How do you tell someone they screwed up ?

[mac]

Any of you that have been around for even a short while has seen someone new to the business, that has way overpaid for a wash. Well, I have some of these as customers. I did not sell the wash to them, or get involved with the original equipment sale. These are basically good hearted people who got in over their head. I can get their equipment working fine, and add things that will actually increase their business, such as card readers in the bays. I can put them on good chemicals. They will still never see a profit. They will eventually think I am the one responsible for their not making money. Do I tell them to burn the place down and collect the insurance money? Someone will be selling these people chemicals and parts while they try to stay afloat, so it might as well be me rather than one of my competitors. They will eventually get mad at me though and it turns ugly at that point. Is there a good way to handle this?

 

[ScottV]

Mac,

In my opinion, the sooner you tell them the better for you. Give them your professional opinion up front and then tell them ways that you can help them enhance their operation but with the understanding that the enhancements won't make up for the poor investment. At least you'll be on record of notifying them prior to selling them anything additional.

 

[Greg Pack]

If they can read a P&L, they will figure it out on their own eventually. But I don't think it would hurt to express your concerns. The best thing to do for these people is show them how to run the best wash they can for as little money as they can so the bleeding is minimized. I would also discourage purchase of big ticket items unless it will be an ROI home run You mention card acceptors, I'm wondering if CC acceptors will even pay for themselves over a reasonable period of time.

 

[bigleo48]

I'm note sure you do anything. If you did not get involved at the start when they bought it, then you sell them stuff if they want it (it would be their decision). Provide them with an honest estimate on the potential return on investment of the CC system and let them decide. The soaps are used based on sales, so the more soap the better it must be going for them. If they ask about their overall business, then give you honest opinion.

I know a guy who's about to get killed by a new wash...his is old, rundown, bad location, etc, while the new one will be in an excellent location, all the bells and whistles, built by someone who knows what he's doing and has deep pockets. He called me and asked me what I think he can expect. I told him it would be devastating...like the lost of 70% of his business at best. Last week I heard from a distributor that he was looking to expand and offer new services. So he'll likely do so and lose even more...but my conscience is clear. Sad...because he has a family and can't afford to lose anything

Big Leo

 

[pitzerwm]

Mac, obviously, this is always a problem. NO one wants to hear that they screwed up, Just like you never tell someone that their spouse is screwing around on them, they probably know and don't want or need you in the loop. Make sure and send him to the Forum, he will at least have a chance to be successful in the end.

I paid too much for my laundromat chain, but I recovered, it was an expensive lesson, and I got smarter pretty quick, no one had to tell me, I figured it out pretty soon.

Although, I must admit that the guy that you sent to me that had bought 2 IBAs that he couldn't use or install, eventually, I couldn't help myself, when he said that he was willing to loose $10-$15K, I said "I'm sorry to tell you this but you are an idiot". "You have screwed up big time and if you get by loosing $100K you will be lucky". He finally agreed and I gave him a couple of options.

 

[Earl Weiss]

First, anything you sell them either get paid COD or with a credit card.

Secondly, it is difficult for you to be certain they will never make a profit unless you know all the details. For instance, their level of debt service will make a huge difference. Maybe they put a big chunk of $ down. How will they benefit from the depreciation expense? Perhaps the land is ripe for appreciation and the wash is a method of banking the land to service some of the expense until it can be redeveloped.

 

[mac]

The one guy that I had in mind when I posted this paid about 1.2 mil for an average auto with 5 self serve bays, and it's on a very tight lot. Land in Florida just went kaboom, if you had not heard about it. The credit card system will pay for itself in about 2 years, and he needs it because he has another wash about 1/4 mile away without it. If he keeps this wash he'll probably pay for it in maybe 15 to 20 years, and that's with taking NO money out. There are many other similar examples down here. Can you say Barry Boyd?

 

[JMC]

I know that I paid to much for the wash that I bought. The person that I bought it from had and still does have several businesses that are very very sucessful. He has deeeep pockets and real old money to help him too. He was puting an extra 300 per week to inflat his income. He had been doing this since he bought the wash. He had 4 other washes that he was selling at the same time. He sold them all and I happen to know one of the new owners. He said that he noticed a 300 per week decrease after he finallized and started running the wash. The other two owners lost their washes due to default on loan. The bank that forclosed on them tried to get me and the other guy to buy them. The banker said that for some reason the other washes had a 300 per week short fall after they closed the deal and the new owners couldn't make it up.
The guy had bought them to resale to a sucker that had no car wash experence. He found four of them.
My question is how can you find out about that kind of deception? I ran due deligence, put it to two different business men. Had two bankers look at it and they all said it was a good buy, they even wanted in on the deal. I had rather not have to deal with other partners. And of course I did get the loan approved.

