Looking to purchase a wash

[Lomaximum]

Hello-

I am looking at buying a wash that supposedly has $39k in monthly sales and can convert to an express wash for $430k.

60k daily car count. Is it safe to assume that if the numbers are true and I get everything cleaned up and working well, looking good and running well that I can expect an uptick in the monthly sales after the conversion? Should I expect to get a 40% profit from that? For example $50k a month is $600k a year minus 40% for mortgage, taxes, expenses for everything - Utilities, supplies, employees etc. that I would be left with $240k? Or is that unrealistic and I’m naive?

Thanks in advance!

 

[MC3033]

40% in cash flow, if that is what you mean by profit, would likely be difficult in a low volume express format with a limited rehab.

Is $430k the rehab cost or purchase cost?
Does the wash have strong visibility and easy access? Competition?If so at 60k cpd you should see far more then $50k in sales if you rehab it right.

 

[Lomaximum]

$1.4m for the wash, $430k to convert.

Yes, very strong visibility and access both ways. Nothing for 5 miles either way, near Walmart and strip malls etc.

I'm also wondering about the profit margin. I know you can't predict it perfectly, but if you are pulling in 50k a month, what is the yearly salary I can pay myself?

I think I don't fully understand the way it works. Cash flow versus what I can pay myself. If it makes 50k a month, that is 600k a year. Would I be able to pay myself 40% of that as a salary and use 60% of the 600k to keep the lights on and pay for the wash, etc. ?

 

[MC3033]

What you do with the money after all debt/expenses is up to you. Obviously it is recommended to keep some extra cash in the business for unexpected big ticket items. Of course how you legally set up the business matters as well.

Are you financing? Do you plan on running it yourself and working at least 40hrs a week as an employee? If you aren’t financing or financing very little + working then 40% of revenue could definitely be take home

Even with a lite rehab based on what you described $50k/mo is an easy revenue target. A site, how you describe should easily be capable of double that.

I would advise that you find a consultant to help guide you. My initial gut reaction is that you would want to double how much you spend on the rehab and do it right.

 

[Lomaximum]

Understood.

I will be financing about 50% of it. I know that the monthly mortgage payment and taxes will eat into about $75k a year of expenses. I plan on working 40 hours a week or more. The place doesn't need a lot of rehab, but I also know that everything costs double what you think it will. I just thought it would be best to convert to an express to increase profits? I would also run promotions, a membership program, advertising, social media etc.

I will definitely be hiring a consultant as well. If I am investing that much time and money into a place, I would really want to ability to pull out a decent salary to pay my personal bills and invest in other areas (Stock market, real estate, etc.). I can't imagine not being able to pull out $200k a year if the place is making $600k+ or am I not living in the real world? lol

 

[Lomaximum]

Here is the write up:

Good Price Full Service Car Wash for sale
more than 1.5 acre land, 61,000 daily car traffic count road.
Neither the owner nor the manager are managing the business for the last 3 years.
(this place is run by hourly paid employees only)

Full estimate to flip to an express car wash is $430,000.

Rare opportunity to build an express car wash with little money.
Listing price: 1.45 mil
current monthly sales: $39,000 / month

 

[Rfreeman]

I would be very very let me repeat very cautious based off:

"Neither the owner nor the manager are managing the business for the last 3 years.
(this place is run by hourly paid employees only)"

I dont know of any business muchless a car wash that runs without an owner and manager. I would park outside this place and watch if a few hrs. a day to see the kind of volume it does.

 

[Lomaximum]

Good idea. Also w/ 60k traffic count and only 39k per month in sales that makes it look like they aren't doing their full potential. Should be at least double that, right?

 

[MC3033]

You are going about things the right way! The only other big piece of advice would be networking in the industry. You will want to know who NOT to work with (lots of snake oil salesman) and maybe get an opportunity to be around an operating express wash.

I would push hard to figure out why they are selling. Also call the cities that are within a 5 mile vicinity to find out if anyone is building a new wash or doing a large rehab.

How old is the current wash? Something that usually bites people in the butt on a rehab are general building/lot expenses (asphalt repair or coating, HVAC repair, door replacement, not having a large enough power supply, etc...)

For a site like that if you want to be in it for cheap I would still consider at least 12 free vacuums and 2 pay stations. That alone will be $250k in rehab expense.

