Advice needed.

[RedLine]

I need some advice from all the savy and experienced operators out there, on how to approach a seller who is asking way too much for his 21 year old, 7 bay SS, in South East Michigan.
In my first meeting with the owner, whome I believe is serious about selling, he quoted me a price that was so far out there, it was unbelievable. Now the owner is up there in age, but he is still very sharp, but he wants to scale back and slow down. I've got to believe that he is aware of the harsh economic enviroment here in Michigan. He did mention that his bottom line has been suffering just like everyone elses. But for some reason I think he assumes that his .71 of an acre is some how immune to the down turn in real estate values, both residential and commercial, that all of Michigan is experiencing right now.
When I meet with the owner for the second time, I want to be able to share with him what is the reality of the market is, without offending him. I've done some research with my local supplier and have a ball park fiqure in mind of what the SS could actually be worth without seeing his financials. Believe me, I'm not going to even entertain an offer without seeing those financials.
So I decided to tap into this great information resource, the AutoCareForum, to try and fiqure out what I could say, or what would be my next move would be, in my negotiations for this SS. Thanks in advance for your input and valuable time.

 

[Sequoia]

Lots of sellers know, analytically, that the valuations are waaaay down, but the emotional side of them doesn't let that message all the way through.

I would ask a lot more questions before coming in with an approach on anything. You might consider asking the seller how he arrived at his asking price, including a breakdown of land value, valuation of the income stream, and fixtures and equipment. With those specific numbers in hand, you could do comparisons locally.

With actual comparative data to share, you might awaken the seller to more realistic values. It depends on how strongly the emotional side is capable of blocking out the analytical side-- which is something you really can't control.

 

[rph9168]

If he is serious about selling he will need to have an appraisal done at some point. I would ask for an appraisal and assuming your local distributor is on top of what washes are going for in your area the owner might get realistic. However, in our area right now not too many washes are selling at their appraised value so don't count on that alone. You really can't make an offer without some documentation like financials or even the tax assessments on the property.

After that there are other issues to look at like the condition of the equipment and building, any potential changes in the area in regards to roads or commercial building, any potential competitor washes in planning, or any local economic factors that might affect the business like plant or business closings or layoffs. Some of these might not affect the price but should certainly be involved in your decision on whether to pursue the deal or not. It would also be a good idea to consider hiring an outside car wash consultant rather than depending solely on your distributor for advice.

If he is a businessman he will understand what you need or if he just wants to see if he can make a quick killing you may have a problem getting him to be realistic. Don't get you hopes up until you find out what his real intentions are. I was recently involved in a situation where the old man who owned a wash was so out of touch with reality that a decision was made to build a new wash rather than negotiate with the guy.

Good luck.

 

[pitzerwm]

OR, Just let him know that you are interested, but need to know how you will make your investment pay off. Bottom line is that if you are just buying yourself a job, that is one side, or you see it as an investment and it needs to return a decent return.

Right today you can buy GM senior notes that are paying 30%, if you think that GM will survive and the government won't let them fail, they will be paying these forever.

 

[Patrick H. Crowe]

In more than 40 years in the business I looked at scores of washes which were for sale. My partner of more than 25 years was an MAI apptaiser who did mostly commercial appraisals. Together we learned what washes were (are) REALLY worth.

Most owners have very little idea what washes are REALLY worth. Usually they base their asking price on a combination of factors such as: What they paid for the place; how much they need to get for it to get by; what they would like to have and so on.

I wrote The Car Wash Appraisal Handbook. It tells a potential buyer or seller how to determine the Fair Market Value of a wash. IT takes some work to arrive at this number but the basis is factual rather than the sorts of things listed above.

Many buyers already own a wash or two and may have even read my book. Some have even loaned a potential seller a copy of it to allow them to be realistic in pricing.

In the vast majority of the washes I looked at the price the owner was asking had little to do with reality.

MOST OF THE WASHES IN TROUBLE TODAY (NOT ALL) HAVE OWNERS WHO PAID WELL ABOVE FAIR MARKET VALUE.

The last wash I sold had an offer over 90% of asking price almost immediately. It sold within 72 hours of the six calls I made to potential buyers. I was asking 600K and the offer I accepted was 590K.

I knew what the wash was REALLY worth and so did the potential buyers. Dealing with owners who do not have a clear focus on what a wash is REALLY worth is a waste of both parties time but apparently "out of town buyers" sometimes come along and pay too much - -at their own peril.

LEARN HOW TO DETERMINE FAIR MARKET VALUE first, THEN PROCEED.

Patrick H. Crowe