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Puchasing First Car Wash

CarWashNovice

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Hello, everyone!

I am new to the forum and also completely new to Car Wash ownership.
I currently own a smaller commercial gym and an online business and looking to diversify further with something I perceive to be a little more "passive" than my current business ventures.

I came across a deal in a local area and was looking to get feedback on this. It seems like it has the potential (based on my digging into info on this forum as it pertains to the location, VPD, capture rate, demographics, etc) with a little more time spent on marketing, advertisement, years in business, etc.

This is a newer Car Wash - opened March/April 2020 when the pandemic hit. I would assume this impacted sales.
The owner purchased this facility in 2018 and invested $275k into renovations including new bays, new automatic bay, roof, parking lot, etc.
I attached a list of all of the Capital Improvements the Owner had done to the property.

6 Self Serve Bays
1 Automatic
4 Vacuums

However, sales seem low but I understand that this is still a new facility, and based on conversation from the Broker, the current owner hasn't tried to do anything to improve revenue or sales (marketing, ads, etc) and is looking to leave the business to focus on other businesses.

I will attach pictures of the Demographic Survey and the Income/Expense sheet sent from the Broker.

Looks like sales will improve in 2021 compared to 2020 and are estimated to be around $60,000.

Broker mentioned through running comparable sales data of other washes in this city revenue could be around $85,000-$100,000 yearly (not sure how true this is but based on VPD and Capture Rate... perhaps).

VPD is 24,000.

Sale includes business, land, and building.

Seller ask is $365k.

Is this a deal that you would consider further?

Truthfully, I would much rather come into an established business that is producing a return on the investment already but it seems like it could be a good opportunity with a little sweat equity and a purchase price that limits risk further.

I bought my gym in a similar situation (it was losing money actually) and increased sales and re-negotiated the lease and 2 years later the NOI is $8,000/month... but I know how much time and energy (and stress lol) it takes to purchase a business that is losing money or even break even (which it seems like this business is or close) and I don't want to discount that.

Any thoughts?

Thanks for your time reading/replying to this as well.
 

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Rfreeman

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I wouldn't touch this for anything over $240K or 4 times current gross sales. Be comfortable with what the wash is doing now and anything you can get from better management, promotion, upgrades will be gravy. I would never buy on potential bc that might never be realized.

I have 4 washes all were purchased as underperforming sites and the first 3 I have seen at least a 20% increase in business since purchasing them. The 4th wash I'm currently working on and has been closed for the past 8 years. On the the first 3 I made offers based on existing revenue and projections based on renovations.

Best of luck
 

Greg_T

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I won't comment on the specific numbers, as the US and Australia seem to have very different purchase price expectations. Therefore my Australian experience probably won't be helpful.

However my concerns would be:

- Buying on "future potential" is a risky proposition. We have purchased two businesses that were run down, but were still showing profit that made them worthwhile purchases. We managed to grow both business, but even without that growth, they would have been OK.
- Hoping for a business to be "passive". Our carwash certainly takes up less time than our other business (automotive workshop), but I still make at least 10 visits per week to the carwash, carry the mobile phone every day so I can respond to problems at the wash, and do lots of other maintenance, improvements etc. It's less hours per week, but unfortunately a long way from passive.

Anyway, I hope your considerations go OK. Good luck with it.
 
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