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Operations and Management

Seller information sharing

Confidentiality is crucial during the sales process of any business. Carwashes are no exception. The last thing a carwash owner wants, after spending a large portion of his or her life building the business, is for everything to become public knowledge or to risk what he or she has built.

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The most frequent question from carwash owners who are considering selling their washes is: What information should be shared with the buyer (or buyers)? The underlying concern that is the root of this question is well warranted, but this is arguably the wrong question to ask. The key to protecting everything you have built is not so much what information you share but rather with whom you share any information at all.

Related: Finding the perfect carwash buyer

Risks of sharing info

In order to understand why the who is more important than the what, we must discuss the genesis and crux of confidentiality concerns and information sharing risks. Although several risks exist, they are far from equal in likelihood and potential impact, and you can quell them all to a point of nonconcern if you take proper precautions during the sales process.

Largest risk: awareness

The single largest risk of selling your carwash is, oddly enough, the simplest and most surface-level of all. It’s not your gross profit, and it’s also not how many plus-level memberships you signed on last month. None of the specifics.

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The largest potential downside to a carwash owner that can result from a sales process is people becoming generally aware it’s for sale at all. This risk can easily lead to the wrongpeople becoming aware: your team and employees.

It’s the nightmare scenario: picking up a phone call from your manager, only to have him ask if you’re selling your carwash and asking what’s going to happen to him or her. Or even worse yet, your manager and employees find out but don’t even tell you or address it. 

All of a sudden, everyone seems to be a tad glummer at work, they stop trying so hard, and they stop caring like they used to. And how could you blame them? Your dedicated team has now been made aware that there may be an impending changing of the guard and its faithful leader. Goodness, they don’t even know if they will have jobs after all is said and done.

Related: 5 steps to take to prepare to sell your carwash

In most situations, this simple awareness is the unequivocally largest risk to an owner who is considering selling his or her carwash. And, this risk of general awareness is irrespective of the level of granularity to which information has been conveyed or shared. The degree of information to which a prospective buyer or party is privy has no direct impact on awareness. Therefore, the vast majority of confidentiality-related risk is introduced upon the simple conveyance that a carwash is for sale, not when the detailed “other deductions” pages from your 2017 tax return are shared for a buyer’s loan approval.

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After knowing where exactly the lion’s share of potential downside lies, the question becomes: How best can you mitigate said awareness risk? There are two options: Either share nothing, or be more selective, careful and methodical in choosing the counterparties and prospective buyers with whom you share information. As the prior option self-defeats the primary purpose and goal of potentially selling your wash, this makes the latter option the clear and resounding answer. The best way to mitigate information risk surrounding the confidentiality of selling your carwash is to focus on with whom you shareinformation, not what information you make available.

Being prudent in deciding on appropriate counterparties is easy enough said but rarely done. The reason for this is that proper filtration requires a significant and often underestimated time commitment from whoever is playing the “gatekeeper” in the sales process. Whether the owner, a broker or someone else, spend the time to have a system, method and structured approach to qualifying prospective buyers and understanding who they are, their intent and their capabilities. If you do this and you don’t cut corners at the earliest and most basic levels of a sales process, you will eradicate the risk of awareness to a point.

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Knowing that the largest risk is completely unconnected to the “what” part of information sharing, it’s now time to turn some attention toward the lesser risks that do, at least somewhat, connect to that part.

Secondary risk: wasted time

Although seemingly mundane and easily viewed as a pill that is able to be swallowed, wasted time is not something to underestimate. The downside of this risk is the endless hours of painfully detailed and often irrelevant information requests that have the very serious potential to deplete the one resource none of us can reclaim: time.

The solution to mitigating the risk of wasted time is to share the right information at the right time and to be hyper-aware of what is and isn’t relevant to share at certain stages. Before dropping the guillotine down on requests for any information that you would not ask for if you were buying another carwash, understand that you are not the only buyer type — and in many cases, you are the minority buyer type. 

