New to the industry and have an opportunity to by an existing wash with 5 SS bays and 1 IBA. About 10 yrs old. Asking price is $550,000. Have 5 yrs worth of financials. Averaging $150,000 Gross/yr and $80,000 NOI/yr consistently. The IBA was replaced 5 yrs ago, and have been told they have an 8 yr life, and cost $125K+ to replace? Location is excellent. In a town of about 40,000. Current owner takes excellent care of facility and is well maintained. I have used several methods to value this wash, but just cant get to his number, especially knowing i have to come up with more money in ~3 yrs for an IBA. Would like you guys opinion and/or advice! Thanks.
Help with valuation of SS wash
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Waxman
Super Moderator
There is no hard and fast rule about when an IBA needs replacing. Depends on alot of factors. Some operators say replace in 8-10 years. Others run them till repairing is too costly or time consuming or both. the asking price sounds decent, based on gross. if location is excellent as you say, 550 is less than 4x gross. not too bad.
I agree with waxman. I just recently purchased a 4ss 1IBA for 290k. It's gross is not what yours is or the demographic but the appraisal as we all know is a educated guess came out a lot higher. Another location pretty comparable to mine about 15 miles away just sold for 500k so like I said if I was in market for another wash and that was in my area it would be something I would explore further. Oh yeah and there is one for sale in another town 30 miles away same sz as mine for 435k and it's less than 10 years old but once again I'm sure it doesn't have your finacials! As you can see I'm also in oklahoma so maybe that will help some.
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robert roman
Bob Roman
A good practice for new-to-industry is sanity testing.
For example, at 57 percent of current sales revenue, would the expected selling price of the wash pay off the loan (if you as the new owner would sell the wash to a 3rd party buyer)?
At 67 percent of sales revenue, would the selling price pay off the loan and return all investment equity?
At 75 percent of sales, would selling price pay off the loan and provide adequate return on investment?
If you can get navigate these questions, Waxman’s opinion has merit.
You should also consider how much risk exists in the market?
For example, town of 40,000 should have no problem supporting express conveyors. If one of those comes to town, it could knock your sales down 30 to 40 percent.
For example, at 57 percent of current sales revenue, would the expected selling price of the wash pay off the loan (if you as the new owner would sell the wash to a 3rd party buyer)?
At 67 percent of sales revenue, would the selling price pay off the loan and return all investment equity?
At 75 percent of sales, would selling price pay off the loan and provide adequate return on investment?
If you can get navigate these questions, Waxman’s opinion has merit.
You should also consider how much risk exists in the market?
For example, town of 40,000 should have no problem supporting express conveyors. If one of those comes to town, it could knock your sales down 30 to 40 percent.
Thanks for the replies . To clarify, the auto has almost 80,000 washes. I was told they have a life of around 120,000?
There is a tunnel in town about 5 miles away and has been here 4-5 years so I would think whatever hit the SS wash was going to take would already be in the gross sales number. That was definitely a concern as it is always busy.
My rule of thumb for looking at investment opportunities has been a payback of 5 yrs or less. In my research I have noticed that car washes don't necessarily follow that rule. Not a bad thing just an observation.
There is a tunnel in town about 5 miles away and has been here 4-5 years so I would think whatever hit the SS wash was going to take would already be in the gross sales number. That was definitely a concern as it is always busy.
My rule of thumb for looking at investment opportunities has been a payback of 5 yrs or less. In my research I have noticed that car washes don't necessarily follow that rule. Not a bad thing just an observation.
I'm not a expert on IBA as this is the first I have owned but it was my impression a lot of car count depends a lot on the type of automatic and maintenance as a lot of automatics have fewer working parts to maintain. I don't know if this is absolute accurate but that was I guess you could say a assumption!
I.B. Washincars
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I have 7 autos, all with over 100K washes and 2 of them near 200K. I have no plans of replacing any of them. As long as they are current technology, kept working, and clean the car well, there is no reason to replace them. I would be more likely to replace an auto because it is obsolete, not by # of washes. My customers can't tell that they have a lot of miles on the clock.
I think some of that rumor that machines have an 8 year life comes from the abuse many automatics suffer from many c-store chains operations and negligent operators. A well maintained auto can almost have an unlimited life span and in the case of a good operator replacements are made more on the basis of the equipment being outdated rather than broken down. I have seen some busy automatics trashed in less than two years while others with over 300,000 washes and still going strong. From what you said about the current operator it sounds like the equipment should be in good shape and last a lot longer than you think it will.
Greg Pack
Wash Weenie
Price is a touch high, but certainly in the area of where a reasonable price could be reached with some negotiation.
I agree that the auto may not need to be replaced so soon.
You are new to the business. expect your maintenance and repair costs to go up significantly at least until you learn the ropes. Find out who will be working the auto and ensure they are a decent company.
You also need to ask around and make sure no expresses are being planned in your area. Maybe a call to the zoning or building department.
I agree that the auto may not need to be replaced so soon.
