To understand where I am today in the carwash industry, you’d have to understand how I started. My wife and I bought our first carwash on February 22, 1988. Later that year, a friend and I formed a corporation and built an in-bay automatic at an old gas station. It wasn’t the first automatic carwash in Casper, WY, but it was a touchless carwash — considered a novelty in the industry back then.
Our “new” technology carwash opened on January 1, 1989, and it went over big. We had planned to have a grand opening after a few weeks of operation, but the acceptance by the community was so positive and sales were so great that we decided to forgo the expense of a grand opening. Besides, even if we had a grand opening, we couldn’t have been able to squeeze the additional cars on the lot.
We were hoping to hit the national sales average of $5,000 a month, and we doubled it and sold $10,000 worth of washes that first month. We were ecstatic. We thought our monetary investment had paid off and we were going to be rich, right?
Wrong. The month of February turned cold and it stayed cold for the whole month. It got -20°--30° at night, and not too much better during the day. I think even the communion wine was freezing. Our February sales were pert-near zero, too. Somehow, we managed to hit what we had budgeted for — an average of $5,000 over two months.
Over the next few years, my friend and I bought three other older locations:
- A two-bay self-serve with an obsolete and unusable automatic bay,
- A six-bay self-serve; and
- A four-bay self-serve in Douglas, WY (40 minutes away).
We remodeled the buildings and updated the equipment, adding new functions like pre-soak and spot-free rinse. We even poured concrete at one location in order to install heated floors. At another, we dug up the concrete floor to repair the heating system.
When the five-year lease ran out on the “gas station” in 1993, we elected to move the automatic carwash down the street to the first location we had bought. We installed our automatic in the bay where the obsolete automatic was and added a third self-service bay on the end of the building, making it a “three-plus-one” in carwash lingo.
Now we had three locations; down from four, with one automatic and 13 bays of self-serve. We had it made. We figured in a few years, we’d own most of the carwashes in the state. Wyoming carwash moguls sounded good.
A few years later, it hit us: we were tired. We had worked hard for years, doing as much of the work as we could ourselves and hiring out only when we had to. The six years of hard work had taken its toll. We decided to put the washes up for sale. Being a mogul would have to wait for another day, another time, and another industry. Bikini bathing suits, maybe.
In 1995, we decided to sell the washes without a realtor. We weren’t in any hurry and thought that if this didn’t work, we could always change our minds and sign on with someone. The strategy worked, but I’m not sure it’s the best decision in all cases.
We had some interest right away. We showed the washes to three or four people over the first few months, but didn’t get any offers. Then two people contacted us from out of town. They indicated they were interested and also disclosed that one of them was a realtor.
We received an offer from them, we counter offered, they countered, we countered and finally arrived at a price we could all live with. This negotiating ran on from the first part of April until the last of August. Five months of negotiations.
Even then it wasn’t over. First, they asked to delay the closing for some reason that I don’t remember. Then, we elected to delay, our reason evades my memory, but maybe it had something to do with income taxes. The deal was signed and checks written on February 29, 1996 — a full year after we first made the decision to sell.
By the numbers
Like I said, we didn’t sell the washes through a realtor. We agreed on the price and who was going to pay for what and turned it over to a title company. The title company ran all the numbers and handled all the paperwork. We met at the title company’s office, signed the papers and received our check; that was the best part about the whole deal.
We had originally asked for $1,250,000 for all three washes with a gross revenue of $338,467 in 1994. The selling price works out to 3.7 times the gross revenue. We calculated the net income at $171,617 (50.7 percent), so the selling price was 7.3 times net income.
The negotiated final price of $1,080,000 lowered these ratios to: 3.2 for selling price/gross revenue and 6.3 for selling price/net income.
These ratios were in 1995 — almost thirteen years ago. I sincerely hope they have increased over time, as we have our carwash for sale now and would never consider anything that low. The ratio I use now is five times gross and 10 times net for a good seller’s price. Of course, a buyer would want to look at something less.
One very last word of advice: In any decision you make about selling your carwash, consider the taxes you’ll have to pay.
Dennis Ryan has been in the carwash business since 1988 and the construction business for 40 years. At one time he owned and operated five self-service carwashes. Currently he owns and operates American Pride Carwash in Evansville, a suburb of Casper, WY. He can be contacted at email@example.com