How does a detail shop affect car wash valuation methods?

[Waxman]

When determining the value of a car wash, I understand the gross multiplier idea. However, if a detail shop is present on site as an additional profit center (and in a separate, 'multi-purpose' building of its own) is the income it generates simply added in as a part of the 'car wash income', and then that total gross multiplied by 'x'?

I'm NOT planning to sell my car wash. I'm building a new detail shop this year and I'm thinking ahead a little.

Any thoughts?

 

[smokun]

Multiple profit centers or separate entity?

There is a distinction that you may wish to draw that may help position yourself more favorably, given the option of having multiple profit centers under one entity OR establishing separate entities.

I designed the flex-serve platform to provide quite a few variations for financial engineering alternatives such as diversified and layered or multiple ownership. This compartmentalization should be designed to meet your specific needs and be mindful of all taxing impact issues.

The rationale of having separate entities better enables you to have separate valuation, if it proves to enhance your needs. Having said that, I embrace a strategic planning approach... but nevertheless prefer to keep things as simple as possible. Streamlined accounting practices can provide whatever revenue footprints are needed... for however you choose to operate. Many people choose to merge everything because of blended savings while others like the severible multiple entities.

Sorry this is vague, but that's the nature of the beast. Hope this helps.

 

[Waxman]

While some expenses are easily attributable to either car wash or detail, many are difficult to separate, especially if utilities are not segregated.

Even things like labor, chemicals, insurance all seem to comingle within a car wash/detail shop business.

I don't understand enough about the potential financial benefits of assigning the exact expense for each profit center on-site to determine whether that is a worthwhile task (seems pretty tough to me). The income side is easier to separate, because I already have a system in place for the income side of the equation.

Without digressing too much, I'm wondering how other car washes with detail shops are valued using the gross multiplier approach outlined in 'The Car Wash Appraisal Handbook".

 

[smokun]

Simply an option to consider.

I agree with your approach but continue to suggest that, if you're adding a new facility, segregate the utilities to gain more flexibility as well as isolate your true costs associated with the addition.

As for shared labor, that's easy to manage and earmark. Comingling overhead costs is always a choice, but properly structuring your operational costs will always help provide a real-time cost for analysis and ongoing oversight. Obviously, I was planning ahead of where your thoughts might be today.

Perhaps I misunderstood your question. I thought that, if you decided to sell at a later date, you'd like to consider an alternative valuation perspective that can also serve your current cost management needs. Sorry to carry you off into a tangent.

-Steve

 

[buda]

Waxman:

Never been much for these conversations of multipliers, etc. They might make the owner feel good about what they think the carwash or carwash/detail shop is worth, but applying the KISS principle it all boils down to this:

"How much you want for the business, and how bad you want to sell it vs how much the buyer is willing to pay."

You can argue multipliers, etc all you want but when all is said and done it is all about supply and demand.

There is an exterior conveyor carwash here in Portland that was built by a gentleman from another country. It was laid out very poorly and they built additional buildings on the street that blocked the car wash building. Even if you knew where the carwash way, it was hard to find. It was open at least 2.5 years and never washed over 50 cars in a day, if that much. The owner had $1.5 million in land, building, equipment. It also had a 3 bay express detail building and coffee shop building on the property.

There was no way that anyone that knew anything about the carwash business would pay the owner $1.5 million. However, another foreign gentleman paid him the asking price.

Obviously the buyer had other reasons for wanting the business and paid the price when financially speaking there was no way the car wash would, and today, is not generating the revenues to justify the investment.

Just some well intentioned thoughts on the matter.

Bud Abraham

 

[Waxman]

I do understand the basic economics of supply and demand. I also do not intend to sell my business anytime soon. I do what I love and love what I do.

However, I also realize that gross multipliers should be at least a factor in the buying/selling of a going concern such as a car wash. I guess the answer is that no one really knows. That's okay, because I was just curious after reading the 'car wash appraisal handbook' and attempting to apply the principles within to my own situation, while thinking 20 years into the future and gazing into my crystal ball.


Heck, maybe in 5 years Taco Bell will want my spot. One never knows what lies ahead...

 

[smokun]

Highest & Best Use

I understood your inquiry as being directed to structure that best positioned your business to be valued, if you chose to liquidate at some time in the future. Accordingly, I offered some suggestions that would apply to all of the methodology for assessing value.

We all know that the market ultimately tells us, at that given moment, what the value of anything is. Yes, it is the supply versus demand axiom. But when you position yourself to sell, most buyers seek the kinds of justification that your original question begged, and that's why the structure of your multiple operations may demonstrate the diversity.

Most operators would agree that at some point, "everything" is for sale... and has a price. When that time comes, you'll benefit more if your argument for higher value is supported by something other than a real-estate/carwash consultant lumping everything together.

Bud is correct when he says that there is a buyer for everything. And, yes... timing is everything!

Accordingly, the key for optimizing the transition is how well you can "market" the site's perceived value. A skilled salesman appreciates all the "tools" available to maximize a purchase. I simply suggested a few more that might make a dollars & cents difference. At least, that's been my personal experience.