Until recently, carwashing was the only business I had ever known. My parents opened a carwash when I was ten years old. I worked at the carwash all through high school, college, and after college. When I was 34-years-old, I opened Safari Carwash, a full-service conveyor carwash. I operated the wash for 12 years, when I was first approached with an offer to buy.
It was inevitable. The carwash had been operating for several years, the business was thriving, the lines were long, and everything had finally come together. That’s when it happened. People began to approach about buying my business.
So, I sold. I was fortunate enough to have two other successful carwashes in the suburbs of New Orleans. Those sold, too. It was 2001, and the carwash consolidation craze was in full swing. Several companies were feverishly acquiring successful carwashes to add to their company’s holdings.
Having sold my carwashes six years ago, I had some time to reflect on what went well, what I would do differently, and give other operators an idea of what it feels like to sell a dream.
My first purchase offer came from a regional chain in Texas that was trying to grow very quickly. They had done their research, negotiated a purchase price, placed a deposit, and scheduled my company as their next acquisition.
As most of you know, there are very few secrets in the carwash industry. Despite confidentiality agreements, the word was out that Safari was up for sale. As a result, several other carwash companies contacted me about placing a bid on the business. While that was very flattering, I told them that confidentiality agreements prevented me from discussing the sale with anyone else at that time.
The company that was purchasing Safari lost their funding, and the deal fell through. The good news was they had given me a $50,000 non-refundable deposit. What’s the lesson here? Execute a confidentiality agreement with the interested party, give them limited information and time until they are willing to put up a significant amount of money for a deposit.
Once you have made the decision to sell the carwash, the next hurdle to clear is determining selling price. There are endless formulas and methods that you can use to arrive at this number, but everything really boils down to just a couple of items:
- Will I be happy with the amount of money that I receive from the sale after the expenses and taxes are paid?
- Is the price a realistic number that works for both parties?
- What will I do with my life, and how will I fund my lifestyle after the sale?
- What are the chances of this opportunity passing by again?
Because this process is fairly complicated, it is important to have a good attorney and CPA. Some items that need to be addressed are:
- Do you sell the assets of the company, or the stock of the company?
- Are you willing to provide owner financing for part of the purchase price? Be very careful with this one. I have heard many horror stories about people trying to collect their money after the sale.
- Will the purchaser require you to sign a non-compete contract, and if so, what are the conditions?
- Does the sale include your trademark and other intellectual property?
- If your wash is on leased land, is the landlord willing to release you from the lease and allow the purchaser to take your place? Unless the purchaser if financially stronger that you are, this may come with a price.
- Have you thought through the details of the sale? Does it include your favorite desk and your company car? How about the cash in the bank, the lobby merchandise, and the company’s payables and receivables? What about chemical inventory?
If there is anything that you want to keep from the sale, make sure that it is listed in the contract.
On the personal side, I can say from experience that it is truly an emotional roller coaster. You endlessly question every decision, and constantly wonder if you are making the right choices. I have never had to sell one of my kids, but it must feel something like this.
If possible, use a trusted advisor to handle your negotiations with the purchaser. Using a third party as a buffer can help prevent making emotionally-based decisions that will later become a regret.
Once the sale is complete and the money is in the bank, there is a great feeling of euphoria. You’ve done it! You have taken an idea and nurtured it to reality, built it into a successful business, and sold it for a handsome profit. You take everyone out to dinner, buy your wife a new car, and marvel that you have weekends off for the first time in your life.
Harry Cole is the owner of Cleaning Systems, a carwash equipment company located near New Orleans, Louisiana. Cole has been involved in the carwash business for almost forty years and has been the recipient of numerous awards, including the ICA Community Leadership Award, and the Entrepreneur of the Year Small Business Award. Cole can be contacted at Harry@CleaningSystems.com