Car wash investment - numbers

[Irishmist]

I am considering buying a carwash in NJ area. In very early stage of looking and comparing to othere businesses. Looking at numbers listed for businesses for sale, a few are looking for 800,000 to 1,200,000 and quite cash flow as being 200 to 300 thousand. So it looks like about 4 x cash flow.
Question - I assume cash flow is essentially EBITDA with some discretionay expenses added back (lease on owners car etc...).
A 25% return before interest and taxes looks attractive. So is there anything major missing? Does the cash flow number have repairs taken out? Or are new capital improvements every dew years the big problem? I want to know if the 200,000 cash flow is available to take out of the business (and pay taces, interest, my salary).

Assume fully automated carwash, no self serve bays. In affluent area.
Thanks

 

[Indiana Wash]

I am considering buying a carwash in NJ area. In very early stage of looking and comparing to othere businesses. Looking at numbers listed for businesses for sale, a few are looking for 800,000 to 1,200,000 and quite cash flow as being 200 to 300 thousand. So it looks like about 4 x cash flow.
Question - I assume cash flow is essentially EBITDA with some discretionay expenses added back (lease on owners car etc...).
A 25% return before interest and taxes looks attractive. So is there anything major missing? Does the cash flow number have repairs taken out? Or are new capital improvements every dew years the big problem? I want to know if the 200,000 cash flow is available to take out of the business (and pay taces, interest, my salary).

Assume fully automated carwash, no self serve bays. In affluent area.
Thanks

Those are questions you need to be asking the seller. How could anyone here know what they are calling cash flow? I imagine with those numbers, cash flow is gross income. You really need to hire a consultant or go to SCORE or something. I would suspect that the cash flow is used to pay for supplies and debt service. Without any debt, a car wash with that much cash flow should make a good profit. With $800k to $1.2m of debt, $200k gross income may not be enough depending on whether the property is owned or leased, property taxes, water rates, etc.

When you start assuming, you get yourself into trouble. Get the facts, then ask the questions. No one here can know the facts on your deal unless you do.

 

[Buzzie8]

Cash flow by most business peoples standards is what's left over after you pay all the bills. There are a number of articles on the web about valuing of car washes. Ballpark estimates for self-serves car wash valuations can be anywhere between 3 to 5 times gross. Gross is all the revenues the wash takes in. There are other methods for valuation with including cap rate valuations and reproduction costs. You should get an accountant to look at the current owners last three year tax returns and get you started with some advice.

 

[Indiana Wash]

Cash flow by most business peoples standards is what's left over after you pay all the bills. There are a number of articles on the web about valuing of car washes. Ballpark estimates for self-serves car wash valuations can be anywhere between 3 to 5 times gross. Gross is all the revenues the wash takes in. There are other methods for valuation with including cap rate valuations and reproduction costs. You should get an accountant to look at the current owners last three year tax returns and get you started with some advice.

Exactly! "by most business people's standards". However, the price of the wash appears to indicate that is the gross income not cash flow. I don't know many people who would sell a golden goose for the value of four golden eggs when the goose's life expectancy is at least 20 eggs!

 

[robert roman]

“Looking at numbers listed for businesses for sale, a few are looking for 800,000 to 1,200,000 and quite cash flow as being 200 to 300 thousand.”

Based on cash flow to price and assuming fully automated carwash (full service?), these washes could not possibly include real estate.

“So is there anything major missing?”

Yes, process.

Without a process, a new-bee can get seriously burnt when buying a wash.

My advice is to hire a consultant and get an opinion of value.

At the very least, this will allow you to gauge the opportunity and value through the eyes of someone with industry experience.

 

[Earl Weiss]

1. So is there anything major missing?

2. Does the cash flow number have repairs taken out?
3. Or are new capital improvements every dew years the big problem? I want to know if the 200,000 cash flow is available to take out of the business (and pay taces, interest, my salary).

1. No way to know without detailerd analysis and asking hard questions. When was the last things major stuff was done and what is theremaining life expectancy? Conveyor, Roof? HAve repairs done regularly to replace worn parts or has stuff been bandaged with tape and wire to keep it going? When was the last time all pits were pumped?
2. You need to analyze this. As far as wash equipment goes I figure 25 cents a car. Newer equipment will typicaly have less. Older, more. Does the conveyor chain and rollers need replacement? IS the entire conveyor structuralty sound?
3. See above. Do the current numbers reflect a salary having been deducted? Taxes? Interest? The current owner may have no debt service.
If you finance $1,000,000 at 7% (or whatever) that would be $70k a year that goes to your debt service not reflected in the Seller's #s.