Selling Power
Make your carwash appealing to potential buyers

With the carwash market exploding across the country, people getting into the market need to create a strong business model to ensure the largest return on their investment. I see too many carwash owners who did not consider the future sale of their wash and improperly ran their business to get the short-term satisfaction out of the business and into their pockets. Whether the sale occurs immediately after opening or a year or five years later, owners need an exit plan to ensure they will get the best price for their wash. There are a few things that operators need to consider while running their business, which includes making sure the property is well kept, keeping accurate financial records and filing accurate income tax returns.

The first thing a buyer is going to see when looking at a wash is the physical appearance of the site. A buyer will pay more for a well maintained wash. After a new owner has taken over a carwash, he needs to evaluate what improvements will benefit him the most. The perfect example of this would be two gentlemen who bought their first wash in Phoenix a little over a year ago. The two men used creative marketing, upgraded the equipment and remodeled the site so the customer’s perception of the wash is that they are getting the best value.

The carwash had been rundown and needed many improvements. By cleaning up the property with new paint, new signage and new equipment, the owners created great curb appeal.

The curb appeal of a carwash will not only make the buyer feel like he is purchasing a well-kept carwash and won’t need to worry about spending a lot of money on improvements or fixing broken equipment, but it will also appeal to customers who before would have driven right by in search of a better carwash, thus bringing in more revenue. By the year’s end, the two owners tripled their revenue.

When they decide to sell the carwash, their improvements will help the sale of their carwash both in price and time. Going into the business with a game plan for improving the site and seeing the importance of resale, a carwash owner will be able to sell his wash at the best price and in the shortest amount of time.

Another carwash chain that opened three sites in Phoenix in 2005 used branding to develop site recognition at their carwashes. The Quick n’ Clean image is repeated in all of the locations. Customers who visit any one of their sites automatically think it’s a franchised carwash. They feel confident in the quality and in purchasing pre-paid packages knowing that the wash will be around for repeated use of the package. When Quick n’ Clean eventually sells one of its carwashes, the appeal to the buyer is that they are buying a successful brand and the clientele who have become repeat customers. A clean image and branding appeal to both buyers of carwashes and customers, ensuring greater revenue and a higher sale price. Richard Karle, the owner of the Quick n’ Clean washes, says “by maintaining the appearance of our carwashes, customers feel good about returning to our wash. It’s not just because it looks good, but also because the quality of wash is superior to any other carwash around.”

Aside from creating an environment that appeals to the customer, accurate bookkeeping is crucial in creating the most value in a carwash. The most difficult and, unfortunately, recurring event is carwash owners taking money from their carwash and not keeping track of what they took. Instead of pocketing the cash like the carwash never had the revenue, operators need to record the revenue accurately and report more expenses if they want the money. By doing this, a buyer is able to see how much revenue there is and pick out the expenses the seller created and add them back to the bottom line.

I had the experience of selling an amazing wash that made one-third more than the records actually showed. It took a long time to find a buyer who understood what was missing from the total revenue and to trust the seller’s explanation of what the wash actually made. The selling process took longer for two reasons. First, we needed to find a buyer who understood the carwash industry is a cash business and sometimes income goes unreported. Second, we had to find a buyer who would not rely heavily on financing from a bank, which would not accept revenue that was not disclosed. In the end, the carwash was not saleable for the price the owner wanted because the price didn’t match the revenue. When you get into your carwash, remember that you will eventually consider selling. Buyers will not pay top dollar for money that is not there, and a bank will not lend for top dollar prices on a carwash that doesn’t show revenue to justify the price or support the debt service.

Another thing a carwash owner must keep in mind is filing income taxes. This is another aspect a bank will take into consideration when financing a carwash. An owner of a carwash will be affected for one year by filing less than actual revenue. By having income tax returns that don’t represent actual revenue, the sale price will be lowered accordingly. While taking cash out of the business is immediately satisfying, a carwash owner will not be able to achieve a greater return in the long run. Record the revenue with expenses and capital improvements accordingly so buyers have confidence in the purchase of the carwash. Without that, the carwash is not saleable at the asking price, no matter how thick the owner’s wallet is.

Finally, an exit plan should always be kept in mind when running a carwash. You may have plans to run your business for a long time, but there is always someone around the corner who wants to buy a carwash. If you have created a business that justifies your asking price, the high return on your investment may come sooner that you planned. If the site looks clean, the equipment is maintained and the finances represent earnings, the sale of the carwash will go smoothly and quickly. The last thing a carwash owner wants when selling his business is potential buyers and other industry professionals saying the asking price is too much for what the wash makes. The purpose of having an exit plan is to create the highest value of the wash so that the business will be able to show its ability to support a buyer’s debt service. So plan smart, knowing that if run properly, a carwash will make you money when you operate it and will make you even more money when you sell it.

Emily Haberman is a carwash real estate broker in Arizona for Commercial Plus, LLC. She can be e-mailed at emily@commercialplus.com.

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