Carwash For Sale

Carwash For Sale
Tips for preparing your carwash for sale

By Roger A. Pencek

After years of long hours, dedication to customer satisfaction, employee challenges and non-negotiable weather conditions, you have decided it is time to sell your wash.

The procedures or processes for selling a carwash, commonly called The Exit Strategy, are usually uncharted territory for an operator. Owners first have to temporarily distance themselves from their love-hate business relationship with the wash. The psychological rewards of owning the business, or seller salesmanship, will be vital later in the courting process when a buyer is interested.

Often, owners have a mental price tag on the operation, but really the performance of the wash dictates this value. This practical process of evaluating the performance of the wash is developed by accumulating both administrative and physical information. All types of carwashes (full serve, self-serve and express washes) will require the same information-gathering procedures.

Before placing a facility on the market, there are two areas of concern a prospective seller must address—administrative and physical site preparation.

Administrative. There is a myriad of information an owner has to accumulate for an accurate presentation of the business. Put yourself in the shoes of the prospective buyer. Joe Carwash Buyer logically wants to see a wash’s books and records, payroll reports, equipment lists and supply agreements to evaluate the profitability and potential of the wash. These books and records are clearly the most valuable instrument the owner has to describe the performance of the business.

The following should be included in these records:

1. IRS tax returns (last three years with “C” Schedule)
2. Year-ending P & Ls plus Y-T-D (last three years)
3. Number of carwashes (per month for three years)
4. Number of lubes (per month for three years)
5. Amount of fuel sold (gallons per month for three years)
6. Environmental waste log (pits) for three years
7. Payroll: who, duties, salary for the last 12 months
8. Fuel supply brand agreements (gas/lube)
9. Computer data (12 months)
10. Equipment list
11. Leases (equipment or leasehold).

These books and records usually are the most difficult for an owner to track since they are changing on a daily basis. The carwash operation is constantly changing and therefore the daily “micro” operations, which need immediate attention, consume most of the owner’s time. Hence, owners often will have financial planners, CPAs or brokers delegated with the task of organizing and keeping these items current. Obviously, tax returns, P & Ls, car counts, etc. are the combination of materials past and present that comprise the financial complexion of the wash. This administrative information is evaluated by buyers and translated into elementary cash flow or a more sophisticated, earnings before interest, taxes, depreciation, amortization (EBITDA) equation that determines the mood of buyers when making offers to purchase.

Physical site preparation. There are eight categories owners frequently take for granted but a prospective buyer will want to know about. These are:

1. Appraisal
2. Phase I environmental
3. Survey
4. Demographic study
5. Landscaping
6. Equipment
7. Housekeeping
8. Attitude

Originally, when the owner financed the wash, a requirement for the loan would have been an appraisal, Phase I Environmental and American Land Title Association (ALTA) survey completed. These three items originally cost the owners $8,000 to $12,000, depending on the area of the country, size of the property and structures. Notwithstanding, all these, even if aged, are valuable documents needed to update estimated values and confirm that the land is not likely to be environmentally contaminated. The cost to update these three items when the originals are available is traditionally half the fee.

Cosmetically, the curb appeal of the exterior landscaping, condition of equipment (exterior and equipment room) and general housekeeping (including lobby and restrooms) are observable eye appeal or eyesores.

In general, assembling 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 prepared to go to market. Or, conversely, the owner may implement some improvements or marketing plans to enhance the value in the future for a greater value in the market. Often, owners will hire specialists in the carwash industry who package washes for a fee and offset the cost against commissions earned if listed and sold.

This article is just a snapshot 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, are the single most important determination of value. The golden rule or equation of valuing the carwash business is location, location, location plus accurate books and records, quality of service and customer satisfaction that equal value.

Roger A. Pencek is the President, Broker, MBA and founder of Car Wash Brokers, Inc. (CWB, Inc.). CWB is the largest national carwash brokerage company in the United States. He can be e-mailed at roger@carwashbrokers.com