LOW Volume

Looked at a closed 4 bay SS with 3 vacuums and 4 single vendors today. Owner was very honest and forthcoming that he closed the wash 18 months ago because it was losing money and not worth his time.(yeah, not a real good sale pitch) I mean when he quoted gross annual revenue, I thought he meant monthly revenue! :) He did state that when he first got it 5 yrs ago that he did put forth effort and never seemed to get any return. Stated that he went to wash a couple of times a week to check on it. Seems it would need more attention.

Did my due diligence and water usage seems high for the numbers he was quoting assuming a water flow rate of 3.5 gpm. According to his records, averaging only $175 per bay per month and that is assuming and additional 20% for vaccuums and vendors. Was wondering if maybe someone else had a key and they were helping themselves to a few coins on a regular basis.

Traffic count of 11K per day on road in from of wash. Approx 2K people in the small town and about 6K in a 3 to 4 mile radius. Only other carwash within 10 miles is 2 bay ss with 1 iba attached to convenience store. Used ss wash several times over past couple of months to determine competition. No hot water, no suds and appears no soap in wash setting, no water pressure, and coin changer has not worked at anytime I was there.

Spoke with several people surrounding the propsepctive location as well as with several people in city gov't there. All were positive and helpful with the prospect that it would reopen. Several people commented on how it was never clean nor inviting whe it was previously open.

So total of 6 SS bays and 1 iba withing 10 to 12 mile radius. 11k daily traffic flow as estimated by DOT. Is it possible that $175 per bay monthly is all this location is capable of? Hard to believe that this location or almost any location can produce only 10K gross revenue per year with that traffic flow.

Any and all comments greatly appreciated.

What you said is the primary cause of no business - No hot water, no suds and appears no soap in wash setting, no water pressure, and coin changer has not worked at anytime I was there.
These things are the prime ingredients in making a SS successful. Give people what they want and expect, make the premises inviting, make sure everything works. Alot of self serves work fine and look aweful - yet the owners make ends meet. The one's that look good and do not function well fail miserably. Customers dislike throwing money away and nothing will drive customers from you more than to have equipment that takes a customers money but gives little back in return. You didn't mention what condition the equipment is in or if its worth salvaging. You may have to consider a installing new equipment.
Consider leasing the wash for six months at a very nominal lease amount. If all goes well, then you could roll into a purchase. During this six month period get a seasoned operator to visit the premises to offer suggestions on getting your existing equipment working properly. Perhaps have a car wash equipment supplier look it over and repair/get to get everything running. You didn't indicate if you were handy and mechanically inclined - this helps ! Whatever can be salvaged then fine - otherwise replace it. Be sure the landscape is well kept, place is clean, well lit, install security cameras, etc. After all this is done, then advertise heavily for a month, make sure your price is competitive, but not higher than your competition.
I could go on an on with advice.
Perhaps to summarize: You have to want to be in this business, you have to have an attitude to being sure everything works everytime and every day, you have to put the time in, you have to learn from you mistakes, you have to be customer oriented, you have to have some mechanical ability to understand how it all works, etc. This isn't about fixing it once and collecting money forever.
At 10K gross per year, it appears there would be quite a bit of upside.
Good luck

I have seen several 3-4 bay car washes gross less than 1K. It is quite common in this overbuilt town to see once good income producers gross less than 2K. So to answer your question the answer is yes, that may be all the business he was doing. I would think it would have more potential. But there is little way of knowing what the true numbers will be if run properly for a while without trying.

Crown's suggestion of a lease is excellent. The current owner has little to lose. You will have to be patient,though. It could take a couple of years before you know what its' full income potential is.

Upload some pics!

You are considering an income producing property, not a used car. So, I believe leasing the facility, as in taking it for an expensive test ride, might be a waste of money and time.

Instead, determine first what is the supportable number of outlets in an area.

