Business Brokerage .
Steve Skrlac, MBA, CFA
sales representative
.
Serving Toronto / GTA / Southern Ontario
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Investing in a Car Wash Business For Sale
For many people, buying a car wash business is an excellent business opportunity. A car wash can be a great business investment but be aware that many different types exist and it’s important to understand the different types and the implications of such. Why buy a car wash business for sale?
A car wash is an attractive investment in that it can be a stable source of cash flow and can be a relatively passive business to operate. Running a car wash business is not necessarily an operation that requires much technical skill and it is possible to have employees operate the business fairly cost effectively. Demand is also strong – there will always be automobiles on the road needing of a cleaning.
Is the real estate included or not?
Valuing a car wash needs to take into account the real estate component. For starters, the value of the business must be separated from the value of the real estate it is situated on in order to do a proper business valuation. If the land is leased then the details of the lease can have a significant impact on the value of the business. For instance, is the lease has only a few years remaining or if there are several clauses that dilute the position of the tenant then the relative value of the business could be diminished. The success of the business very much depends on the location and it is probably not practical to move it to a different site.
Tunnel car washes
These are the most capital intensive of all types of operations. They consist of an automobile entering a tunnel and being placed on a conveyer and being washed along the path of the tunnel. The driver is usually not in the car while the car is being cleaned and is waiting in a reception area where they can upsold on other ancillary products or services.
Stand-alone washes
These consist of a car entering a small wash with the driver remaining in the car. They can be quite automated with the owner entering a code into a keypad before entering. While in the wash, the car stops and is rinsed and brushed while in a stationary position. After existing the driver usually has self-serve vacumm stations that might be coin operated. It is common to see these types of operations coupled with a gas station. An advantage of these types of operations is that they are less capital intensive than the tunnel washed and take up a smaller real estate footprint.
Self-serve bays
These are the least capital intensive of operations. The equipment is relatively inexpensive and minimal staffing is required. The operation consists of bays where drives pull into and pay for the hoses and wands to be activated via coin operation. Vacuuming is also usually coin operated.
Valuing a car wash for sale
Because of the different types of operations available and whether real estate is involved, the valuation of a car wash is not a very straightforward exercise. Fundamentally, the business value should be determined separately from the real estate value. Using a very broad generalization the value of the business for sale could be 2-3 times earnings (discretionary cash flow).
Earnings can be cyclical
The cash flow of a car wash business can be cyclical with the economy. Since a car wash is a discretionary expense for most people, when times are tight revenues usually decrease. If you are buying one during an economic expansion, you should not expect revenues to always be as strong as they are during a boom. Do realistic sales projections when preparing a business plan.
A car wash business for sale can be an excellent investment. There are many that come for sale in the Toronto, Ontario area and, if priced properly, usually sell quickly. If you are seriously considering investing in one talk to a qualified business broker to go over the purchase process with you.
