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Preparing Your Car Wash For Sale
April, 2005
By: Roger A. Pencek
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By: Roger A. Pencek – President/MBA/Broker
Car Wash Brokers, Inc.
Years of long hours, dedication to customer satisfaction, employee challenges and non-negotiable weather conditions – now it’s coming to an end.
The procedures or PROCESS for selling a car wash is commonly called “The Exit Strategy” for an owner is usually unchartered territory. Owners first have to temporarily distance themselves from their “love-hate” business relationship of the wash. The psychological rewards of owning the business “Seller Salesmanship” will be vital later in the “courting process” when and if a buyer is interested. Often, owners have a mental price tag on the operation, but practically, the performance of the wash dictates this value – or simply put, the “owner” stays the “owner”. This practical process of evaluating the performance of the wash is developed by accumulating both administrative and physical information. All types of car washes (full serve, self serv & express wash) will follow the same information gathering procedures.
THE PROCESS
Administrative:
There is a myriad of information that an owner has to accumulate for an accurate presentation of the business. Think of it as you, the seller/owner, buying your own business. “Joe Carwash Buyer”, is logically wanting to see your books and records, payroll reports, equipment lists and supply agreements to logically evaluate the profitability and potential of the wash. These would include:
Books & Records:
Clearly the most valued instrument the owner has to describe the performance of the business:
1. IRS tax returns (last 3 years with “C” Schedule)
2. Year ending P&L’s plus Y-T-D (last 3 years)
3. Number of car washes (per month – 3 years)
4. Number of lubes (per month – 3 years)
5. Number of fuel sold (gallons per month – 3 years)
6. Environmental Waste Log (Pitts) – 3 years
7. Payroll – (who, duties, salary the last 12 months)
8. Fuel supply brand agreements (gas/lube)
9. DRB or equivalent computer data (12 months)
10. Equipment List
11. Leases (equipment or leasehold)
These books and records usually are the owners most difficult task to track since they are changing on a daily basis. The car wash operation is constantly changing and therefore the daily “micro” operations which need immediate attention consume most of the owners time. Hence, owners often will have financial planners, CPA’s or brokers delegated with the task of organizing and keeping these items current. Obviously, tax returns, P & L’s, car counts, etc. are the combination of material past and present that compose the financial complexion of the wash. This administrative information is evaluated by buyers and translated into elementary cash flow or more sophisticated EBITDA, (Earnings, Before, Interest, Taxes, Depreciation, Amortization) equation that determines the mood of buyers when making offers to purchase.
Physical Site Preparation:
1. Appraisal
2. Phase I Environmental
3. Survey
4. Demographic Study
5. Landscape
6. Equipment
7. Housekeeping
8. Attitude
These eight categories are frequently areas owners take for granted. Originally, when the owner financed the wash, a requirement for their loan was to have an appraisal, Phase I and ALTA survey completed. These three items originally cost the owners $8-12K, depending on the area of the country, size of property and structures. Notwithstanding, all these, even if aged, are valuable documents needed to update estimated values, and most of all confirming that the land is not likely to be environmentally contaminated. The cost to update these three items when the originals are available are traditionally half the fee. Cosmetically, the curb appeal of the exterior landscaping, condition of equipment (exterior & equipment room) and general housekeeping (including lobby and restrooms) are observable “eye appeal” or “eye sores”.
In general, the preparation of assemblying the administrative and physical aspects of the wash operation is called “Packaging” in the Commercial Real Estate Business. Once all the information is assembled, owners can evaluate the wash that is now logically prepared to go to market. Or, conversely, the owner may implement some improvements or marketing plans that may enhance the value in the future for a greater value in the market. Often, owners will hire specialists in the car wash industry such as CWB, Inc. who package washes for a fee and offset the cost against commissions earned if listed and sold.
This is just a “snap-shot” of a more sophisticated process that owners may elect in preparing their wash for sale. Without a doubt, books and records that are current, precise, accurate and most of all profitable,is the single most determination of VALUE.
Summary:
The golden rule or equation of valuing the car wash business is: Location, Location, Location + books and records, quality of service, customer satisfaction = VALUE!
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All information furnished regarding property for sale, rental or financing is
from sources deemed reliable, but no warranty or representation is made to the
accuracy thereof and same is submitted subject to errors, omissions, change of
price, rental or other conditions prior to sale, lease or financing or
withdrawal without notice. No liability of any kind is to be imposed on the
broker herein. |
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