Another Newbie-1st Post-Value of Existing Wash?

[JGinther]

When you say its a small town, is the car wash in the 'trade area' of the small town? You can't fix a bad location no matter how good the car wash looks or works. If the small town abuts to a large town, and everyone uses that trade area because it is more convenient, you might have a hard time making more business flow like you are expecting...

 

[Dave1972]

JGinther--the car wash is in a pretty good location on a high visibility area at the end of the main street through town at a very high traffic intersection. I've attached a 2009 Traffic Count map. Of particular note, the Highway with the 9800 and 13900 numbers to the east (right) is closing access at the red diamond I've noted. That is the location of the only other existing car wash that's attached to a Mobil gas station/convenience store (Laserwash 4000 that's actually very nice). My hope is to bring local traffic back to the car wash once it's better maintained and partnered with other local businesses as well as small town clubs/organizations and school district (athletics).

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[Washmee]

I didn't say it looked bad guys-I said it needed a lot and it does. No working lights in SS bays or parking lot, old Mark VII doesn't work, vacuums don't work, hasn't been maintained...while I understand that may be ok with some of you-it's not ok with me and there is less "value" because of these items. Good bargaining chips in my opinion.

Anyone know much about Mark VII machines?

Not sure why he still has the express key-looks like a pain in the a$$.

Most of what you are talking about in this post are fairly easy fixes. Search the forum for converting the bay lights to CFL's and cover the bay walls with some FRP and you make a huge improvement for not much of an investment. There lots of used Mark VII machines available on the market for next to nothing. Buy one of those for parts and I would bet you can get that machine running too.

http://www.carwashconsignment.com/wiki/CWC/MarkVIIModels

 

[Dave1972]

Washmee--I couldn't agree with you more! Definitely easy fixes--but bargaining chips nonetheless! I've used the search function a few times and was looking into the lighting issue as I think it's huge--especially during our long winter days/nights without much daylight. While our little Midwestern town is extremely safe, it is a little creepy being around somewhere without lights. I believe I may be able to partner with the electric company to offset the costs of lighting--is another thing I want to look into!

Thank you for the post--I'll want to check on the FRP and see what the costs are--it will brighten things dramatically in the current IBA that is gray block walls that are a little dirty.

I think that MarkVII can get up and live again--just not sure about $$.

 

[Kevin James]

Mr. James I notice a lot of the time when you post you are very negative about the carwash business. I am not trying to pick a fight but if you are unhappy with the carwash business why not sell your wash or washes and do something different. Life is to short to do something you dislike.

If telling someone the TRUTH is being negative then I guess I’m being negative, but I’m being truthful. I wouldn’t say we are in the car wash business, we are in the car wash buying business. We buy car washes for the sole purpose of redeveloping the property. We currently have a number of car washes that we are running until the time is right to bulldoze them for another purpose. We have already done a few and they have worked well.

 

[cwguy.com]

If telling someone the TRUTH is being negative then I guess I’m being negative, but I’m being truthful. I wouldn’t say we are in the car wash business, we are in the car wash buying business. We buy car washes for the sole purpose of redeveloping the property. We currently have a number of car washes that we are running until the time is right to bulldoze them for another purpose. We have already done a few and they have worked well.

I agree with Kevin and he brings up all valid points? Also if you ever built a car wash new or talked to equipment sales people they paint a way different picture on reality. Also consultants and builders from 8-15 years ago.... they were the worse. Could be worse now I don't know? But they have all switched to being experts on express washes. Everything was sold as "just pick up the money". Kevin is "just keeping it real". He might be exaggerating a little but better to be notified of the crap then think you just show up once a month right?

 

[rph9168]

The car wash business has never been an easy business. Even in it's heyday from the late 70's to the early 2000's there were many failures. From my experience much has changed in our industry and one has to be a much better businessman today than in the past to succeed. However I don't think that our industry is alone in that regard. The economic climate of our country is not good. Many businesses are failing or have failed. Before you make the move make sure you are ready to work hard to make a profit. Make sure you are committed to provide your customers the best that can be in your area. Expect some disappointments and work through them. Expect to sacrifice more time, effort and money than expected and the reward not to be possibly what you have been told to believe. I still maintain that the car wash business is a good one but not for everyone. It's ultimately up to you to decide if this is for you. Good luck in your decision.

 

[robert roman]

The ground truth is the carwash business can be a very trying road to travel but it can also be very rewarding profit wise and as a vocation.

