Selling Your Car Wash Business: 3 Key Lessons
Take an inside look at the buying and selling of two businesses so many would “love to own.”
In 2018 I had the privilege of listing and selling two separately owned tunnel car washes right around the same time frame.They were located on the same road about 5 miles apart in the Lake Travis area of Austin, and they were somewhat competitors to one another. Both of these were owner operated, so the business was conveyed with the sale of the real estate. I was fortunate to get a double dose of car wash selling and retained some valuable lessons along the way.
1. It’s all about the Demand
Both of the car washes I was marketing were flex-serve washes, meaning that around 70% of the business was full service and the other 30% was express or detailing. One of the washes also had a lube center attached as well. In the marketing process, the majority of prospective buyers desired express car washes only, the kinds that you now see on busy intersections have the do-it-yourself vacuums. Express washes typically have the least amount of overhead and are easier to maintain. However, there’s no doubt that there is still a demand for full service car washes, especially in areas such as Lake Travis, just outside of Austin, where the demographics are strong. Customers expect a luxury service and don’t mind paying for the kind of quality you get with a full service wash. Needless to say, selling the flex-serve washes as opposed to express made the task more challenging as the buyer pool was much more limited.
2. Valuation has many Variables
When you’re valuing a car wash business, you want to make sure you have solid bookkeeping and that you get the most accurate EBITDA number possible, factoring out any of the owner’s personal expenses that aren’t going to be transferred or ongoing. It’s also very important to have an accurate track of outstanding gift card balances, and if you haven’t already, implement a way to track the balances and set expiration dates on them. This will make life easier when it comes to negotiating how balances will be conveyed with a new buyer. In coming to a price valuation, most buyers use a multiple approach by using the EBITDA number and multiplying it by the “multiple”, or as I also call it, the going rate. In most cases, newer express washes sell for a higher multiple than flex or full-service. For the flex-serve washes that we sold, we used a multiple that was somewhere in between what the multiple would be for full and express.
3. Not all Buyers are Real Buyers
Many people think that they’d love to own a car wash, but once they get into the nitty-gritty they either realize that it’s a full time job, or that they can’t drum up the funds to make the acquisition. This is important to know in the selling process so that you can carefully vet your interested parties and make the most informed decision on your offers.
From valuation to closing, the process of selling a car wash business can be very challenging. It’s important to have updated and well kept financials, and that you’ve had a discussion with a trusted brokerage team to understand the pros and cons to selling, as well as what to do to prepare for a potential sale