"Traffic count of 11K per day on road in from of wash. Approx 2K people in the small town and about 6K in a 3 to 4 mile radius. Only other carwash within 10 miles is 2 bay ss with 1 iba attached to convenience store"

6,000 people living within a 4 mile radius should have enough buying power to support five wand-bays.

Moreover, in rural areas, trade area distances tend to be greater than their suburban and urban counterparts because of differences in population density.

So, the competition 10 miles away could be more of a factor than you think.

Given everything described, I would proceed as if the property was a bare piece of land with utilities, permits and an empty building.

Does it make sense to buy it, rehab it and operate it?

Thanks for all input so far.

I am considering buying for more of an asset purchase than an income purchase as it can be purchased for approximately land value. Then if I can turn it around great, if not I will just sit on the land. I have wanted to get in business for a while now, and this certainly seems like a big enough challenge.

Owner offered lease or lease purchase when I did not make an immediate offer at our meeting. Also is willing to owner finance. It currently still has a mortgage (118K)and asking price is 99k, but he understands something is better than nothing. He has told me to make an offer and we can go from there. Taxes and insurance run around 5k yearly.

He is a coat and tie person and I believe he did not fully understand work involved when purchased 5 yrs ago. Stated he put forth effort when he bought and checked on it twice a week. Neighbors said it was dirty and not much eye appeal. Small town and overhead ridiculously low as far as water, sewer, garbage and so forth.

Enough room behind wash to build a small laundromat, and back of wash borders street that leads into towns only grocery. Located next door to a dollar general.

Seems to have huge upside potential and I wouldn't go hungry if I this didn't work out as a cash flow opportunity. I was prepared to sign a purchase option when we met, but the LOW figures he quoted startled me. Just don't understand why it would be that low. Of course if the figures where higher it wouldn't be for sale or they would be asking fmv.

Does the avg of 3.5gpm seem like a fair avg to use when calculation estimated revenue based on monthly water consumption?n It has been closed since August 2009 and I was able to get may 09 thru august 09 water consumptiong figures. Based on the consumption divided by 3.5 multiplied times .25 a minute, his stated revenue seems a little low. I allowed nothing for the 3 vacuums or the 4 single column vending machines.

I really want to buy this location, but I need to try to understand why the volume was so low.

I don't know how much money we're talking here for "land value". Buying a business for value of the raw land does seem on the surface like a can't lose proposition. And at one time it was. But is commercial property moving in your area? Is the community growing ,stable, or on a long, slow downslide? Who would be willing to buy that property, raze the building and build something new? Are there environmental issues with car washes in your State?

I have had discussion with bankers and appraisers recently who have called and tried to put valuations on underperforming washes. They often cite that land value often exceeds the value of the going concern. One appraiser told me he thought this underperforming wash without income records was worth well over 100K, just because of the land it sits on. This was in front of a partially abandoned strip center where no new retail construction has occurred in ten years. So-who's gonna buy this place to build a new McDonalds? I know of a couple that has owned property with an abandoned car wash shut down in 2003. They finally sold it in 2010 at auction to a guy who wants to park his dump trucks on it. Just be careful, or you might be the next bag holder.

I've seen some decent self serves in very poor locations that do very little, especially once someone uptown install another one closer to shopping, etc.
I've also seen poor locations do seemingly well - but this is out of the ordinary. 3.5 GPM is not anything you can work with - especially if you also have weep water. Is your location in a cold climate ? Even though the purchase may be worth it for the land, running a car wash with utilities, repairs, insurance, etc. is another ball game. If you really want this site, then you need to buy it cheap. 99K for a wash with no business - less the 10K in revenue would not be worth much to me. What is the land value ? I would consider a land value purchase and the wash as being "free". Alot depends where it is and whats around you. Robert Roman knows his stuff and has very good points. In the end, it may be about you and what you think you can do with it as a wash or piece of land. I would still consider having an experienced successful operator or someone like Robert visit your site if you intend to run it as a car wash for a recommendation - as I said, running a wash is an entirely different ball game, than owning dirt.

Regarfds