Capex baked into the loan is better then capex out of cash flow later. Don’t overlook the possible need to add/replace air compressors, water softeners, RO, etc..

If the bank allows I would try to get some extra financed cash to sit on the first year or two in case you have big capex. Don’t put yourself in a position to make a bad decision.

 

[Axxlrod]

I'm suspect of the details I've heard so far. I'm thinking there are some landmines you haven't uncovered yet.

What does the $430K for remodel include? We converted a full serve to an express and it was well over $1M to convert.

A word of caution. It is much difficult to get customers to come back to a car wash that they had (several) bad experiences at, remodeled or not. Much easier to get customers to try out a new facility built from the ground up.

Make sure the site has adequate water service (2") and electrical supply. Other wise, you will be handicapped from the beginning.

You're also too fixated on how much salary you can pull out. It all depends on how much money/cars the remodeled wash does. You can't really back into that number. It's just a guess.

 

[MEP001]

I dont know of any business muchless a car wash that runs without an owner and manager. I would park outside this place and watch if a few hrs. a day to see the kind of volume it does.

Not just watch it, but go through it a few times. If you've already met the employees while looking, send some people through. Unmanaged employees often get complacent or greedy, and you don't want to have to fix a bad reputation.

 

[Lomaximum]

You're also too fixated on how much salary you can pull out. It all depends on how much money/cars the remodeled wash does. You can't really back into that number. It's just a guess.
[/QUOTE]

I understand that. I am trying to network with owners of washes to see if my assumptions are correct. Right now I have a job as a Software Executive and maintain a certain lifestyle.

If I take a risk and spend 2m+ on a car wash I'd like to have a rough idea on how much I'd make. I don't think that is being too fixated. What if I spend 2m on a wash and make 50% of what I make now.

I know I can handle the work, planning, stress, hours, working with contractors, advertising, social media, Customer service, promotions, selling fleet accounts, etc.

But if I don't think I can sustain my current income or more with this, then I wouldn't want to go through it all and find out later.

Again, if the wash makes 600k a year in gross revenue, I wouldn't be able to pull 200k out to pay myself? That is less than a 35% profit margin. Where would all the money go?

Mortgage and taxes - 70k a year
Maintenance and repairs - 50k a year
Employees - 75k a year
Utilities - 50k a year
Misc stuff? - 50k a year
Landscaping and building upkeep - 50k a year
Inventory and chemicals, soap etc. - 50k a year
Profit - 200k a year

I'm new at this, so cut me some slack

 

[OurTown]

I don't know about the other expenses but the labor number seems low. I'm assuming you will be open 80 hours per week and have two employees on location at all times. Sounds like four full time employees at minimum and could easily be $150K and maybe much more.

 

[DavidM]

Your labor, utilities and possibly maintenance and repair look low to me. Turn arounds are often slow. I doubt you are pulling a 200k salary in the first year or two, if ever. If that is your main focus, I would keep looking.

If it turns out to be a great site, what keeps a competitor from building down the road in 2 or 3 years? That would take a chunk of your profit.

The price seems high for its current income and your estimated cost to rehab looks pretty low for what I assume is a fairly run down site.

 

[jfmoran]

Hello-

I am looking at buying a wash that supposedly has $39k in monthly sales and can convert to an express wash for $430k.

60k daily car count. Is it safe to assume that if the numbers are true and I get everything cleaned up and working well, looking good and running well that I can expect an uptick in the monthly sales after the conversion? Should I expect to get a 40% profit from that? For example $50k a month is $600k a year minus 40% for mortgage, taxes, expenses for everything - Utilities, supplies, employees etc. that I would be left with $240k? Or is that unrealistic and I’m naive?

Thanks in advance!

I don't know what wash you are buying, but looking at the area where it is, gives a few red flags.

There are a couple of national chains in that area and if this site were a homerun, it wouldn't be available, especially at that price.

Some of these chains are paying $1.4 million just for land. 61K car count his huge, but there has to be a problem with access because again, no way this site would be available with a car count like that. Where did the estimate of $430K come from to convert to an express, what does this entail?

My advice is that you need a feaseability study done including a proforma, which will help to answer your questions. You need professional eyes on that site before you do anything else.

Feel free to reach out, I'm happy to steer you in the right direction.