A 16 year old car wash in my town is up for sale. The wash is two SS and two IBA with three vacuums.The asking price is $595,000. I have some details from the owner but no tax returns yet. Here is what I have so far: in 2014 they grossed 235K of that 190K came from the two IBA, 38K came from the SS bays, and 6K came from the vacuums. In 2013 the automatics made 190K. In 2012 the automatics made 175K. So far from Jan 1 - April 22 of this year the automatics have made 80K. Location wise it is the only carwash for a 5-7 mile radius. It sits on a corner lot behind a gas station in a heavily trafficked area. The property taxes are 4k per year and he claims to have spent 36k in 2014 on water. I do not have details on other maintenance fees or utilities. Both automatics are laserwash 4000 and were installed in 2001. Let me know if you want any more details. I think this is a gem of an investment but I am SUPER new to this!
Looking to acquire car wash
- Thread starter sicnic
- Start date
robert roman
Bob Roman
“I think this is a gem of an investment but I am SUPER new to this!”
Depends on what you are buying. Is this deal business-only or 100 percent of the company including the real estate?
For example, maximum valuation for this type of carwash using the WAG method is 3.0 to 5.0 multiplied by gross sales or roughly between $700,000 and $1.2 million.
If business-only, typical valuation unadjusted for pertinent risk factors like you have no hands-on experience, low barriers to entry (no other competition), etc. is 3.0 times net operating income or EBIDTA.
Assume NOI is $129,250 so business-only value would be $388,000.
If price is $595,000, it’s under-value for 100 percent and over-value for business-only.
There are other factors to consider. In-bays are 14 years old and obsolete from technical and marketing perspective. Building is 16 years old and most likely needs renovated. Property taxes are only $4,000.
Property taxes are one indicator of the relative strength of the retail market in an area. Lower taxes suggest market has limits. For example, if a significant portion of the business comes from gas station and heavy traffic, market entry could cause the wash great pain if the retail market is relatively weak.
My advice is to obtain an opinion of value from carwash consultant or business broker or real estate agent who understands carwash industry.
Depends on what you are buying. Is this deal business-only or 100 percent of the company including the real estate?
For example, maximum valuation for this type of carwash using the WAG method is 3.0 to 5.0 multiplied by gross sales or roughly between $700,000 and $1.2 million.
If business-only, typical valuation unadjusted for pertinent risk factors like you have no hands-on experience, low barriers to entry (no other competition), etc. is 3.0 times net operating income or EBIDTA.
Assume NOI is $129,250 so business-only value would be $388,000.
If price is $595,000, it’s under-value for 100 percent and over-value for business-only.
There are other factors to consider. In-bays are 14 years old and obsolete from technical and marketing perspective. Building is 16 years old and most likely needs renovated. Property taxes are only $4,000.
Property taxes are one indicator of the relative strength of the retail market in an area. Lower taxes suggest market has limits. For example, if a significant portion of the business comes from gas station and heavy traffic, market entry could cause the wash great pain if the retail market is relatively weak.
My advice is to obtain an opinion of value from carwash consultant or business broker or real estate agent who understands carwash industry.
I.B. Washincars
Car Washer Emeritus
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On the surface, that price seems low. Maybe they know about imminent competition that you don't...just a thought.
I have photocopies of PDQ software printouts for each of the four washes provided and how much each was generated in revenue for 2013,2014, and 2015. For 2014 total wash count for bay 1 was 9511 generating $92,177.00 and bay 2 was 10900 generating $98,279.00. Super new means my extent of car wash knowledge is paying for it and driving through, but I am mechanically inclined and willing to learn. I currently have a full time job making about 65-70K per year so my involvement would be after work and a weekend thing.
My opinion then would be don't do it. I'm sure most here would agree. A busy wash generating that much income is a FULL TIME job.
wash4me
Member
You need to be very careful. People have deposited money from wash a and b into the account for wash c to make it look good and get sold. I don't know enough to know what it would take to manipulate the counts but it's certainly possible. Rude awakening when you have payments to make. You need to add in the cost of a full time attendant if that's not going to be you. On the other hand this guy may be salt of the earth and all is just like he says.
robert roman
Bob Roman
“….owner will not disclose taxes because they file multiple car washes on one return.”
Since comingling funds in one account only causes disadvantages, ask why seller would want to do this.
