Newbie Looking to buy Car Wash business - Please help

[gpark1234]

Hello, I am looking to buy a car wash in a rural area (4,500 population). The car wash comes with the real estate and has 4 self serve bays and 1 auto touch less bay. I have the business/property under contract for $350,000 and the gross is approx $150,000 per year. He has a manager that does the day to day and pays her $22,000/year. He puts in approx 15 hours per week. He has 3 years tax returns showing small profit, but that is mainly because he has around $15,000 in depreciation, cell phone bills, car expenses etc. I did some math, and without the deductions, he is making around $40k a year. The owner is willing to carry 10% and the bank is wanting 10% down. I would have to put down $35,000.

The positives:
- The owner seems to be honest about his record keeping and shows tax returns for 3 years. The water bills seems to reflect his honesty.
- I would have to only put down $35,000 and would see the money back the first year (100% return).
- This is the only car wash in this town, other than a Super America Gas Station.
- He has been operating for 20+ years.
- Possible Income Growth with water recycling system

The negatives:
- It is a older building and older equipment, but they seem to be working fine.
- I don't want to be "stuck" in this business since I don't have experience.


In conclusion, is this a deal that makes sense? The return on investment makes sense, but the older equipment worries me. I plan on doing a inspection and renegotiate if needed.

Could any experienced car wash owners tell me if this a good deal?


Thank you very much.


Greg

 

[gpark1234]

Buying a Car Wash in Rural Area

When buying a car wash in a rural area (4000 population) does community involvement matter? I just don't want the whole town know that a "investor" came and bought out the only car wash there and everyone stops coming. Is this a irrational thought? Thanks

 

[PaulLovesJamie]

It is a rational thought, but there are so many other things that are far more important that it would not be on my radar.
The only situation that would change my response is if it is a monoculture community - for example I wouldnt operate in chinatown unless I had a chinese manager...

 

[Whale of a Wash]

What city are you from &where is the wash.
Also, what is the name of the wash as I live in Fargo, and actually
been to most of the washes in minnesota, except near Rochester.
The Gen.Public may or may not care depending on what city you are
in, but if just an investor , you may feel they are all against
you, but it is just how they treat car washes.

 

[robert roman]

“…..does community involvement matter?” – In a rural area.

If you sold crack at the carwash at night and got arrested, this involvement would be highly detrimental to the business.

If you sponsored a 4-H charity wash, this involvement would be highly beneficial to the business.

“Is this a irrational thought?”

No.

Some operators do not actively market their business because the risks of owning a self-service wash are typically considered much lower as compared to what they are in a traditional retail store.

However, the business operating risks are categorically similar to those found in any retail store; producing sufficient sales and providing a customer-centric operation.

Retailers mitigate these risks through product (service), place, price and promotion.

The fact you are - that "investor" who came in and bought out the only car wash in town – does not change this equation or marketing mix.

 

[Kessler757]

The key to purchasing a small town car wash (as I did) is to improve your services, take pride in the appearances, and getting involved in the community. If the current location is dirty and in need of repairs, you will have a great opportunity on maintain your current core customer base and also increase the business. If the location is already in great shape and well maintained, you will have to keep the current standards and there might not be any growth opportunity. Your loyal customer and growth opportunity will come from improving the location apperance, services, and maintaining the current price. The keys are convenience and offer a good product. If there are other major company’s / franchises (drug chain, restaurant, gas station) in the town and they are doing well, they will also support you. If you can improve the product offered and maintain the current prices and they will take you with open arms. If you can’t improve on what's offer and the location is already in great shape and well maintained. It will be a hard act to follow and they might look at you as an outsider… I would consider another business opportunity

 

[MEP001]

When buying a car wash in a rural area (4000 population) does community involvement matter? I just don't want the whole town know that a "investor" came and bought out the only car wash there and everyone stops coming. Is this a irrational thought? Thanks

Customers don't care who owns a car wash. They just want a clean, reliable facility and to feel they're getting their money's worth.

 

[Waxman]

All I can say is you could easily double your purchase costs if significant building and/or equipment upgrades are required.

Did you say 4500 polulation? That's pretty small.

Why not hire a carwash consultant to help you decide?

$35k is alot to spend out of pocket, IMO, for a carwash venture. Not for some perhaps.

I would proceed with caution in such a small market.

My wash serves 20k and could still be busier and gross more and my equipment is 5 years old. Carwash equipment gets hard use as do buildings and land associated with the business.

Plan for extra profit centers to help generate income (detail, used cars, hot dog cart, etc).

Good luck!