Jake

 

[Earl Weiss]

The only way I know is to spend some time watching the operation and ask around about it. As I said a local guy was interested and asked me about a place I knew nothing about. Figures indicated the SS bays wered doing $4000 per month per pay. I said the joint must really be jumpin and on a very busy street. Neither was true leaving theonly logiacal idea that other money was coming thru that business. My guy passed.

$300 a week may be difficult to see because it breaks down to 100-150 customers a week .

 

[pitzerwm]

It is unusual for someone to just buy to resell and add revenue, but obviously it happens. You can add a clause that if the revenue drops within some time period the price is adjusted. The other is research, research, research. We all get screwed at sometime, the ability to recover is the trick. I wouldn't ever rely on a banker's judgment, if they knew something, they couldn't be a banker.

 

[rph9168]

If there was some way to prove that revenues were intentionally inflated you might be able to get some relief either in court or through negotiations with the seller with the threat of a lawsuit. Were these revenues supported by financial along tax returns? How long did the seller own them before you bought them? Maybe you could contact the previous owner to get an idea on what their revenues were. It's a long shot but there isn't much else you can do to prove your point.

Realistically, unless you can prove intentional fraud there is probably not much you can do.

 

[JMC]

Yes on the tax returns. I think he was writting a check to someone, kid, brother, and cashing the check and putting it back in the kitty. A write off for labor and deduction on the income. Kinda like a flow through thing.
He owned one of them for two years for sure and the one I bought was a year and 3 months of him running it the other two I really don't know for sure.
I did ask the previous owner that he bought it from and he said that it never made that type of money. 300 a week is not alot but it can add up if you can't keep overhead to a minimum.
I thought about confronting him but I didn't. I have had it for 6 years now. Love the business and have learned alot in the process. Schooling can get expensive either by hard knocks or by going to a business college. And experence has always been the best teacher for me. Learn faster and it sticks the first time.

 

[Greg Pack]

1. 2 million for a 5/1 is pricey, but may be a legitimate project cost if the property was expensive. I'm not saying you can make any money at that, it is obviously very difficult. But with the ballooning price of land, construction, and equipment new projects have gotten very expensive in nice areas. The days of a 600K 5/1 (a price where you could make good money) are just about over.

Rykopro, yes there is at least one distributor in the south Mac is referring to that has been in this business for years and has left a trail of unhappy customers. When things turn sour he just moves on to the next area, and next equipment line.

 

[mac]

From reading the replies, two things seem to stand out. 1. There are more legitimate crooks out there than most realize. These are distributors who intentionally screw investors knowing that they will most likely get away with it. 2. If you get screwed by one of these guys, you have few realistic options. Lawsuits can take years with no guanantee that you will get anything but a big bill from the attorney. I am hoping that this may change. It will NOT change through the legal system or our favorite ICA. If enough info is reported here, it can be useful in a threatened lawsuit. Manufacturers can also be made aware of these perps, and some form of self policing can happen. And lastly, my favorite - public shame. This is harder to pull off since you can't have someone walk around with a scarlet letter on their shirt. (For those of you educated in government schools, you'll have to look up the reference.) There are still ways to do this however. Be creative. You can have some fun and do good at the same time !

 

[Earl Weiss]

I must have missedthe memo, but when did people start relying on distributers of any sort, in any business to advise them as to when a business would be profitable?

 

[Waxman]

The problem is that certain distributors will offer alot of input regarding potential revenue from a site in an effort to seal the deal. The investor is left to decipher all his data independently, and some of it comes from certain distributors, like it or not.

I almost got into a deal years ago, where a distributor told me crazy sales figures, which at the time sounded great to me! He took me to busy washes off the highway that tied into gas pumps and did huge numbers annually. He also advocated a 'closed loop' system, because I had no sewer tie-ins at the time. His equipment was also far more pricey than what I wound up buying.

My point is that the first time investor has no prior knowledge of car washing and sometimes not a clue as to predicting revenues from this type business. So he has to look somewhere for numbers, and one easy source is the distributor. The guy I got, finally, was completely honest and as straightforward as they come. I finally got a realistic project completed along with necessary things like sewer and water connections, all for far less $$$ than my original plans years before. It has been the difference, I am certain, between failure and success.