How to Sell a Carwash for the Best Price Possible
Ready to sell? These tips can help raise the value of your carwash to secure the best sales price.
America is experiencing a wave of entrepreneurship like we have never seen before. Millennials are choosing entrepreneurship over traditional jobs, baby boomers are looking for post-retirement endeavors and more people are exiting Corporate America to pursue their dreams of small business ownership. All of these people have one goal in common: to find a career path that they can be successful in and enjoy at the same time. For first time entrepreneurs, this often leads them into the auto services industry. The auto services industry is appealing to new entrepreneurs due to the ease of operating the business and the built-in model for success.
Carwashes are one of the most popular businesses within the auto services sector. As of 2015, there were around 62,000 full service carwashes in America and on average, the profit margin is around 4.2%. Starting a carwash from scratch is pretty expensive, leading most buyers to look at existing carwashes for acquisition. If you own a carwash and have been thinking about planning your exit, the financial state of the industry and buyer demand puts you in a very favorable position. The first step to planning the sale of your carwash is to get a business valuation. To give you an idea of which factors are important in valuing a carwash, we have included some formulas below. Keep in mind that these formulas are only a guide and only a professional intermediary can tell you the true value of your business.
- .80 – 1x annual sales + inventory
- 2.5-4x SDE includes inventory
- 3-5x EBITDA
- 4x SDE without land, 2x SDE + land & equipment
Now that you have an idea of what is important when determining the value of a carwash, you probably want to find out how you can ensure your business secures higher multiples. We have sold over 50 auto services firms over the years and have compiled some tips to help you increase the value of your carwash.
Curb Appeal
Curb appeal and condition of the facility is important when valuing a car wash. Customers actually spend time waiting in car washes while their vehicles are being detailed, so it’s critical to have a nice facility that they don’t mind being in. If you are getting ready to sell your carwash, spend the extra cash to spruce it up a bit. Buyers will be impressed with a facility that has been well kept or has some new features to it because that means they will not have to invest money to get the facility looking nice. In addition to curb appeal, standalone car washes generally pull higher multiples than combination facilities. For example, a carwash that is attached to a gas station will not be worth as much.
Good Bookkeeping
One thing we have noticed over the years is that the bookkeeping in this industry isn’t great. Keeping clean books and records not only helps you now and helps keep you out of legal trouble, but it will help you down the road when you are ready for a valuation. Professional business brokers use cash flow and revenue to calculate the sales price of your business, so by providing them with accurate numbers, you may be able to get a higher price. When financials look a little sketchy, it may be hard to justify the sales price to buyer. Good bookkeeping can only help you the highest price possible when selling your carwash.
Charity Events
Civic engagement is important for small businesses. Millennial entrepreneurs believe it is the responsibility of small businesses to engage their community and 70% of young entrepreneurs cite civic engagement as one of their highest priorities. Engaging with your community will revamp your image as a business and customers will think of you in a different way. Hosting charity events at your cash wash will not only catch the attention of a philanthropic buyer, but it could lead to increased revenues for your company. Charity events actually help market your business and get your business in front of potential clients. Carwash owners have actually reported that in the months following a charity event, they have seen a bump in revenues due to the additional exposure.
Green Initiatives
Our society is beginning to place a higher value on preserving a planet and asking business owners to do their part. Carwashes have an opportunity to conserve by reclaiming water to use in their wash. Water is a precious commodity, especially in the Southwestern states, and by reclaiming water, carwash owners can better control expenses and ultimately, make more money. Some owners have reported as high as 60%-90% in savings after implementing a reclaiming system. To learn more about water types and see what kind of system would work best for your business, check out these links.
Reclaiming water can also help with marketing efforts. More consumers are paying attention to green initiatives and by advertising your efforts, you may be able to hook an extra client or two. Buyers will also be impressed by your conservation efforts and the equipment used for reclaiming will carry significant value in the deal.
Management Team
This tip can apply to any type of business but it’s still good for carwash owners to know – build your management team. Every buyer is looking for a business that they can easily transition into and by building a strong team of managers, the transition should be virtually seamless. The goal of every business owner who is looking to sell should be to get the business functioning without your direct involvement. The business should be able to function under the supervision of managers, while the owner takes a higher level role. By strengthening the structure and management of your business, you are creating an environment that you are able to easily remove yourself from – and ease a new owner into.
Marketing Strategy
Developing and implementing a strategic marketing plan for your carwash will not only drive sales revenues now, but show a potential buyer that your business is ahead of the curve and on track for future success. Having a developed website, social media presence and blog can help set you apart from other businesses in your industry simply because very few of them invest in marketing. Use your website to display specials or coupons and update it regularly. Social media is a wonderful tool to engage with clients on a personal level that allows you to stay in their mind and become known as more than a brand to them. You can also use social media to advertise fundraising opportunities or deals you have going on. More than anything, marketing gives you the advantage of a web presence and buyers will appreciate that you have laid the groundwork for them.
Someday you will need to plan an exit strategy and hopefully, these 6 tips can help you prepare. By understanding what goes into valuing a carwash, you can begin taking steps to ensure yours secures a higher multiple. Viking Mergers & Acquisitions can help you to understand where you stand today and how far you need to go. We offer a no-cost, no-obligation valuation for business owners. Valuations are a priceless tool that all business owners should equip themselves with and we are here to help when you are ready.