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Prices of an Express Car Wash

4 replies created about 1 month ago
posted by jessie.chimni about 1 month ago

Hi:

I have been looking to buy or build a carwash. I think I have found a good one and it on a street that has good traffic and they seem to be washing high volume of cars. It is business only ( no real estate included). The seller has not put a price on the business yet. In this industry, what is the price, as a multiple of profit or as a multiple of revenue, that one should pay? A very long lease is available as well.

Appreciate your help.

Thanks,

Jessie

Replies

reply by AutoWashUSA about 1 month ago

Paying for a professional appraisal could be money well spent. I had to have one done on my property, and they divided it into land and on-going concern (business) a few years back when I've refinanced. My 50+ page appraisal back then (2013) cost me about $2,500.

Every location is different, so numbers will vary. I'm sure some other members here will shed some light on some sort of 'rule of thumb' formula to get a ball-park number.

You can browse car washes for sale on some specialized business websites and look at the asking price and stated gross income and cash flow (if disclosed) and do the math.

Most ratios are a bit off in my opinion, because as a buyer I'm always focused on the ability of the business to service debt (or lease) and still have cash left at the end of the month after all expenses are paid. A healthy business with strong numbers will always be worth more than another that operates at a loss. Those who operate at a loss can potentially be a very good buy, if you can turn them around.

See if the seller would agree on you signing a non-disclosure agreement, and get a hold of at least 3 years of financial reports and tax returns. That will help you in determining a fair price.

reply by Robert Roman about 1 month ago

“It is business only….The seller has not put a price on the business yet.”

Then I would begin by telling owner – “call me when you have a price.”

Next, you will need to know and verify earnings to justify the price.

Therefore, you don’t need a multiple but rather a capitalization rate. Cap rate is function of the risk associated with buying and operating the business. Risk varies considerably by individual.

For example, a person new-to-the-industry is considerably more at risk than someone with 20 years of carwash ownership and management experience.

So, you wouldn’t expect to be willing to pay the same price.

Therefore, I would suggest engaging a broker or consultant to help you ferret out what a fair price might be.

reply by Mitun patel about 1 month ago

New car wash projects in my area is around $3.0 M. It is not advisable to build new wash unless you are projecting 10000 plus cars a month.

reply by AutoWashUSA about 1 month ago

Even at 10,000 cars per month, lets say at $7.00 average per car without sales tax, it is still difficult to service $3M debt (or $2.5M if you put $500K down) and have any decent amount of money left after all operational expenses are paid.

If car washing was easy, everyone would be doing it.

I've seen pool of investors dump $3M-$4M building beautiful facilities, and they are washing some cars but I can't see them maintaining the equipment or the premises in top shape 5 or 10 years from now, because car washing isn't their business. I'm thinking those washes will be buying opportunities at some point.

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