek to regulate the offering and selling of stocks and bonds. In other words, they require companies to make full disclosure of their sales and offers. They also seek to protect investors against fraudulent security trade.
Take your total assets and subtract your total liabilities. This approach makes it easy to trace to the valuation because it's coming directly from your accounting/record keeping. However, because it works like a snapshot of current value it may not take into consideration future revenue or earnings.
The Revenue Multiple (times revenue) Method
A venture that earns $1 million per year in revenue, for example, could have a multiple of 2 or 3 applied to it, resulting in a $2 or $3 million valuation. Another business might earn just $500,000 per year and earn a multiple of 0.5, yielding a valuation of $250,000.
The 1% Rule is simply this - focus on growing your business by 1% every day, and compounded, means your business gets 3,800% better each year. Sir Dave Brailsford, former performance director of British Cycling, revolutionized cycling using this theory.
So as an example, a company doing $2 million in real revenue (I'll explain below) should target a profit of 10 percent of that $2 million, owner's pay of 10 percent, taxes of 15 percent and operating expenses of 65 percent. Take a couple of seconds to study the chart.
The Net Book Value (NBV) of your business is calculated by deducting the costs of your business liabilities, including debt and outstanding credit, from the total value of your tangible and intangible assets.
Generally speaking, most businesses will sell for between 6 and 10 times their annual EBITDA depending on factors such as size, industry, competitive landscape, and geographic location.