Thinking about buying a SS car wash.. NEED ADVICE

[GSragtop]

Hello Every one,

I have one of those long stories, like every one else.. I will shorten it as much as I can, but basically this is where I am.. My wife wanted to move closer to her Mom, and live in an area with a lower cost of living then NJ where we lived. So she moved, and I have been looking for work down there for 6 months. All this while I have continued to work/live 1000 miles away from my family. This opportunity has come to my attention, and I think it is worth while but I wanted your guys take on the matter. I am looking at a 6 bay car self serve car wash, with a detail/hard wash bay. It was totally renovated about 3 years ago, and 2 years ago the owner entered into a buy sell with the guy who was doing his detailing. The guy stopped paying him, and he re-took position of the business 2 months ago. He has no interest in running it, as he has alot of things on his plate right now. I can buy the business for about $30,000.. This is for the business and the equipment, not the land which will cost $2000 per month..

The owner has no books, as he has not run the place in over 2 years. He claims electricity and water runs about $500 a month.. I assume I can get records from the water/electric co to back this up.. There are at least 2-3 other self serve car washes in a 5 mile radius and I don’t even know how many full service (at least 3-4).. I don’t think any one does a hand wash though.. It is on a busy road, and next to a laundry mat..

Ok so thats the background on this, I am a technical guy and can fix most things my self.. I have owned a used car dealership in the past, but never a car wash.. I would plan on selling some cars on the property, running a full hand wash out of one bay, and full detail service out of another bay..

I would need to pull a salary out of the wash FROM DAY ONE, as this would be my full time “Job” and I would need the money for my family.. I can not stress this enough. Maybe $2000 a month from day one, and I would hope to work it up to about $5000 a month on avg. His claim is that back in the day on a good month he was making $8,000 profit.. I assume BS on that one.. So what are your guys thoughts?? Am I WAY off base on this one??

One more question, this guy does not have insurance of any type. I would want at least some liability insurance, any idea how much this would cost?? What else do I need to know ??
Thank you in advance??

 

[MEP001]

I would need to pull a salary out of the wash FROM DAY ONE

That right there should make this a big "No" for you. You can't count on the reputation of a business built by someone who didn't make his payments to his landlord. You'd have to expect to lose money for some time, possibly up to a year, while you build the business up.

 

[wendy's wash]

first 6 bay wash i bought with land cost 65,000, 26 years ago. seller was honest and said he owned it 5 years and it never made enough money to pay the note. at closing he had to bring a personal check to pay off wash as it was more money than i paid him for it. second wash was 4 bay and seller said it made average of 25,000 per year. massive, massive 60,000.00 remodel was done after i bought it and after 5 years it now averages 25,000. he lied. lights here run around 400.00 plus at each place and water runs at 4 bay 200.00 plus and 6 bay 400.00 plus. i have liability on both place and it cost a total for 1550.00 a year for 1,000,000.00 for each place. you can figure expenses are around 15,000.00 to 20,000.00 a year before you make any money. there will be things breaking, stolen, soaps, light bulbs, ect. the list will be very long.

 

[rph9168]

This scenario sounds like the making of a nightmare. As several people have already discussed, there is no way you will make money from day one. The first red flag should be the fact that there aren't any accurate records of revenue or expenses. Chances are the guy that bailed was losing money so he quit paying. I can't think of any business that you could buy for that kind of money right now that would make money from day one - least of all a car wash that appears to be losing money already.

 

[GSragtop]

That right there should make this a big "No" for you. You can't count on the reputation of a business built by someone who didn't make his payments to his landlord. You'd have to expect to lose money for some time, possibly up to a year, while you build the business up.

OK let me ask you guys this.. I have been reading the articles on this site for a few days now, going back a few years. It seems that the AVG Net income on a bay is about $1500 per bay per month .. So I go VERY conservative and say $750 a bay X 4 bays that’s $3000 a month.. That should pay the over head, and I would "Live on" Vending, Vacs, hand wash and detail profits. Also if I can flip some cars there that’s about $1000 per flip.. The wash is open now and doing some business with no effort from the current owner. Are these numbers way off??

Other info, this was is located in support community for a "resort" community where there are alot of expensive cars, and retired people.. in this area there area alot of middle class younger people.. There is also a very active Boating community in this area and we are all salt water, so the boats need to be washed after EVERY use. Temps usually are nice although this winter has been much colder than usual..

 

[Greg Pack]

Your avg net is way too high. Maybe avg gross of reported washes, which is usually the best of the best.

My first wash was a lease purchase with NO payment for ninety days. Then a structured payment increasing slowly over the next two years. If I hadn't run across that deal I probably wouldn't be in the business today. If you are willing to deliver pizzas at night for money and can get a some sort of lease purchase agreement with an "out" it may be worth a chance. As MEP said, you will probably not be able to pull any money out for months, a year, or maybe ever.....

