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Multiples for Full Service Car Washes

If you need assistance getting a valuation for or selling a car wash contact me today.

In a previous article we discussed the costs of building a self-service combined with automatic car wash.  Start up, 3 years of planning, etc.  What about a Full Service Car Wash?  The only part of a Full Srrvice that might still have any Coin Op might be the vacuum or tire pump kiosk.

These sell very well!

Before the Great Recession, Multiples of 5-7 times EBITDA was not uncommon.

One that I sold just before the Big Crunch was a combination full service car wash and Oil Change.  These are more and more popular, especially in states with required annual emission inspections. (Another recurring revenue stream and customer driver).

There is another Rule of Thumb that Appraisers like myself also take into consideration when determining a Valuation.

Although previous overly high real estate prices in some places threw this Rule in the recycle bin, now that we are on the other side of the Great Recession, and unless the commercial real estate prices have re-inflated to pre-2009 prices, it is this: A car wash should be worth double the yearly gross revenues.

Valuations that greatly exceed 2X Gross are generally not going to fly with a Lender.  Of course, here I am referring to a private party, a person buying a business.

The exception to this Rule, of course, is a “Strategic Buyer” – this could be a PEG (Private Equity Group) or someone else doing a “Roll-up”  or multiple acquisitions in a given niche, like car washes.

It may be worth as much as the previous 5-7 Multiples of pre- 2009 pricing to a strategic or similar corporate buyer.

In doing a Business Valuation, the Key factors I look at include market conditions, owner’s salary, benefits, condition of equipment and of course gross sales.   Because car wash is so often a cash business, if there is any under reporting of income, this reduces the Gross Annual Sales, which, as previously stated, is primary in determining the strength and value of the business.

When I am appraising for the purpose of a Sale of a FULL SERVICE Car Wash I also calculate the cash flow, including recast items that are verifiable.  Without the real estate, generally if my valuation exceeds 4 times the cash flow, I want to go back and check my figures.  If it does include the land and equipment – I take that appraised value, including depreciation for equipment and increasing value of the real estate, if any, and want to recheck my figures if the Valuation I did exceeds 2 X cash flow.  (Summary: 4X Tops without land.  2X with and plus land)

I hope these multiples are helpful.  Remember, with Multiples, these are not cast in stone.  Valuation and Appraisal take into consideration a multitude of “judgement” factors as well, such as “is it a well run business?”

The Appraiser (that would be Me) is not just a human calculator and as far as I know, there is no software program can duplicate the experienced eye and skilled savvy of a seasoned profession who has done this 1,000 times!

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