What do you think about these financials?

[levijean]

I am looking at a bank owned wash built in the late 80s. 4 self serve bays, 2 automatic bays. Last year financials as follows:

https://docs.google.com/spreadsheet/ccc?key=0AqZzDavW-lJVdEh5dFNSQzk5aDZBaWgyUkRoZURLUHc&usp=sharing

Obviously this is not very attractive as-is. Just wondering if there is room to do better. Some of the expenses seem high like insurance for example. The bank is probably not the best car wash operator, but obviously the previous owner didnt do so hot either. Any thoughts?

 

[robert roman]

“Any thoughts?”

Here is some things to think about.

A decent 4 + 2 should gross about $190,000. $65,000 is only 34 percent.

Real estate taxes are $15,000, the benchmark is $8,000.

The wash is well over 20 years old and is now bank-owned property.

My thoughts are;

If we assume prototypical, 75 percent of projections, you would need to increase current sales by a factor of 2.19 (219 percent) to have a viable exit strategy.

Experience clearly shows real estate prices (and property tax) are directly related to the relatively strength of the retail market.

This leads me to suspect the site may have been miss-specified – wrongly built. Causes of this can be an over-built market or under-served market.

Of course, sales can also be affected by economic decline.

So, it is hard to know with any certainty without a location assessment. Likewise for operating expense values – meaningless without some anticipation of forward looking volumes.

My questions;

Are you paying more for the property than the value of real estate alone?

Can you deliver a business plan that can increase sales from $65,000 to $143,000?

 

[borumrm]

I didn't think the insurance was that much out of line or at least based on what mine is. I don't think I saw anything for sewer...it could be included in the water bill I guess which mine is but my water bills run way higher than these and the sewer is triple what the water is..if my water bill ran 1200 for the month water would only be about 300 of that and sewer 900. One other thing is there is not entry for debt service which of course you would have to consider.
Property taxes seem high to me but depending on the area maybe not...but seems there are taxes that I pay that aren't showing such as personalty tax, business taxes every year, what about alarm monitoring if there is one, etc

Are the functions priced competetively....perhaps after a few improvements you could raise prices. You would really have to buy this for the right price to make any money off of it in my opinion .... that said everyone's situation is different...if you own a business next door probably would try it...if you have to drive 40 miles everytime there is a problem wouldn't be for me. Just my two cents worth...

 

[PaulLovesJamie]

Obviously this is not very attractive as-is.

Not. IMO there is no way of knowing if this is attractive or not based only on the info you provided.

However since you are only asking about the financials, there is one massive item that jumped out at me: Why are 2 IBAs grossing <1/2 of the 4 SS bays? Thats the first thing I'd want to know.

 

[Earl Weiss]

“Any thoughts?”

Here is some things to think about.

A decent 4 + 2 should gross about $190,000. $65,000 is only 34 percent.

Real estate taxes are $15,000, the benchmark is $8,000.

Can you deliver a business plan that can increase sales from $65,000 to $143,000?

Disagree that "Decent" would be $190,000. I know that some industry mag published averages might lead you to tink this, but in todays environment expecting $190,000 from this operation would mean the location has phenominal potential.

Again disagree about RET benchmark. This benchmark will vary widely by area.

Agree, that you need to focus on what you realisticaly think it can do as opposed to what it's doing. $143K should be a realistic target, however what is realistic will vary widely vis a vis factors like traffic count and competition.

Take note of "Missing" costs as outlined above by others.

 

[levijean]

Here is a pic of the property. The last traffic count from a few years ago was 10k to 11k VPD. This is a secondary commercial street in the neighborhood. The primary street a couple blocks away has about twice the traffic. This better street has a tunnel wash nearby, as well as several gas station automatics, and one self-serve that sits back off the road a bit.

 

[rph9168]

I am assuming that this site needs some upgrading. If that is the case you need to get several estimates before you do anything else.

 

[levijean]

I am happy to post some demographic info, what should I look at?

 

[levijean]

Site picture. This location gets about 10k VPD. It is a secondary commercial location. The primary traffic artery which is a few blocks away has twice the traffic. The main street has a full service tunnel wash, several gas station automatics, and a self serve wash within a half mile or so.

 

[madscientist]

Not to nitpick, but there is a small mistake somewhere. The total in N31 is not equal to the income minus expense for that column. Don't have time to search for the problem, but it's minor.

 

[robert roman]

Earl,

I have come to expect nothing different – you always disagree with me.

First, taking note of “missing” costs is the last thing this guy needs to be concerned about.

As for decent, I meant average performance. Most of clients with self-service combinations gross over $250,000.

I have one client in a very rural area of the S.W. with population of only 3,500. His single in-bay washes over 25,000 vehicles a year.

The path to profits is trip generation not focusing on costs or cost cutting.

This comes from aiming high, not low.

Friend, the link/jpeg you provided isn’t working.

 

[robert roman]

Oh, so it (jpeg) is working.

However, this doesn't really help answer any questions.

 

[levijean]

What other info can I provide to help with this analysis?

 

[levijean]

Some general demographic & competitive data:

There are two gas station automatics, one self-serve, and one full-serve car washes in the immediate area that I would say are direct competitors with this one. These four washes are in superior locations with 2x the daily traffic.

Aside from drive by traffic, I'd guess the car wash would pull from residents that live within 0.75 mi from the site. This ring has a population of 6,000 people. The neighborhood is fully developed, growth is 0%. Median household income is $50,000.

 

[Earl Weiss]

Earl,

I have come to expect nothing different – you always disagree with me.

.

Well, I agreed on 1 out of 3. OOOOOOPS. Gues that means I just disagreed again.

Anyway, I am a big believer that if you ask 5 people in the industry a question you may get 10 opinions. I think that is a good thing. No one should get or rely on a single opinion unless there is a record of experience with that source. Even then the goal is information and education.

As a famous person once said; "if 2 people agree on everything, one of them is unneccessary".

 

[levijean]

Given a certain traffic count, nearby population, and competition, is there a rough rule of thumb a person can use to estimate the number of washes to expect per day/month/year?

 

[bighead]

I find it curious that the SS bays outpace the automatics 2:1... at mine its the reverse...

Do they have a bad reputation? That might be an area for growth if you can turn that around....

 

[Kevin James]

How much does the bank want for this car wash? It's probably only worth land. What does the county tax assessor say the land is worth? Is this bank willing to hold the note of the car wash?

 

[levijean]

They are asking $225,000. Its assessed for over $300,000. The land is maybe worth $150,000, but it would be a long time before anybody paid that to redevelop it.

 

[rph9168]

As many have already said. The value is only the appraised value of the land and unless you have financing lined up already if the bank won't loan you the money plus rehab expenses walk away. You are doing them a favor taking it off their hands.

From the little we know from what you have posted I think it is a risky opportunity. I have always thought the hardest thing for a newbie to do in this business is take one that is a loser and turn it around especially if it has either become run down or has gained a bad reputation. Experienced operators have a better chance but I have seen many of them fail as well.