I know this has been discussed here at length but always like to have professionals throw there two cents (food for thought) I am considering the purchase of another location it currently is doing gross receipts of around 100k a year for last three years they are currently asking 375k 1. Does this seem high in opinion? The location was buildt in 01 and in good maintenance condition. 2. I just purchased another location approx 3 months ago should have plenty equity in properties to cover down payment does anyone think this makes good or bad business sense from mine or a bank prospective considering I only have income for the last few months to show other than when I purchased?
Business value and financing?
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Waxman
Super Moderator
no it's not high. 3-4 x gross is industry standard.
soonermajic
Well-known member
buy it dude!
robert roman
Bob Roman
“….does anyone think this makes good or bad business sense from mine or a bank prospective….”
Good business sense would be to invest in a business that can survive bad times and increase profits during good ones.
Gross sales of $100K is less than one-half industry same store sales. So, by one measure, this is a pretty weak store.
There are only several months of financials to support this. Most appraisers like to see at least two years, audited.
Expected useful life of FF&E is 10 to 15 years and standard carwash building 20. The wash is 14 years old.
Is it good or bad times where this wash is located?
If bad, multiple of 2.0 or 2.5 might be appropriate.
Good business sense would also be to invest in a business that provides adequate return for risk taken (risk reward). Rule of thumb is 2.0 or greater.
Risk reward = expected cash flow / investment equity
Plug in your deal numbers and see what it looks like.
Good business sense would be to invest in a business that can survive bad times and increase profits during good ones.
Gross sales of $100K is less than one-half industry same store sales. So, by one measure, this is a pretty weak store.
There are only several months of financials to support this. Most appraisers like to see at least two years, audited.
Expected useful life of FF&E is 10 to 15 years and standard carwash building 20. The wash is 14 years old.
Is it good or bad times where this wash is located?
If bad, multiple of 2.0 or 2.5 might be appropriate.
Good business sense would also be to invest in a business that provides adequate return for risk taken (risk reward). Rule of thumb is 2.0 or greater.
Risk reward = expected cash flow / investment equity
Plug in your deal numbers and see what it looks like.
The gross number and asking price is not unreasonable. I never pay more than 3x gross now. 2.5x if equipment is old.
However with your current situation, I would try to pay off you recent purchase before buying another wash. Buying a wash is easy, but making high profit margin is hard with bank loan. When it come to selling a wash, that is the hardest part in this business. I am dreading that day.
However with your current situation, I would try to pay off you recent purchase before buying another wash. Buying a wash is easy, but making high profit margin is hard with bank loan. When it come to selling a wash, that is the hardest part in this business. I am dreading that day.
soonermajic
Well-known member
If its not in a town that is on the upswing, I wouldn't do it. Only a few exceptions : equipment is new, super high traffic count, easy in/out, & no competition. Otherwise, I wouldn't go over $300k.