Related: PC&D Unscripted 12: Private equity changing the carwash landscape

You, being a wise, well-tenured and experienced carwash operator, know everything (to a point) that a potential first-time owner or even less experienced carwash owner and operator doesn’t and couldn’t. When deciding on what information to share, it’s important to account for specific types of funding sources and their requirements, pro forma plans and other more nuanced factors, such as the purchaser’s familiarity and experience level. 

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That is not to say that everything should be mind-dumped. Truthfully, irrelevant (or, more accurately, inconsequential) information requests should be denied, but in an effort to mitigate this secondary risk of wasted time, they should not be replaced with another more nebulous risk. After all, anything truly inconsequential doesn’t carry much weight anyways. Such superfluous info as knowing how many people work for the company that does the landscaping in front of your wash is neither important (and shouldn’t be shared for the aforementioned risk of wasted time) nor poses any risk by itself in anyone knowing the answer to such. 

Many times, it’s not the actual exact information that is or isn’t shared that’s so very important to reducing this secondary risk — it’s when to share what level of information.

Monthly car counts by package do not, nor should be, shared off the bat. Denoting which information is shared at which different stages per buyer is crucial no matter the specifics of the carwash sales process at hand. In general, information should be shared in increments that are prioritized to share as little as possible while weeding out non-starters or the proverbial tire kickers as quickly as possible. No one — neither the owner nor any serious buyer, for that matter — wants a sales process to take longer than it must.

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By being smart, aware and knowledgeable as to what information is meaningful at what stage and what information is not needed at any stage, one can eliminate the risk of a long sales process that includes ample wasted time all along the way.

Tertiary risk: conspiracy

The most contentious of the risks involved with selling your wash is actually the tertiary risk. Although having downside implications arguably as relevant and impactful as those of employee and team awareness, the probability of incurring actual impact is so low that it sits in third place. This risk is what can be referred to as “conspiracy risk” (and not the tinfoil hat type).

Up until now, none of the risks discussed have had anything to do with how someone could use the specifics of the information shared during a diligence period. Unlike the other two risks discussed before, conspiracy risk is exactly that and pertains entirely to how someone could use the specifics of the information (chemical mixes, employee handbook, maintenance procedures or volumes) to the point of reverse proxying into market size and need. The risk here is that someone would use this info to his own benefit while simultaneously being a detriment to you as the current owner.

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As grave as it sounds, there is a reason why this is neither the primary risk nor the secondary risk. The reason why conspiracy risk ranks third overall is because the probability of risk realization is infinitesimally smaller than any other risk involved with selling your carwash. On the most basic level, the number of carwash purchasers who would even know how to exploit specific trade secrets — let alone know what they’re looking at when staring at an unaltered and non-summarized general sales report — are few and far between. 

This results in a drastically smaller population of capable risk enactors than either of the other risks that have been discussed. Taking it one step further heightens this truth and the implication even more. Of that already thinned population, the amount of those capable who are willing to partake in the other side of conspiracy risk is yet another small fraction of what is already a fraction. And then, it’s extraordinarily rare that even a capable and willing conspirator would have the opportunity to tangibly use this gleaned knowledge.

Although small in probability and size, the magnitude of the downside of conspiracy risk is still massive if executed upon, and for that reason, this type of risk must be combated as well.

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Luckily, the surefire way to completely expel this high-magnitude risk from a sales process is the same solution to solving the primary risk of employee awareness: simply focusing on with whom you are sharinginformation rather than what information you are sharing. A little common sense, some Googling, a few phone calls, a little time spent and, yes, even a $5 background check when it gets to that phase can ensure that you share info with only the parties you should. 

Conclusion

There is no doubting that selling your wash introduces risks to you and the business. Despite the risks being widespread and potentially catastrophic to you, rest assured that when you take the proper steps, time and precautions to explore selling correctly, all these risks can be eradicated. It’s not easy, and it takes a time investment, but it’s most certainly doable. Just remember, the single most important key to eliminating risk when selling your carwash is to focus on with whom you share information far more than what information you share.  


Harry Caruso is the founder and CEO of Car Wash Advisory, a leading carwash brokerage. Harry has a background in investment banking, capital raising and investing. He first got started in the auto sector over a decade ago through building engines and racing cars. Connect with Harry at www.carwashadvisory.com. 

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