subject: 3 Types Of Car Wash Businesses To Buy [print this page] Listen to five potential small business buyers who are investigating car wash companies as they talk about the enterprises they've seen. Most likely you'll hear five different descriptions of the business.
That's because there are three basic business models in the industry and variations on those, often including a gas station, mini-market, gift shop, and lube rack. Further confusing the issue, some of those opportunities come with real estate.
The costliest and highest revenue configuration of this business, usually selling for over $1 million, consists of the long tunnel through which the driverless car is conveyed, while getting soaped and rinsed, then delivered to a crew with drying cloths and vacuums.
An automated version, but not as investment-heavy, is the small building, open at both ends, through which the car is driven or pulled, for a quick scrub, with no workers involved. Vacuuming is usually a do-it-yourself project.
Least expensive, and usually the lowest revenue producer of the three, is the self-service coin-operated carwash with individual bays, water and soap wands, and the pay-for-use vacuums and dry cloths.
Regardless of type, carwash offerings usually attract a lot of buyer interest, and if in good condition and priced correctly, frequently sell without delay.
There always are cars on the road in need of a wash.
Another draw for much of the business buyer market is ease of operation. For many enterprises success requires an operator with experience and knowledge about the specifics of the business. But most any competent businessperson should be able to run a carwash after getting a little education from the seller. In fact, many of the business owners in this industry are able to manage on a part-time basis.
Also attractive about this industry is business expandability. Additional revenues may be available to the owner of a "tunnel" carwash by beefing up the retail sections in the customer waiting area--expanding a gift store or introducing a coffee bar--and providing auto detail service. And for operators of "drive through" and coin-operated auto wash businesses, sales might be increased by adding vending to dispense, as an example, soap and drying cloths, the vacuum service, and even fast foods.
And unlike owners of most other businesses who have to worry about a new competitor coming to the neighborhood, the carwash operator knows this is not likely to be a concern. Government officials in most communities hesitate to allow additional vehicle washing businesses to open because of land use, water use and wastewater issues.
But while investigating available businesses, the potential car wash owner needs to make certain the real estate will be part of the package, or that the company will come with a long-term lease.
The tailor or gift card store operator may be able to relocate if the current lease expires without renewal. But a move is not a possibility for the owner of a car wash.
Another concern is the business volatility. Spending a few dollars to get the gunk off the family's SUV may not seem a big investment, but belt-tightening during slow economic periods, does impact this industry. And while a few rainy days will mean a slow-down in many retail operations, the wet weather will quickly cause income stream from a carwash to "go dry" although overhead costs continue.
Figuring out the right price to pay for a carwash can be quite a challenge. Considering all of the various possible factors that go into the business, it's hard to calculate whether the asking price is fair.
There are buyers eager for the chance to own the land under the business. But some buyers won't be satisfied with the return on the real estate investment after all the debt service and taxes are calculated. Yes, they are acquiring property also, but that property may not produce enough extra income--or rent relief--to justify its cost.
Considering the different configurations this business can take, it's difficult to apply a pricing formula that is widely applicable. One popular approach, which might be used as a general rule for what the package is worth, separates the business from the assets. Next comes calculation for a solid return on the business investment. That's usually a figure about two to three times discretionary income, adjusted for factors such as value and condition of equipment, value of inventory, what the real estate--if included--is worth, and location.
The carwash business may not be the easiest business to evaluate and to buy, but it offers many very appealing characteristics once purchased.
by: Peter Siegel
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