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Car wash

How to Sell a Car Wash

The uncomplicated business model of a car wash gives you access to a large pool of potential buyers. This is how to capitalise.

With 650 vehicles on Canadian roads for every 1,000 people (and growing), the car wash sector counts on huge, stable demand for a comparatively inexpensive service.

But for all the attractions of this sector to business buyers – another being the straightforward business model – don’t assume that selling your car wash will be easy.

Finding a buyer within a reasonable time frame and maximising your sale price is still contingent on patience, thoroughness and setting realistic expectations.

A business broker and/or suitably qualified lawyer can help you in these areas. They will guide you through the process, from preparing paperwork, producing a prospectus and screening buyers to conducting negotiations and reaching an agreement.

The very first step – preparing your business for sale before putting it on the market – is as important as any.

Preparing for sale

Your advisers can help you gather, format, store and – at appropriate junctures – share with buyers all relevant paperwork. This includes things like accounts, tax records, payroll, employment contracts, lease documents and so on.

Naturally, you should strive to optimise your business model whether you’re selling your car wash or not. Nevertheless, the prospect of maximising the return on your investment of time, toil and money is a powerful motivation for boosting its appeal to buyers.

So, what steps can you take in the next few weeks and months to boost takings, cut costs (without undermining service standards) and enhance curb appeal?

But first, a caveat: beware the risk of spending money you might not recoup through a higher sale price. However, relatively inexpensive changes could make a subtle, but meaningful difference to buyers’ first impressions.

It could be a new carpet or fresh coat of paint in the office. Replacing shabby or dated signage can really help since this is the very first thing the buyer will see and this sector is heavily reliant on passing trade.

Buyers will want reassurance that the transition to new ownership will run smoothly and that they can continue your success after you depart. To this end, document in a handbook all processes involved in running the business day to day, such as maintenance schedules, shift rotas and point-of-sale processes.

Buyers will also seek evidence of historic and current business performance and the potential to maintain and build on your success.

They’ll obviously want to see a healthy balance sheet and a consistent track record of strong profits. Should financial performance fall short of this lofty ideal, be ready with explanations and reasons for optimism that the business can improve under new ownership.

Perhaps a patchy track record has recently given way to a marked upswing. If this coincided with an investment in automated technologies that cut costs or raised customer throughput, then the buyer can be confident of maintaining this positive trend.

Or maybe you can convince the buyer that a local housebuilding boom and the recent closure of your main competitor points to a bright future.

If you boast a great location – on a busy highway or adjacent to a gas station – this is worth shouting about in your sales prospectus and during negotiations.

Whether you’re a self-service location, have automatic rollover bays or provide car washes by hand, there are pros to each that you can emphasise.

Additional services, like waxing, detailing or valeting, might also burnish your appeal.

Business valuation

Car washes are typically priced by multiples, generally between 2 or 2.5, of gross annual revenues or EBITDA.

But this process is somewhat hamstrung by the fact that, as with other businesses taking a lot of cash, it’s often difficult to validate every sale and therefore report earnings accurately.

One workaround is estimating actual earnings based on a proportion of gross revenues – typically 30% to 35%.

The buyer could also scrutinise water bills during due diligence since water usage should be fairly consistent for each wash. This approach is less useful, however, where services that don’t use water, such as waxing or detailing, account for a significant share of revenues.

Longer established car washes might be valued using the capitalised excess earnings method, which factors in goodwill as well as tangible assets like property and equipment.

Newer car washes, especially rapidly growing operations, might be better served by discounted cash flow, which is based on an earnings forecast and risk assessment.

Finding buyers

That the car wash model is relatively straightforward is good news for you, the seller. This is because the pool of potential buyers capable, or who feel capable, of running the business is larger than highly technical, professionalised or otherwise complex sectors.

Buyers typically come from one of these sources:

  • Introductions via business brokers
  • Advertising on sites like BusinessesForSale.com
  • Advertising through trade press
  • Existing employees
  • Competitors

Agreeing on a dealSell Your Business

When you find a credible buyer (or they find you), negotiations will then take place (ideally by cool-headed intermediaries). What then emerges should be an agreement of a non-binding price and heads of terms.

You might achieve a higher price by accepting some of the payment in instalments, although this comes with risks.

Thereafter the buyer will conduct an exhaustive appraisal of your business. Called ‘due diligence’ this will involve visits to your business, a deep dive into your accounts and other paperwork and research into the local car wash market, among other things.

The final purchase agreement, which might differ from the initial terms depending on the outcome of due diligence, is a binding contract. Once signed, it’s a done deal: payment and the keys to the premises will be exchanged according to the terms agreed.

For more advice on the sales process, read our guide to selling a business .



Paulyne Antoniou

About the author

Paulyne as Head of Content has produced regular videos and editorial for many years with small businesses, franchises and industry professionals.

@Be_theboss

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