Anyone buy a wash where the seller's numbers didn't add up?

[Marcelo]

Has anyone bought (or tried to buy) a wash where the seller couldn't or wouldn't give you clean financials — cash business, "off the books" numbers, that kind of thing?


How did you end up figuring out what it was actually doing, or did you just walk away? Curious what people actually did in that situation, not just what they wish they'd done.

 

[Earl Weiss]

Have both bought and sold without numbers. The washes bought were usually dogs and I bought them because of what I thought they could do.

The ones I sold - Buyers had some familiarity with operations and bought then what they thought they were doing or could do.

 

[kentadel]

I didn't buy, but supplied equipment to the seller. The seller did disclose he would pull some cash, and could clearly disclose wash counts and credit card income. In this sale he let the purchaser essentially help run the business for a couple months to verify and familiarize the business.

 

[Greg Pack]

I bought one a long time ago that way. The financials were just had a handwritten ledger because multiple washes had been co-mingled in the bank account the owner had. The person was a friend and I had no reason not to trust him. I spent minimal time investigating the revenue, kinda managing the place for a week or two but as we all know you can have unusually slow (or busy) weeks with no real explanation why. Anyway, I made the purchase. It took me a couple for Months to realize I got screwed. Revenue was probably 30% lower than anticipated. What I thought was going to be a way to earn a decent living with one wash turned into a wash that just cash flowed most Months the first few years.

I heard (second hand) of a situation in a neighboring state where a person bought a wash from a multi site operator that also had other businesses. The operator took income from his other business and deposited them into his car wash account to show income to potential buyers. The buyers managed to get a settlement against him.

The lesson I learned from my purchase is don't trust anything but tax returns and bank statements from all related properties that put all the numbers together. There is no reason for an owner to co-mingle funds of multiple washes into one account. Anything else that is purchased is based on value of the land and improvements, plus any value I can add.

Nowadays with 80% or more credit card revenue at many washes, it makes it pretty easy to verify income with those statements

 

[Marcelo]

I bought one a long time ago that way. The financials were just had a handwritten ledger because multiple washes had been co-mingled in the bank account the owner had. The person was a friend and I had no reason not to trust him. I spent minimal time investigating the revenue, kinda managing the place for a week or two but as we all know you can have unusually slow (or busy) weeks with no real explanation why. Anyway, I made the purchase. It took me a couple for Months to realize I got screwed. Revenue was probably 30% lower than anticipated. What I thought was going to be a way to earn a decent living with one wash turned into a wash that just cash flowed most Months the first few years.

I heard (second hand) of a situation in a neighboring state where a person bought a wash from a multi site operator that also had other businesses. The operator took income from his other business and deposited them into his car wash account to show income to potential buyers. The buyers managed to get a settlement against him.

The lesson I learned from my purchase is don't trust anything but tax returns and bank statements from all related properties that put all the numbers together. There is no reason for an owner to co-mingle funds of multiple washes into one account. Anything else that is purchased is based on value of the land and improvements, plus any value I can add.

Nowadays with 80% or more credit card revenue at many washes, it makes it pretty easy to verify income with those statements

That co-mingling story is wild — would something that cross-checked the bank deposits against water/chemical usage have caught that before the sale, or is that not really checkable after the fact?

 

[Marcelo]

I didn't buy, but supplied equipment to the seller. The seller did disclose he would pull some cash, and could clearly disclose wash counts and credit card income. In this sale he let the purchaser essentially help run the business for a couple months to verify and familiarize the business.

Have you seen deals where the seller wouldn't let the buyer verify hands-on like that — how did those usually go?

 

[Marcelo]

Have both bought and sold without numbers. The washes bought were usually dogs and I bought them because of what I thought they could do.

The ones I sold - Buyers had some familiarity with operations and bought then what they thought they were doing or could do.

For the buyers who didn't have operational familiarity going in — did any of them get burned the way Greg did, or does that just not happen much in this market?

 

[kentadel]

Have you seen deals where the seller wouldn't let the buyer verify hands-on like that — how did those usually go?

I haven't seen that. I would be very careful considering any purchase with limited info.

 

[Marcelo]

I haven't seen that. I would be very careful considering any purchase with limited info.

Fair enough. Since you're on the equipment side — do owners or buyers ever ask you whether a wash's claimed volume actually makes sense given the equipment/capacity you installed? Curious if that's ever come up as a way people sanity-check the numbers.

 

[Greg Pack]

For the buyers who didn't have operational familiarity going in — did any of them get burned the way Greg did, or does that just not happen much in this mar

There are many stories of people getting burned by relying on numbers provided by the owners but not backed up by tax returns.

 

[Earl Weiss]

Nowadays with 80% or more credit card revenue at many washes, it makes it pretty easy to verify income with those statements

I would agree thatit makes things easier but a Fraudster could divert cash sales from "other operations" to the wash in order to boost value for a sale.

 

[Marcelo]

There are many stories of people getting burned by relying on numbers provided by the owners but not backed up by tax returns.

Right, tax returns catch the case where numbers are just made up — but in the co-mingling case, the money was real, it just came from somewhere else. Would checking water/chemical usage against the claimed wash volume have flagged that one specifically, even with real bank deposits?

 

[Marcelo]

I would agree thatit makes things easier but a Fraudster could divert cash sales from "other operations" to the wash in order to boost value for a sale.

That's a good point — and kind of scary since bank statements alone wouldn't catch that. Have you ever seen that actually happen to someone, or is it more of a known theoretical risk? And is there anything you'd actually trust to catch it — water/chemical usage vs. claimed volume, something else — or is it just 'buyer beware' at that point?

 

[HeyVern]

I looked at one recently, just looking at the profit and loss, several numbers just didn't make sense. Chemical costs were way off, almost no reported cash income. Made an offer based on the income he was showing, way below his asking. He's still trying to sell.

 

[Marcelo]

I looked at one recently, just looking at the profit and loss, several numbers just didn't make sense. Chemical costs were way off, almost no reported cash income. Made an offer based on the income he was showing, way below his asking. He's still trying to sell.

That's exactly the kind of check I've been curious about — how did you actually judge the chemical costs were 'way off'? Did you compare against expected usage for his claimed car count, or just gut-feel from experience? And since he's still trying to sell — are you still considering it at your lower number, or has that stalled out?

 

[aussiewash]

I looked at one recently, just looking at the profit and loss, several numbers just didn't make sense. Chemical costs were way off, almost no reported cash income. Made an offer based on the income he was showing, way below his asking. He's still trying to sell.

I had a similar one recently, seller purchased the site a couple of years ago and seemingly seriously overpaid, got credit card payments fairly easily verifiable, but cost per car seemed a bit high based on chem invoices vs cars washed on a CC payments basis.
Queried this and seller states that there's 40k P/A of cash revenue as well.
Discussed that this was basically impossible to verify and floated a ballpark offer, but it was pretty clear our figures weren't going to align and had to walk away.

 

[OurTown]

Lenders run from these types of deals.

 

[liftheavy]

im going thru it right now. tunnel wash is in an amazing location triangulated amongst kroger, publix, and walmart. wash used to do really well before it sold for a premium price at the end of covid 19 when car washes were going for crazy dollars to current group of owners who've never ran a car wash and ran it to the ground. taking cpa weeks to produce proper p & l. taxes show they are losing money. asked for a simple car count report and offered to pull them off their POS system since i know their POS well. wants premium price to recoup how much they paid for it, but revenue just isn't there.

about to call it quits.