Business Interruption Planning, Insurance, and Calculations for Auto Dealerships

Proper Preparation is Essential to Your Succession Plans

Natural and man-made calamities, catastrophes and complications cause businesses from coast-to-coast to lose billions of dollars each year and most people think conventional business insurance will cover their losses. It may be true that your insurance will be sufficient to replace damaged or destroyed inventory and equipment, but what will happen if your ability to conduct business is interrupted or ended permanently? Will you be able to replace your lost and future income?

Hurricanes, floods, and even volcanoes can cause businesses to lose the ability to conduct business, sometimes forever. In Hawaii many businesses have been closed because the ground on which they operated has literally moved or been covered by lava.

Tragic events like terrorist attacks and mass shootings, while rare, can lead to the permanent closing of many businesses simply because people cannot imagine going into a business where loss-of-life has been extreme. A U.S. News and World Report article stated that a home can lose substantial value after a crime and the same can and has happened to businesses.

Whatever the cause, your business should be prepared for the possibility that some event may cause the long-term or permanent stoppage of your day-to-day operations and the decrease or total loss of income. There are three key points to consider when looking at this issue:

• Current Income Assessment – You’ll need to have accurate records of income and there are formulas and worksheets to be used in this endeavor. Each industry is different and experience in the auto industry is essential to make these calculations.

• Amount of Insurance Coverage – Once again, each business is different and your insurance company will recommend different amounts and types of coverage depending on your circumstances. It’s best to have a second opinion on these issues.

• Cost to Rebuild and/or Resume Normal Activities – There should be an assessment made by someone who has dealer valuation experience about how much money would be required to rebuild your business.

Auto Dealer Business Interruption

Every business is susceptible to a catastrophic event that could cause a loss of income, but auto dealers are particularly unique. Bryan Parker has been working within the auto industry at the dealer level for many years and has also gained certification and recognition as an expert in valuation, asset management, and has served as an expert witness in many areas of dispute. Bryan can be reached at 612-294-8730.