As for this wash, the equipment room is as I would suspect a disaster area.

The current pay stations and in-bays are good equipment but obsolete technically and from marketing perspective.

Standard today is touch-screen POS with marketing capabilities like supporting customer loyalty program, up-selling and dispensing token for vacuum.

The building looks structurally sound but the brick and dark blue mansard are drab by today’s standards.

Also the building has no perspective, flat roof.

Perhaps the best thing you have going for you is the building has been designed for two in-bays.

I see it several ways.

1) Follow industry best practices in restoring the wands and in-bays.

With low traffic site, you might expect $1,200 per month per wand and maybe 8K to 9K cars through the automatics, combined.

Basically, you would be investing in a business with below average performance.

This underscores importance of fundamentals. Development cost must be in line with market potential.

Although it would require more in-depth analysis, there are other strategies you may want to consider.

For example, with three wand-bays and two in-bays there is enough infra-structure present to support other business models like express exterior, quick-serve or flex-serve format.

Either of these business models would help make this location more of a destination, meaning a lot more door swings.

 

[Greg Pack]

Thank you for posting pictures. That helps tremendously.

A SS bay out of service for a lengthy period indicates the owner didn't feel like the bay was needed to meet demand.

Due to your non-disclosure I think it might be useful to talk about gross income multiplier, which is still a useful tool for a quick evaluation of a reasonable wash price. This number varies from operator to operator and even to a great extent between site based on some other variables, but paying more than 5X gross revenue (on a reasonably short amortization)will cause financial struggles. Most operators shoot for between 3-4X gross revenues. Some people will take issue with my multiples. But figure expense at 45-50% of gross revenue and do the math yourself to see how your net income will support a payment.

I also will argue for shorter term loans. Taking a twenty year or longer loan is not a good idea IMO. You're almost guaranteed to be upside down during the loan period at one time or another. Get the car wash paid for as soon as possible. If you can't make it work in 15 years (ten would be better) I would pass. Also, full term loans only- A five year note with a 15 year am is a potential disaster. Your bank may decide not to renew and your personal or national economic conditions may make it tough to find another willing lender.

 

[Greg Pack]

I would purchase the property for what it does now not what is could do.

I'll second that

 

[Dave1972]

I agree that the purchase price needs to be for what the property does now as you never know what will happen right? Anyone use a business analysis tool or formula other than a multiplier X gross earnings to determine value? I'm working on getting detailed utilities expenses as it sounds like that might be a determining factor of truth for sales/cogs. The owner did share an appraisal that was done (for a refinance with the bank in 2013) that is near the asking price. I think he's very high with his asking price based on several factors that include the minor repair items needed as well as the 2nd IBA not being operable.

Robert--you mention different business models and I'm not familiar with your terminology "express exterior, quick-serve, flex serve"--what do each of those mean?

Also--I have not researched the latest technology for pay stations--especially with the IBA. What's a cost to replace what is currently there (shown in pics) with ONE of the latest technology (touch screen POS w/customer loyalty blah blah). What are you guys doing regarding loyalty programs?

 

[cwguy.com]

Robert--you mention different business models and I'm not familiar with your terminology "express exterior, quick-serve, flex serve"--what do each of those mean?

Also--I have not researched the latest technology for pay stations--especially with the IBA. What's a cost to replace what is currently there (shown in pics) with ONE of the latest technology (touch screen POS w/customer loyalty blah blah). What are you guys doing regarding loyalty programs?

If you plan on keeping your job changing the format is the worse advice ever.

The entry units are completely fine. I wouldn't waist your time worrying about the entry unit or changing the format. I would just be concerned with getting the automatic working and the numbers?

Changing the format could cost between $300k-1.5m. A new entry unit that was recommend would cost around $40-50k I think? They are really for express washes that are up saled to self serves.

 

[rph9168]

I totally agree that negotiations should be based on revenue highlighting the fact that it is on a downward trend and an investment in the wash will be necessary to change that trend. One of the reasons for the failure of a wash when it changes hands is the cost of "blue sky". This wash needs some work and from the looks of it the result of that is loss of customers.

 

[Dave1972]

Thanks for the advice-yes, I think the most important is getting the place fully functioning with existing equipment. If it's going well after that, then I can maybe take my time to do additional upgrades as they are warranted/needed.

RPH-agree with you on the blue sky and downward trend. I don't think he thinks that he will get his asking or even close to asking price. If we are looking at a 3x gross sales multiplier-his asking price is roughly $170k too high.