You are new to the business. expect your maintenance and repair costs to go up significantly at least until you learn the ropes. Find out who will be working the auto and ensure they are a decent company.
You also need to ask around and make sure no expresses are being planned in your area. Maybe a call to the zoning or building department.
The problem with someone asking what a car wash is worth on a forum is I’m not there to look at it, I don’t know what town it’s in, must be a real secret, I don’t know what the land values are in the area, because I don't know the location, I don’t know the demo graphs are, all I do know is they want $550K for it and it makes $150K a year gross. In my area you couldn’t buy a lot to build a car wash on for less than $550K. The car washes that have been sold are gone and something else is in there place. Most of the investors I’ve seen over the years get into the car wash business thinking it’s an easy game and they are going to make a ton of money at it with little or no effort, only to learn that that isn’t the case, it’s dam hard work and sometimes long hours. Someone has to go there every day, sometimes twice a day.
There is a 4 bay in Bartlesville OK for $950k. It is a premium location with a quick lube attached. That real estate is prime though being a major highway with commuters to Tulsa. But I think it also has a newer conveyor type wash like 2 doors down. Not sure if that is really the same clientele though.
Waxman
Super Moderator
look at the financial and see what it makes
UPDATE:
Wanted to give you guys an update on this deal. After several weeks of negotiating, the seller will not take less then $525k. Is willing to carry the note for 36 mos at a rate between 3.5-4%, amortized over 10yrs. A few more details below:
GIM= $150K
NOI= $80K
IBA= Oasis Baywash I5 with 80,000 washes
Currently pays a guy to "clean" the wash, i.e. empty trash, clean bays, etc. Everyday twice a day.
All equipment is maintained by a "car wash mechanic" in this area. I happen to know this guy. He services pretty much every wash in town plus surrounding towns, and owns 3 of his own.
Thoughts?
Wanted to give you guys an update on this deal. After several weeks of negotiating, the seller will not take less then $525k. Is willing to carry the note for 36 mos at a rate between 3.5-4%, amortized over 10yrs. A few more details below:
GIM= $150K
NOI= $80K
IBA= Oasis Baywash I5 with 80,000 washes
Currently pays a guy to "clean" the wash, i.e. empty trash, clean bays, etc. Everyday twice a day.
All equipment is maintained by a "car wash mechanic" in this area. I happen to know this guy. He services pretty much every wash in town plus surrounding towns, and owns 3 of his own.
Thoughts?
robert roman
Bob Roman
I make part of my living preparing opinion of value.
Seller wants multiple of 3.5 for wash that is performing below industry norms.
Willing to balloon finance, own three years then hopefully statement of risk otherwise owner takes wash back.
Ten year old wash means nearing major updates like refresh building, replace in-bay and upgrade technology.
Otherwise, you will need to wrestle with wash everyday to achieve above average performance.
Carwash mechanics aren’t cheap nor is paying attendant/caretaker.
So, how realistic is NOI?
Available cash flow is what investor use to measure the true investment value in a business.
My advice is to pay the insurance and engage someone to prepare an opinion of value.
Valuing a business involves a lot more than just applying a multiple to gross sales.
Seller wants multiple of 3.5 for wash that is performing below industry norms.
Willing to balloon finance, own three years then hopefully statement of risk otherwise owner takes wash back.
Ten year old wash means nearing major updates like refresh building, replace in-bay and upgrade technology.
Otherwise, you will need to wrestle with wash everyday to achieve above average performance.
Carwash mechanics aren’t cheap nor is paying attendant/caretaker.
So, how realistic is NOI?
Available cash flow is what investor use to measure the true investment value in a business.
My advice is to pay the insurance and engage someone to prepare an opinion of value.
Valuing a business involves a lot more than just applying a multiple to gross sales.
Curious, what are "industry norms" for this size wash?
Building has just been refreshed, new vinyl panels. Looks brand new. Technology has been and is being upgraded currently on the IBA.
NOI is realistic, I have 6 yrs financials verified by tax returns.
What is the cost of an "opinion of value?"
Building has just been refreshed, new vinyl panels. Looks brand new. Technology has been and is being upgraded currently on the IBA.
NOI is realistic, I have 6 yrs financials verified by tax returns.
What is the cost of an "opinion of value?"
robert roman
Bob Roman
Industry norms or benchmarks are available from Auto Laundry News and Professional Car Washing and Detailing surveys and International Carwash Association cost of doing business reports.
Some data can be obtained online in archives otherwise it can be bought.
Fees vary for opinion of value.
Letter report is least expensive whereas broker report might cost $2,000 and summary appraisal $3,500.
My advice is to shop around.
Since this seller financing (no loan officer), you may want to your attorney for references.
Some data can be obtained online in archives otherwise it can be bought.
Fees vary for opinion of value.
Letter report is least expensive whereas broker report might cost $2,000 and summary appraisal $3,500.
My advice is to shop around.
Since this seller financing (no loan officer), you may want to your attorney for references.