On the old forum there was a user I believe called goat. His posts should be required reading for any newcomer to this business. He was lied to by the previous owner who painted an overly optimistic picture. Shortly after they financed him they sold the mortgage to a third party. Goat wasn't wealthy to begin with and got stuck in a negative cash flow situation. His frustration with this business and ensuing depression in his posts was very sobering.

I'm not saying there might be opportunity there, but without cash flow coming form somewhere else it's just too risky for your situation.

 

[Tpoppa]

Good advice here.

I bought a 4 bay SS (my first) about 18 months ago from an honest seller. He did not keep detailed records, but was honest about gross income. TO cover myself, I recieved 3 years of utility history & projected revuenue from water usage with reasonable accuracy.

My wash is profitable, more so now that I have taken it over and made improvements. Even still, during my first year I made mistakes that cost $$. It takes a while to learn this business and to run it efficiently.

I should mention that I also work a full time job, and never would have taken on the wash unless I had another income to rely on.

My wash is a solid second income, and will be until I sell it (hopefully, for more than I paid).

 

[wendy's wash]

sounds like you really want to do this. well its your money and you are the only one who can spend it. the only way for you to know if you will make loads of money or not is to try. if you don't try, you will always second guess yourself. i am willing to bet that there are few if any wash owners that will tell you this is a good buy. just a word to the wise. you are not the first person to deal with this wash. find the last person who rented it and ask them how well they did. the most that could go wrong is you give it back and then you are done with it. if you bought it straight out then it would be yours to have to get rid of. good luck.

 

[Waxman]

Look here;

There are some red flags here.
1. No Income records. This is a biggie. Without them you are buying only blue sky. Any real, legit business has tax returns. No tax returns, NO SALE.

2. Previous owner couldn't/didn't pay. Most people will pay if they can unless they are also supporting a habit of some sort (which also falls under 'can't pay').

3. You are a family man who needs a steady income from the git go. If you have never run a carwash and/or detail shop there is simply too much risk here without the requisite possibility of reward. Heck, you won't even own the dirt, which is what alot of us carwash owners ease our minds with when times are tight and the wash isn't throwing off alot of extra cash.

FWIW, don't try hard to justify this idea in your head. Go out and get yourself a steady job working for someone else.

 

[pitzerwm]

I always bought businesses, and started a few businesses, that I knew absolutely nothing about. I didn't realize that you could actually fail through no fault of your own. I was willing to work 24/7 to make it work, I was willing to eat beans if I didn't have any money. If you have a family, you can't do that. Most people are not willing to or prepared to work 24/7. If you/anyone thinks that they are willing to pay that kind of price, then you probably will make it.

In this case you apparently know how to sell cars. You need to know if the city will allow car sales on that property. There is a lot of anti-business attitudes in cities today. I pretty much recommend that if you are going into business for yourself. Do something that you know something about. The learning curve in something that you don't know, might be to steep and you will die before you figure it out.

Can you make this work, probably, will the price you have to pay be worth it, only time will tell. What you are getting here is a lot of advice from people that have been there and done that. Of course the ones that died, are not here with their insight. Do it with the least personal risk that you can negotiate. There is a school of thought that if you put all of your eggs in one basket, you will pay better attention to the basket. I prefer to put my eggs into many baskets.

 

[GSragtop]

I want to thank every one who has replied so far, and while the responses were not a total surprise i am still a little shocked.. I do want you to know that I am taking this all to heart, and reading EVERY word.. That being said from reading your posts I don’t understand why anyone is in this business, because reading this post and others it seems everyone only has negative things to say about it.. No one on this board seems to be making money, or at least not that they are willing to admit to. I appreciate the harsh reality, but….

Truth be told if I could find a real job down south I would do so, a steady pay check (and bennys) is a very nice thing.. I have owned a business before and I know how hard it is to go with out a paycheck. Honestly if I need to I can always work something part time if I got the car wash and it was not making money.

Bottom line is I would love to own my own business again, but without a large bank roll (which I don’t have). Finding a good opportunity for a low buy in is very difficult. I have priced out many franchises and the like, and most need a HUGE investment that I do not have. I know this deal has A LOT of unanswered questions, and I have a lot of leg work to do before I give up my job where I get paid VERY well, and fork over 30K of my money. However In the back of my mind I keep thinking no risk=no rewards, and that there are no guarantees in any business (just spoke to one guy who put his house, and 401K on the line for a business venture). Name one other buisness i can get into for 30k, and have at least a good chance at turning a proffit sooner then later??

Please keep the input coming it is really appreciated. THANKS

 

[mjc3333]

GStragtop

I've been in the SS car wash business for 22 years. Built my first wash in ‘88 second in ‘89 third in ‘91 and bought an existing in ‘89.

Boy oh boy...... I thought this business was great, that was until I realized I could not afford to take any kind of salary / income let alone pay down the debt service. It all went for small extra help, utilities, supplies, etc., and the bank.