 

[mac]

Possible Income Growth with water recycling system

Water recycling MAY save you some money, but most likely not with a self serve. It will definitely not increase income or profit. If this were me doing it to a 20 year old place I would plan on updatint the wash bays. You can put in wall paneling, new meter boxes with credit card, and maybe add features. To just take it over and clean a bit won't impress the customers a lot.

 

[Kevin James]

I said this on 3-11-12 and I'm saying it again

"Can you say “LOW PROFIT” The car wash business is one of the worse businesses that I can think of to get into? There are a few that do fairly well, but the majority of them are going sideways. We’ve looked at a lot of car washes and the only value in them is the land they sit on. We’d never get into the car wash business if it wasn’t for the land they sit on. It’s not all that important to keep a clean car when you’ve got other expenses that are more important. Most of the people who come to self serve car wash aren’t the most affluent folks, most are low income"

 

[robert roman]

A self-service wash usually goes sideways when the owner depends too heavily on low income folks who don’t believe it is all that important to keep a clean car. Then, the value in them tends to be the land. This is cause and effect.

I beg to differ with “low profit” because self-service owners that target market other segments are often rewarded with high conversion rates, typically twice the benchmark.

If you have a crummy location, you will most likely have a crummy carwash business.

 

[rph9168]

I have to agree with Robert. The clientèle a self service wash has depends a lot on its location. I have seen women in a dress and high heels and a man with a coat and tie on using a self serve. It is simply wrong to assume that all self service customers are low class. Like every other type of wash the location, demographics and condition of the wash plays a large part in the customer base.

 

[gpark1234]

So, should I buy this or not?

Isn't the people on this forum experienced car wash owners? Does this sound like a deal?


Thank you.

 

[Jimmy Buffett]

150k is a pretty busy wash for a 4 and 1 but it is certainly possible with no competition. The barriors to entry in the cw business are significant so new competition is less likely now than at many times in history. If those numbers are correct and you are sure you want to be in the cw business I'd say this looks like a good opportunity. I should say though that being a car wash owner is not always as glamorous as it seems.

 

[rph9168]

You say the wash has been operating for over 20 years. How old is the equipment? Have the equipment checked out before you sign on the dotted line. While you say it is in working condition that does not mean it will stay that way for a long time. While the terms seems to be fair hidden expenses could really hurt this deal.

 

[gpark1234]

I signed on the dotted line, but I have a 30 day due diligence period for inspections.

If there is any more advice, it would be much appreciated.


Thank you.

 

[MEP001]

So, should I buy this or not?

A general rule of thumb for getting into any business is to go with what you know. You obviously know little to nothing about this business, so what you SHOULD do is spend some time familiarizing yourself with it and deciding whether or not it's something you can handle. I'm sure I could make a good profit from it, mainly because I can and would do all the maintenance and cleaning myself. If you intend to pay someone $75 an hour to make your repairs and continue to pay an attendant $22,000 a year, you won't see much profit at all, ever.

 

[Indiana Wash]

A general rule of thumb for getting into any business is to go with what you know. You obviously know little to nothing about this business, so what you SHOULD do is spend some time familiarizing yourself with it and deciding whether or not it's something you can handle. I'm sure I could make a good profit from it, mainly because I can and would do all the maintenance and cleaning myself. If you intend to pay someone $75 an hour to make your repairs and continue to pay an attendant $22,000 a year, you won't see much profit at all, ever.

This.

Or as I suggested to someone who was considering buying a wash, take a vacation from work for 2 weeks to a month and go manage the wash before buying. Yes, that's a lot of time, but is two weeks of your time worth more than the $350k investment? Probably not.

 

[robert roman]

“I signed on the dotted line, but I have a 30 day due diligence period for inspections. If there is any more advice, it would be much appreciated.”

By signing, you have learned one ground truth - carwash has low barriers to entry.

My advice is to hire an independent consultant or equipment distributor to assess and evaluate the carwash as well as the proposed buy/sell transaction.

Otherwise, you may learn other ground truths and possible unintended consequences of investing in the carwash business.

 

[Kevin James]

A self-service wash usually goes sideways when the owner depends too heavily on low income folks who don’t believe it is all that important to keep a clean car. Then, the value in them tends to be the land. This is cause and effect.

I beg to differ with “low profit” because self-service owners that target market other segments are often rewarded with high conversion rates, typically twice the benchmark.

If you have a crummy location, you will most likely have a crummy carwash business.

As a business model the Self-Serve car wash industry is in a slow state of decline or in other words it’s dying a slow death. Look at the number of Self-serve car wash equipment manufacturers and distributors that have gone out of business, if you can’t sell new equipment you’re not going to survive. Look at the number of car washes that are for sale and most of them aren’t selling because they can’t float the note. If there was big money in the car wash business corporate America would be in it with both feet.