Need advice on HUGE business deal

[soonermajic]

Im a HS bb coach, so not a businessman, & $1 million dollar deals are astronomical to me.
Here's the deal: town of 9k is 50 miles outside of Ok-City. 3 SS washes, w/ 13 bays, 1 of which has an OLD LW 4000. Gross $300, guy is asking $900k.
Well, WalMart has 2 vacant lots in front of it, just to the South, owned by Ok St Uni. Don't know if they're for sale. Gotta figure $300k for each lot, give or take. They've been vacant since WalMart moved in.

Dilemma: 1. do I buy the well established 3 washes, all of which are in obscure locations, install a new friction, & hope it goes like gangbusters (current OLD LW4000 washes 25cpd, & does a POOR job). All the timebworried someone will build a tunnel of those vacant lots can be built.
2. Do I MYSELF, try & buy 1 of those lots, & install a single IBA, & do Oasis "Eclipse" model (Xpress tunnel, no conveyor but separate washing/drying chanbers & tire shine is in drying chamber) make major coin, then sweat the other vacant lot sells to a tunnel comglomerate...
I figure building new Xpress tunnel will cost, all-in, about $750k, but will have no labor. I am SEVERAL hrs away & do NOT want any labor or tunnel hassles.
Buy current washes $900k

What do you guys think?

 

[Kramerwv]

Option 1 is a hard pass to me. Old, obscure locations, hours away. Option 2 only better based on cost and everything being new. Hard to say if you’d make any $$ though. Lotta risk

 

[soonermajic]

The 3 SS washes are in same small town of 9k, just not prime locations. But they've been there forever, so everyone knows where they are. As evidenced by $320k/ yr.

For that amount of gross, a multiple of 3x is a pretty dang good deal. IMHO...

 

[Kramerwv]

Without knowing the net on the $320k it’s hard to evaluate. Just seems like a lot of risk if it is hours away. There is always some kind of labor needed no matter what format of wash you own and if you can’t provide that yourself then you need someone reliable and that might eat into profits. Again, not enough info for any real advice. Could be fantastic deal or could have limited upside and a well funded competitor could really throw a wrench into potential profits. Lots of risk (for my funding level anyway) but every market is different. Either way you go best of luck!

 

[Sequoia]

I am surprised a town that size could result in three SS washes each grossing over $100k. Am I missing something?

Is this town landlocked in a larger metropolitan area?

 

[OurTown]

I am surprised a town that size could result in three SS washes each grossing over $100k. Am I missing something?

Is this town landlocked in a larger metropolitan area?

I'm confused about that too and is hard to imagine especially in OK. There must be more info left out.

 

[soonermajic]

There are actually 4 SS sites, & the 4th is in adjacent town about 12 miles away. It also has an IBA that does about 20 cpd. So $70k on that bay & the 3 SS bays w/ it does about $35k. So there is $105 of that $300+.

He has a guy who works full-time at all 4 washes 6 days/week. He is paid a nice chunk of change $48k!!! Gross is slightly over $300k, & net is lil more than half that $165k. But it doesn't included the bank note. Take bank note out & it would net about $60k.

Does that change anybody's opinion?

 

[Sequoia]

A lot of savvy business buyers purchase a business with a clear path to raising revenues. Such as rehabbing an old broken down wash, or adding an IBA to an existing SS location, or ... whatever.

Of your options, which of them offers the best chance to significantly improve revenue over what exists now? In that size of a town, seemingly limited by population, that is something I would be looking at.

 

[Roz]

Sounds like an interesting opportunity to improve the places! 20 CPD is nothing so a huge upside with a compelling website, a little marketing, and sprucing up the places. SS equipment can last for many years but you want to take a close look at the age, brand, and condition of the equipment. $900K (or 3x gross) is probably a fair price based on the gross but if you can see that you would need to invest more money to make the places grow you might consider subtracting that amount from the offer. If you would need a new IBA then take that into consideration - everything is negotiable. Keep in mind that a good wash does not run without attention and some effort/time. You get back what you put into the places (in general). You need to be able to devote some time to the places especially if they are underperforming now.

Maybe the owner will consider a rent to own sale so you can learn the industry from him and see if you like the industry before making a huge financial commitment...some have done this for 6 months.

Good luck, sounds exciting, enjoy the process...

 

[soonermajic]

I'd definitely replace the old LW4000, cause it is REALLY OLD, & town has no confidence in it.
Building new makes a ton of sense (new equipment, great site, less labor costs, close to ssme gross potential)...but having to start from new (instead of buying established biz) is nerve wracking.

 

[STXCW]

100k a year on each self serve and a auto with a poor quality wash still washes 25 CPD? I would buy all 3 and add new autos in all 3 locations and you should do fairly well for yourself.

 

[Rfreeman]

Screw it Sooner you only live once......buy them both!!!! only caveat...you will have to hang up the coaching shoes because you would definitely be full time car washing!

 

[soonermajic]

100k a year on each self serve and a auto with a poor quality wash still washes 25 CPD? I would buy all 3 and add new autos in all 3 locations and you should do fairly well for yourself.

I thought about that, but 1 of the sites has too small of bays & pumphouse. Other site might could, but it's not in a very good area.

Rfreeman, I hear ya...but dang over 25 yrs & i STILL LOVE coaching! 4 yrs to retire, so too close to quit now.

 

[washallday]

How far away do you live from these sites?

 

[Greg Pack]

He has a guy who works full-time at all 4 washes 6 days/week. He is paid a nice chunk of change $48k!!!

If the guy knows what he is doing and has a good work ethic he's worth that. You'd go nuts trying to take care of those places. But it sounds like a decent deal. All it takes is one express to really screw things up though.

 

[JMMUSTANG]

I would get a broker to give you the valuation of only the lots without the car washes figured in the valuation.
This could help you in making a decision.
The banks would like it if the lots by themselves are valued close to or higher than the selling price without the washes.
Then add in cost of improvements to the washes and IBA’s.
Hopefully the original income is sufficient to cover the loan and expenses.
I always calculate a minimum (10% increase and a conservative max of 15%) in revenue increase after improvements.
Do you think you can increase bay prices after improvements?

 

[soonermajic]

Jim, I would go up 1 qrtr, to $1.75. Currently $1.50/3 minutes.
Id definitely rip out the old LW,& install a friction (leaning Oasis i5).

The lot by WalMart is incredibly enticing, & working on it as we speak. I am 90 miles from these, but would definitely use the local CarWash tech.

 

[OurTown]

What kind of express tunnel can you build all in for $750K?

 

[soonermajic]

What kind of express tunnel can you build all in for $750K?

Because OSU has informed me they will not sell, but just lease the land.
It is NOT a conveyor/tunnel, but an IBA Xpress type "tunnel". Wash in first section, then move to 2nd section for Tire Shine & dryers.
I would imagine used paystation, used dryers, & used Tire Shine, along w/ new IBA + building cpuld comfortably be done for $700 or ess....?

 

[OurTown]

Because OSU has informed me theybwill not sell, but just lease thebland.
It is NOT a conveyor/tunnel, but an IBA Xpress type "tunnel". Wash in first section, then move to 2nd section for Tire Shine & dryers.
I would imagine used paystation, used dryers, & used Tire Shine, along w/ new IBA + building cpuld comfortably be done for $700 or ess....?

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