You will NEED some other kind of income to survive. I also got into selling used cars, detailing cars with 6 + employees, and snow plowing as a contractor in the winter. Even with ALL this side income, it was tough.

I do not know anyone who could honestly say they can survive on a single 6 bay SS car wash. The figures from the national trade magazines are just that....figures. Where they get them to be honest with you I do not know. Try about $500 - $600 per bay per month gross to start out.....again maybe.

Your over head will be at least 45 - 55% of your gross income, minimum; with the way costs have escalated. Then the debt service to this so called owner. To be honest, you may get lucky and be able to see $10,000 to $12,000 per year for yourself....maybe. $5000 a month... will NEVER happen!

Trust me..... The car wash will NOT run itself period! Things will break; money will be stolen, attempted break ins will occur. Even though the business will not be 'busy' 24/7, the problems will exist 24/7.

The biggest problem you will have is making a go of it right out if the gate. Without any kind of figure, you will NEVER know the income of the location. Utility bills don't always tell the whole story. If the place has problems, it will take YEARS to gain any kind of substantial business. Time you may not have.

 

[Greg Pack]

For most operators a successful six bay is "good side money" until the debt is paid. Then, when it's paid for the cash flow is nice and you have a nice piece of dirt that may be worth more than the wash cost when you bought it. So it's a property play for many, too. There are a few SSs with limited competition, etc that do very well, but they are the exception. Most people that do this full time have multiple locations or automatics, or both.

Your situation if different. Your lease payment never goes away. You don't get to sell the dirt. You are buying cash flow, and a low cash flow business at that.

I would still try to get the guy to work out some sort of short term lease with option. Six-eight weeks of operations would tell you a lot. You could maybe even pull that off with a leave of absence from your work. Although some would argue you need to burn your ships to give you the motivation to succeed.

Good luck. If you buy I'm sure many of us will be here to help you in any way we can.

 

[GSragtop]

Uncle

OK UNCLE, I have been scared straight.. I guess the main reason I was pushing so hard is that it got me south to be with my family.. This long distance stuff is really tough... Guess I will keep looking for an opportunity; there must be something out there for me.

 

[MEP001]

If you have your heart set on a car wash, you might do better by finding a regular job and shopping for a wash at a good price. You can use your spare time on the wash until you're confident it will be a steady source of income before you quit your job. And if the market is right, it can be a good source of income. I've worked a ratty old 6-bay up to $13,000 a month, and since it was paid for and maintenance was practically nothing, the net was very good, easily over that $5,000 a month you're looking for. But it was a lot of work to get it there, and seven days a week to keep it. The whole point to my first reply was that you'd be a fool to expect it to make you money from the start. You might get lucky, but as others said there must be a reason why the current operator isn't paying his bills.

 

[Waxman]

I think you are taking the advice the wrong way.

We are sharing our stories and experience with you so you will make money not lose it. You won't be doing your family unit any good if you buy into this business and let it drag you down financially, physically and mentally.

To me, in business, real estate is where it's at. That's where your investment of time and sweat pays off, hopefully. The lease situation negates this.

I am in this business because I love it. Business is challenging, which I also enjoy. I am the captain of a tiny ship, but being the captain is what I want right now. There is a certain freedom of owning a business. Financial rewards may come sooner, later or not at all. I think many operators (myself included) began with one mindset and then we conduct the business for years and then the mindset is changed. Reality has offset some initial starry-eyed enthusiasm. That is the crux of these replies. We sense your earnestness and excitement and sometimes that needs to be tempered with reality. We are living in the real world with these businesses and it is like anything else; lots of struggle to get ahead and stay ahead and grow and prosper.

Sure, we could rattle on about what we love about carwashing and entrepreneurship, but if that makes you buy a crummy carwash and you go belly up have we really done you any favors?

 

[Mr.Aap]

I think you would be better off taking your 30 grand and getting in the lawn maintenance biz......

 

[cleaning up mud]

If any carwash is making money these days, good for you!

 

[Tpoppa]

If any carwash is making money these days, good for you!

Self Serves seem to do pretty well in my area.

 

[JIMT]

GS,
Your statement (I am still a little shocked.. I do want you to know that I am taking this all to heart, and reading EVERY word.. That being said from reading your posts I don’t understand why anyone is in this business, because reading this post and others it seems everyone only has negative things to say about it.. No one on this board seems to be making money, or at least not that they are willing to admit to. I appreciate the harsh reality, but….) Many of us got into the business when there were not very washes and the business was quite good in the late 1980's so a lot of people built a lot of washes. In the Toledo area there are 4 times as many wash as there were in 1990. There are a more than 1/3 of them closed or up for sale. I cannot sell mine because there are no buyers, so we keep our operating and hope that more will go out of business and our business will improve.
JIMT