Would you build/invest right now?

[Roz]

You should be able to check the wash counts on the IBAs to see volume and project income based on prices.

Look at the water bills.

Multiple of gross revenue can vary depending on opportunity/risks, no hard and fast numbers. Call IBA equipment manufacturers if you want independent details on the equipment.

Running a car wash is not rocket science. 50% showing up, 10% being observant to sounds and unexplained water on the floor, 10% knowing what you can fix and what you need to call a pro to fix, 20% customer focused, 10% being willing to learn from others' knowledge/experience. Develop a good rolodex of outstanding service providers and other car wash owners who are very successful whom you can ask questions.

But always remember to have fun.....Good luck with the adventure...

 

[cw01]

Running a car wash is not rocket science. 50% showing up, 10% being observant to sounds and unexplained water on the floor, 10% knowing what you can fix and what you need to call a pro to fix, 20% customer focused, 10% being willing to learn from others' knowledge/experience. Develop a good rolodex of outstanding service providers and other car wash owners who are very successful whom you can ask questions.

Great advice. Thanks!

 

[Dan kamsickas]

DO NOT take the owner's estimate of the remaining lifespan/quality of the equipment. I've dealt with more than a few new owners who did that and got burned. Contact the manufacturer, local service people(you may have to get a couple of opinions), even try to make friends with a wash owner or two that are near you that would trade a meal or alcoholic beverages(usually both) for an unbiased opinion.

I would hate to see you buy something that is going to need major overhaul/replacement within a year or two.....if not sooner.

 

[cw01]

DO NOT take the owner's estimate of the remaining lifespan/quality of the equipment. I've dealt with more than a few new owners who did that and got burned. Contact the manufacturer, local service people(you may have to get a couple of opinions), even try to make friends with a wash owner or two that are near you that would trade a meal or alcoholic beverages(usually both) for an unbiased opinion.

Excellent advise. Thanks so much.

 

[cw01]

The owner has priced out the carwash at 10x EBIDTA. Is that a fair range within the industry?
Thanks!

 

[Kramerwv]

It might be, but it’ll depend on your comfort with that return or potential for that return. Does that price also work out to the 3-4x revenue some others have mentioned as another quick value indicator? If another wash gets built down the road, are you still ok? Are you financing or paying cash? If financing, what level of debt service will you have? Can you still make your desired return after debt? Have you factored in reserves for eventual equipment replacement? Just a lot of other variables that only you can know the answer to.

 

[cw01]

It might be, but it’ll depend on your comfort with that return or potential for that return. Does that price also work out to the 3-4x revenue some others have mentioned as another quick value indicator? If another wash gets built down the road, are you still ok? Are you financing or paying cash? If financing, what level of debt service will you have? Can you still make your desired return after debt? Have you factored in reserves for eventual equipment replacement? Just a lot of other variables that only you can know the answer to.

> Does that price also work out to the 3-4x revenue some others have mentioned as another quick value indicator?

Nope. 10x ebitda comes to 28% higher than 4x gross.

> If another wash gets built down the road, are you still ok?

Hmmm. Not sure how to figure that. I *think* it is unlikely, since it is a smaller town of 6,000 people and there is already one other competitor. But your question is an excellent one. More likely would be if the competitor started to actually care for his customers. That could be a reality to consider.

> Can you still make your desired return after debt?

Not at the 10x. Yes at the 3-4x gross.

> Have you factored in reserves for eventual equipment replacement?

Yes. Right now, depreciating based on the owners word at 15 years. If we get through an LOI and into due diligence, I will confirm with 3rd parties.

Thanks.
Chad

 

[Kramerwv]

Sounds like a pretty large disparity between the two methods. Due diligence is going to be very important in determining a final value that you are comfortable with and will work for your financial expectations.

 

[soonermajic]

> Does that price also work out to the 3-4x revenue some others have mentioned as another quick value indicator?

Nope. 10x ebitda comes to 28% higher than 4x gross.

> If another wash gets built down the road, are you still ok?

Hmmm. Not sure how to figure that. I *think* it is unlikely, since it is a smaller town of 6,000 people and there is already one other competitor. But your question is an excellent one. More likely would be if the competitor started to actually care for his customers. That could be a reality to consider.

> Can you still make your desired return after debt?

Not at the 10x. Yes at the 3-4x gross.

> Have you factored in reserves for eventual equipment replacement?

Yes. Right now, depreciating based on the owners word at 15 years. If we get through an LOI and into due diligence, I will confirm with 3rd parties.

Thanks.
Chad

Be careful of wanting it so bad, that you talk yourself into it, in spite of red flags. Remember "all that glitters is not always Gold".

If there's about 6k pop, you're buying 2 washes
(3 IBAs & 5 SS) & there's another wash similar...it just seems like WAY too many bays & not near enough people. 28% higher than 4x gross sounds like somewhere around 5x gross , or more. Thats enough to make u walk away, right there.

 

[cw01]

Be careful of wanting it so bad, that you talk yourself into it, in spite of red flags. Remember "all that glitters is not always Gold".

If there's about 6k pop, you're buying 2 washes
(3 IBAs & 5 SS) & there's another wash similar...it just seems like WAY too many bays & not near enough people. 28% higher than 4x gross sounds like somewhere around 5x gross , or more. Thats enough to make u walk away, right there.

Good advise. Thanks.

 

[soapy]

Also consider the following. Capital gains tax is at 15% now but if Biden wins the tax could go to 28 or even 39%. That makes a big impact when selling if you are looking for equity to cash out when you are ready to sell.

 

[Roz]

No one should ever make an important vote or decision based on political talking points about taxes.

No one has a crystal ball, takes more than a Prez to change tax rates, and tax increases will always be a third rail political effort.

Only Trump can figure out a way to not pay taxes for decades. Probably good material for another book.

 

[Kramerwv]

Taxes shouldn’t be the only thing that factors into decision making, but it is certainly something to consider. Companies and individuals are constantly incentivized or not due to changes in the tax code, I.e. section 179 depreciation limits, IRA deductions, etc. Again, just one piece of info to evaluate before making a final decision.