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The above valuations are at best an art, and not a science, since each wash has its own personality. Remember, a value is only an estimate. The new investor should be prepared to rely heavily on carwash consultants, brokers, and other unbiased experts to clearly evaluate the wash’s hygiene (books and records and trends). The value of these aforementioned multipliers are only estimates and to be used as a guide.
Be cautious in your due diligence and consider that an equipment manufacturer with a pro forma has an agenda.
I will close with a comment on denial versus reality on values. From 1990 to 2003, the carwash industry was experiencing a profit boom. An owner, buyer or builder could buy and flip a wash and make an easy 20-30 percent in a year. The rate of land increasing every year was a minimum of six to eight percent per year, added to the 20 percent profit margins increasing each year. It was a roaring commodity.
Related: Carwash eNews
Today, land is flat to declining, economy the same and financing difficult. So the denial part is from the current owners that either bought over the last five years high, or owners in the wash business hearing of inflated and high past sales that cannot comprehend the current price adjustment reality check.
Unfortunately, retirement, divorce, partnership dissolutions, health and burnout, just to mention a few, does not have any warning when a sale is involuntarily forced, reality then prevails. There is no negotiation to the Golden Rule: Get an expert to evaluate each model. It can easily prevent the devastation of over or underpayment.
*Author’s own estimate.
|Roger A. Pencek is the president and founder of Car Wash Brokers Inc., and has been selling and brokering carwashes since 1985.|