Need help Evaluating a Deal

[mikeyb]

Looking at buying a chain of 3, IBA, single stall car washes located in small towns surrounding a growing metro area.

Two of the locations have fairly new LaserWash 360+, but one of the locations has a much older machine, still waiting to hear back on the make/model of that machine.

The seller is asking $660k for all three, the washes had 2024 revenue of $165k and NOI of $80k, both revenue and NOI have been relatively consistent over the past 3 years. The seller is claiming Q1 2025 numbers are significantly up from previous years..... but I am skeptical.

I definitely think the seller is high, we are looking more into the low-mid $500k range, based on 3x of revenue and 6.5x NOI valuation methods. My biggest concern is the older equipment in one of the locations. Roughly what would this cost to replace? It is in a low income small town, with lower usage, so I would be thinking to replace it with a low end model from a name brand manufacturer.

What is everyone's initial thoughts on this deal? What should we be looking for, asking about, etc? Thank you.

 

[Waxman]

I would probably look at each location individually to determine the correct price to pay for it. At first glance the revenue looks fairly low. You have to look at three years of tax returns and use them to gauge revenue versus price. It's not like all the revenue coming from one location, where you have one tax bill, one water bill, etc.

 

[Roz]

While 3x gross is a good method for a single location it probably is not a good number for three separate locations as you are getting 3x all the equipment (I assume). Is there an equipment list for each location as that may tell us why the revenue is very low for 3 IBAs. Perhaps you do not have a softener or real spot free water or something else that keeps customers away. What do the reviews say about the place?

Depending on the setup $200K for an IBA location is cheap and worth the risk if you think you can bring back customers who left the place to go elsewhere or you can attract new customers with some upgrades and marketing.