Fiar Market Value

[washregal]

Looking to sell a couple of my wash's - How do I gauge a price for fair market value? Should I sell through a Broker - seems like they just take 6 pct off the top.. Any advice on this would be appreciated - What kind of questions should I ask the broker on how they are going to market car wash's?

 

[rph9168]

There have been many threads here about valuing a wash so with a little bit of searching you should get some sound advice. Personally i think the bottom line is that the minimum requirement should be that the revenue the wash brings in should be enough to cover expenses and the loan payment. I would not recommend financing the loan yourself but if you are going to carry the note make sure there is plenty of collateral to back it up. Before going to a broker I would put the word out in the street that you want to sell. I have seen many times when local owners have bought out competitors. If you do go through a broker try to find one with experience in selling a wash or small business. Interview them like you would an employee and check references. Good luck.

 

[Kevin James]

We looked and bought a number of car washes over the years for redevelopment. The problem we’ve found is the owner has an emotional attachment the car wash and they are asking an unrealistic price for the property or they have no records to back up there asking price. Do you have records on the performance of the car washes that you want to sell? Why do you want to sell off your washes?

 

[washregal]

Yes we have all the records on the properties - My children do not have an interest in them -

 

[robert roman]

“How do I gauge a price for fair market value?”

I would begin the same way that most operators gauge how much to charge their customers for a carwash – from the customers (buyer’s) perspective.

For example, can I buy the property priced to yield at least 30 percent return on equity after all operating costs and overhead?

After recovery of equity, net sale proceeds should be at least enough to pay off any mortgage and all selling costs (i.e. 6% commission).

Here, price is a function earnings rather than revenue.

The reason is current net earnings allows potential buyer to determine true investment value of the business (i.e. net present value of future cash flows).

So, the first thing I would ask a brokerage is how it goes about determining an asking price.

Then I would ask how potential buyers are pre-qualified, what methods and how aggressively will property be marketed and for how long? And so forth.

 

[Waxman]

Maybe go a bit broader in scope of potential buyers as well. Perhaps your site would be more valuable as a fast food restaurant, commercial building or apartment complex.

 

[Earl Weiss]

For some the place may be worth more than FMV, As suggested, a local competitor may value it more than a stranger because operating locations in close proximity offers certain efficiencies. Another local business may be able to take advantage of similar efficiencies. Is there a local Chamber of commerce?

 

[Stuart]

All the information listed above is good and true. What was not stated was a quick & basic starting point. I have discussed pricing on carwashes and this is mostly geared towards self serve. Tunnels and ES have other quick figures to get to a starting price.

I have found the use of 8 to 9 times the net profit or 3 to 4 times gross sales to look at a starting position to sell the carwash as a carwash. From there you go up or down considering the condition of the facility, economy of city and other. If someone wants the land only and not the wash is a whole different deal. FWIW

 

[robert roman]

“I have discussed pricing on carwashes and this is mostly geared towards self serve. Tunnels and ES have other quick figures to get to a starting price.”

This assumption introduces bias into calculation of value.

Assume Wash-A full-service tunnel, Wash-B express tunnel and Wash-C self-serve with in-bay each generates net operating income of $150,000.

This implies gross sales of $250,000 SS, $300,000 express and $428,600 FS.

8.5 X NOI = $1.275 million each for SS, express and FS

3.5 X sales = $875K SS, $1.05 million express and $1.5 million FS

Evidence of bias is the approaches produce different results.

This is why using rule of thumb is sketchy at best and often leads to exaggerated expectations of value or worth.

This is one reason most brokers and consultants begin calculation of value by determining the available free cash flow (ACF) in the business.

The value assigned to ACF should reflect the risk associated with the continued operation of business with recent, proven financial results that can be reasonably be expected to continue after the sale.

Clearly, rule of thumb does not embody this notion.

So, my advice is to engage a professional to help determine a realistic price.

The purpose of opinion or calculation of value is to determine a price that will result in an exchange of ownership of property which is different than the purpose of a summary property appraisal.

 

[mac]

Most business brokers charge 10% to 12%. You financing the sale can be quite beneficial. I know one guy who financed his wash sale, and he's sold it three times already. Get a nice deposit and have a 60 or 90 day repossess clause.