Time will tell. I have the wife's blessing which is a very big step in the right direction!

Just out of curiosity-my personal finances are protected in case this thing goes to sh*t right? The LLC would just cease to exist and property would go back to the bank? Sorry to ask a crappy question but we all have to look out for #1 first.

 

[cwguy.com]

I'm pretty sure there is no way that will work. The bank wants collateral.... Plus bankruptcy laws have changed and they will get there money after your dead.

 

[robert roman]

“If you can't make it work in 15 years (ten would be better) I would pass. Also, full term loans only- A five year note with a 15 year am is a potential disaster. Your bank may decide not to renew and your personal or national economic conditions may make it tough to find another willing lender.”

Again, stick with the fundamentals. Don’t put the cart before the horse.

For example, support services like carwash, convenience store, dry cleaners, etc, are usually built only if they can be reasonably expected to generate a pre-tax yield (IRR) of between 25 percent and 30 percent or better in three years. Most investors aren’t willing to go five years.

Reason is you want to be able to sell to a 3rd party buyer priced to yield, after all operating costs and overhead, a 30 percent return on the new buyer’s equity, or an exit strategy.

New-bee, based on the nature of your questions you may not be ready for carwash. That’s cool because it’s always better not to have a gun to your head when making such decisions.

Take your time. I would not suspect that someone is going to come rushing in to grab up this gem anytime soon.

Moreover, I would say by looks of the map there may be better sites in town to prospect.

Carwash is a retail business. Retail business is location, location, location.

I agree, this wash is probably not worth much more than value of land and site improvements (water, sewer, electric).

 

[2Biz]

Time will tell. I have the wife's blessing which is a very big step in the right direction!

That's funny! My wife was the one who wanted to buy the wash. I fought her tooth and nail for about a month, then gave in to go look at it. We ended up buying it, obviously, and now 3 years later she would like to sell. She say's "I'm always up there working on something". Or I'm never at home. Or I always find an excuse to go up there!

If you do it right, be prepared to spend a lot of time at The wash. You won't be showing up once a week to collect $$$ and make sure the chemicals are full. That's the easy part....

 

[Dave1972]

2biz-yes, I understand this is a real commitment of time and labor and obviously money. If I wanted to do things like sit back and collect the money there are far better and easier ways of doing so (oh politics I don't want to bring them in!). Funny your wife is now ready to sell!

Robert Roman-have you read any of my posts? I find it insulting for you to say I'm not ready based on my questions. I don't think I've asked ANY inappropriate questions and feel you do to know anything about me in order to form an opinion like that.

I'm not building a new business, I would be purchasing an established one. The location is great as it's on a high traffic (at least in my little town) area that most locals have to pass to get their kids to school, buy groceries, post office, etc. it's the "main" street in town. I can't afford 1.5 million to put up an ideal wash in a higher traffic area by the interstate and besides, local townsfolk don't normally visit that area as gas is more expensive and the only thing out there is fast food and hotels.

CWGUY-I asked about the personal liability just to get a better idea of reasons to operate under an LLC versus other type of business. While I understand that the bank will always get theirs one way or another, I'd like to protect my and my family's personal portfolio should anything go wrong. If seller is providing down payment and I am operating under an LLC, where does the personal financial liability come in?

 

[rph9168]

If you stick to paying for the land and improvements only you shouldn't come out too badly if the business fails. In the good old days banks were usually willing to take as little as 10% down. Today even with good credit in most cases being a newbie in the business you can count on needing to have 40 to 50%+ and some reasonable collateral as well. I also doubt an LLC will give you any real protection. It might help slow down some of you small creditors from going after you but it won't stop the banks or large creditors. If you are really concerned about this I agree with several others - this may not be the way for you to go especially if you have to convince your wife. If it doesn't work out you might also lose a marriage as well as the business. Time to step back - take a deep breathe - and rethink the whole project before proceeding.

 

[2Biz]

Dave, if you've already told us, Sorry I must have missed it. But do you have a regular paying job? Full time hours? This is something else that needs consideration. I work (as an Engineer) 9.5-10 hrs. a day. So working full time AND taking care of the wash, upgrades, maintenance, clean-up, electrical, and plumbing, can be taxing. Maybe your circumstances are different?

The reason I ask, it would be So much easier on me to take care of a car wash (or 2 or 3) if that's all I did. Doing both (Working Full Time and taking care of the wash) is what can strain a relationship. RPH gave some good advice. Step Back and take a deep breathe!