Selling a Car Wash

What the buyer is pricing

The format matters before anything else. An express tunnel with a conveyor, an in-bay automatic where the car sits still, a self-serve bay with a wand and a coin box, and a full-service wash with hand drying are four different businesses. They have different labor needs, different equipment, and different buyers. A person who wants to run a tunnel with a small crew may have no interest in a hand wash that needs twenty people on a Saturday.

Whatever the format, the buyer is trying to find out how much cash is left after the manager is paid and the equipment is kept running. They will ask for wash counts by day, the average amount paid per car, and how many of those cars came from a monthly plan. They will also look at weather. A wash in a place with a rainy spring has a soft quarter every year, and a buyer would rather hear that from you with the numbers laid out than find it in the monthly statements.

Memberships get read first

Most modern tunnels sell an unlimited plan, billed to a card every month. Buyers go to that report before the profit and loss statement because it shows how steady the income is. They want the member count month by month for several years, how many people joined, how many cancelled, and what the average member pays.

They also want to know how often members come. A member who washes twice a month costs the wash a little in water, power and chemicals. A member who washes every day for a month costs a lot. The profit in a plan usually comes from the people who pay and rarely show up, and a good buyer will model both groups. If your payment system can export visit counts by member, hand that over early. Our post on recurring revenue and contracts explains why buyers pay more for income they can count on.

Fleet accounts, a rental car agency or a dealership that sends cars every week, work the same way. Buyers will ask for the agreement and how much of the volume comes from it.

The equipment and what it will cost soon

A car wash is a machine, and the buyer will bring someone who knows the machine. That person looks at the conveyor, the tunnel controller, the blowers, the brushes or cloth, the pumps, the water softener, the vacuum motors and the pay stations. They ask how old each piece is, what has been replaced, and what the maintenance log says. A wash that has the log, the invoices from the equipment dealer and a manager who can answer questions about each piece makes this visit short.

Deferred maintenance gets subtracted from the price. If the conveyor chain is near the end of its life, the buyer will price in the cost of replacing it and probably add a cushion. An older wash that earns well can still sell, often to a buyer who plans to rebuild the tunnel after closing, and we would want to know that going in so we market it to the right people. License plate cameras, new pay stations and a modern membership system all help, because they make the numbers easier to trust.

Land, building and the stacking lane

Many wash owners own the land. If so, the buyer will want to know whether the price covers the property or only the business, and the answer changes the financing. Our post on selling a business with the property attached goes through the choices. If the site is leased, the remaining term and renewal options are checked right away, since a lender will not finance a wash with a short lease left.

The site itself gets examined too. Buyers look at the traffic past the entrance, the length of the lane where cars wait, and what happens on a busy Saturday when the line backs up onto the road. A line that blocks traffic brings complaints from the city, and a buyer will check whether any have been filed. They will also check for a competitor. A new express tunnel opening a few miles away is the first worry for most buyers, and they will look through planning department records to find out whether one is coming.

Water, chemicals and permits

A wash moves a lot of water and a lot of cleaning chemicals, and the question is where it all goes. Buyers ask about the reclaim system, the sand trap, the oil and water separator and the connection to the sewer. They ask for the discharge permit from the local sewer authority and any inspection reports. They ask how chemicals are stored and whether there have been spills.

Some permits transfer with the business and some have to be applied for again by the new owner. Rules vary by state and your attorney confirms what applies to your site. A lender will often order an environmental site review before it commits, and the review is easier when the owner has the paperwork in one folder. Old fuel tanks from a previous use of the lot are a classic surprise, so find out what was on the site before you owned it.

The records a buyer will ask for

Expect requests for business tax returns, monthly profit and loss statements, a balance sheet, daily wash counts from the point of sale system, the membership reports and the processor statements. Utility bills matter more here than in most businesses. A buyer will compare water and power use to the car count, because the two should move together, and a gap raises questions.

Cash at the self-serve bays and the vacuum stations is a recurring issue. Coin and cash machines are hard to verify, and a buyer will discount any income they cannot trace to a deposit. If the cash has always gone into the bank and onto the books, say so and show the deposit slips. Our post on getting financials ready for a buyer covers what clean books look like.

Buyers will also ask for payroll, the manager's pay and tenure, the insurance history including any damage claims from customers, and the list of vendor accounts for chemicals and parts.

What tends to sink a sale

Washes that fall out of a sale usually share a few causes. The membership count was never checked against the processor. The equipment inspection found a worn-out conveyor or a failing water system. The manager quit when the news got out. A competitor announced a new tunnel nearby. The environmental review turned up something nobody had looked at in years. The lease was too short for the lender.

Most of these show up in the first weeks of a deal, which is why we like to find them before a buyer does. The manager is a special case. A wash that runs without its owner is worth more, and a manager who knows the sale is coming and has a reason to stay is worth a lot.

How to get the wash ready

Start with the records. Pull the membership history, the processor reports and the maintenance log into one place. Fix the small mechanical items that make a walkthrough look bad, like a dead vacuum motor or a worn mat. Confirm the permits are current and filed where you can find them. Talk to your landlord about the lease before a buyer raises it. If you own the land, decide with your advisor whether it goes in the sale.

When you are ready, Business Advisors of America starts with a valuation based on your own numbers, then prepares what a buyer and lender will ask for and screens buyers before anyone sees the site. If you want to see how we approach it, our page on selling a car wash is the next place to read.

This article shares our opinion and general information. It is not legal or tax advice. Always speak with a licensed attorney for legal advice, and a qualified tax professional for tax questions, before you act.