For example, without separate LLC for each wash, there is no way to isolate liability and protect personal assets (i.e. legal entity) or borrow money from bank (statement of risk) or sell the business (i.e. separate balance sheet).
Arguably, the only logical reason to comingle funds is to obscure facts.
There are a lot of good people in the carwash industry and perhaps just as many that will stick it to you with one hand while they shake with the other.
These people count on first-time buyer, new-to-industry tendency to be emotionally charged over prospect of getting into business.
Big income numbers are like throwing gasoline on a burning fire.
Not backing them up with income and balance sheet statement, audited books and income tax filing is fool’s gold.
Since comingling funds in one account only causes disadvantages, ask why seller would want to do this.
For example, without separate LLC for each wash, there is no way to isolate liability and protect personal assets (i.e. legal entity) or borrow money from bank (statement of risk) or sell the business (i.e. separate balance sheet).
Arguably, the only logical reason to comingle funds is to obscure facts.
There are a lot of good people in the carwash industry and perhaps just as many that will stick it to you with one hand while they shake with the other.
These people count on first-time buyer, new-to-industry tendency to be emotionally charged over prospect of getting into business.
Big income numbers are like throwing gasoline on a burning fire.
Not backing them up with income and balance sheet statement, audited books and income tax filing is fool’s gold.
I.B. Washincars
Car Washer Emeritus
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Not necessarily. Bookkeeping is much less. I have four washes and run them all as one business. If they were seperate, I would have to have 4 different bank accounts, and 4 different accounts with each vendor. Transferring something from one wash to another would be a hassle to track, the list goes on. I'm sure that's not the way you would do it, but there's nothing sinister going on, just making the best use of the limited manpower available within my small business.
Jim L.
Florida panhandle
A set of books or a tax return can be manipulated to show just about anything owner desires...it's called "Tax Planning".
robert roman
Bob Roman
Well, sure not necessarily but in many cases, yes.
If 100 percent of company is sold (all four washes) sure there is no problem. For example, big chains don't have LLC for each wash.
However, it’s going to cost a lot more to separate businesses now (i.e. attorney and CPA fees, loss of value due to shoddy records, etc.) than it would have been to set up and maintain four LLC earlier.
I’ve seen a lot of stuff over the last 15 years as an adviser and owners who get hurt the most are those that run the business out of a cigar box.
Owner may have good business and certain expectation of price but without documentation of revenues and balance sheet, how can buyer determine true investment value.
Without income verification, value to most willing and knowledgeable buyers becomes fair market value of the real estate plus the liquidation value of building and furniture, fixtures and equipment.
If 100 percent of company is sold (all four washes) sure there is no problem. For example, big chains don't have LLC for each wash.
However, it’s going to cost a lot more to separate businesses now (i.e. attorney and CPA fees, loss of value due to shoddy records, etc.) than it would have been to set up and maintain four LLC earlier.
I’ve seen a lot of stuff over the last 15 years as an adviser and owners who get hurt the most are those that run the business out of a cigar box.
Owner may have good business and certain expectation of price but without documentation of revenues and balance sheet, how can buyer determine true investment value.
Without income verification, value to most willing and knowledgeable buyers becomes fair market value of the real estate plus the liquidation value of building and furniture, fixtures and equipment.
carwash11147
Member
Don't buy this wash. If this wash does this kind of volume then you need to be available 24/7. When a automatic breaks down at 10 a.m. you need to be available at 10:01 a.m. to fix not 5:00p.m. If not your revenue numbers will take a huge hit.
I.B. Washincars
Car Washer Emeritus
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I don't think I would go so far as to advise against this wash because it will be too busy, but you do need to be prepared. It should be attended all day on Saturday and Sunday, and checked on at least three times (morning, noonish, after work) during the day throughout the week. Realistically, you need an attendant. With two autos, they can shut down a broken one until you arrive. If you find an attendant that can use wrenches at all, a broken hose shouldn't put a wash out of service long at all. Most repairs tend to be simple things like this.
Go in with your eyes open, and you'll have a fighting chance if everything is as it seems on the surface.
I agree with IB. You cannot operate a wash like this alone. You definitely need an attendant. Maybe you could find a retired guy with some mechanical skills. Even with that plan for it to take up most of your "free" time.
