You’re thinking of selling your car wash, you’ve spent time exploring the different options, and you’re now considering the broker approach. Although you may be feeling a momentary win in the way of decisiveness and completion, there is still another decision fork ahead; what broker to go with.
There are actually two main choices a seller must make when deciding on a broker; first is the type of broker, and second the specific broker within that type. This piece will focus on the first of these choices; that being the type of broker.
There are three types of brokers to choose from:
In order to make a well informed and meaningful decision as to what type of broker is best for you, it’s important to dissect what the duties of a broker truly are. When condensed to its core elements, the duties of a broker are relatively simple. A broker’s responsibilities can be broken out into three roughly distinct categories:
This is the “planning” stage of selling your car wash. This is the majority of what occurs before selling has begun.
Overview of Valuation:
So, it’s time to sell, but what’s the price going to be? Many believe that the onus of price setting lies on the owner and seller. Truth be told, it really does not, and quite frankly should not. In fact, one of the largest and most immediate signs of an ill-equipped broker and intermarry is one that simply agrees with a seller’s thoughts on price without running their own analysis, forming their own opinions, and coming to their own answer. A broker is worth but nothing unless they sell your car wash. Marketing your car wash for sale, and then not successfully selling it, can in fact do harm to the seller and their business. Valuation and price determination being of issue is not a rarity. In fact, the reason why most businesses don’t sell is incorrect pricing.
It is the brokers job to not only derive an expected range and a list price, but also to do such through a methodical, meaningful, and explicable manner. The broker must be doing this knowledgably and through the influence of their pre-existing knowledgebase and current market dynamics.
Broker Types – Ability to Value:
Car wash brokers are best suited to correctly value a car wash in comparison to both other broker types. Business brokers will typically have a leg up on real estate brokers in the way of fluency of business valuation methodologies but will still fall far short of car wash specific brokers in valuation knowledge. This is especially pronounced and true in isolating historical financial aberrations and in rationalizing pro-forma performance in sales where the purchase is predicated on such.
Overview of Strategy:
The term “strategy” is used here to describe the process of deciding on how to sell a car wash. Methods include open listings, closed structured processes, and bespoke unstructured “opportunistic” processes.
The car wash market, on its own, is truly and correctly described as just that – a complete market. The variety, vastness, and diversity within it is large enough to constitute an entire market itself. The difference in profitability, ROI opportunities, capital outlay, company size, buyer profile, wash model type, owner involvement, and more; cover such a wide spectrum in just the car wash market alone that it would be in incorrect in all meanings to say “a car wash is a car wash”. The presence of this variety is what makes less knowledgeable eyes determining price so very dangerous – as a simple comparables analysis approach often leads to either the gross overpricing of a car wash (and the wash never selling), or significantly underpricing a wash (which can leave a large amount of money on the table and not in the sellers pocket).
The diversity that exists within the car wash market, combined with current market dynamics and demand being in its current state, makes it so that a “one-fits-all” strategy of selling is nothing but a gross act of negligence by any broker implementing such. Not all washes should be listed. Not all washes should be run through closed processes. Not all washes should have only one method tried on them. Although the method through which your car wash is sold may seem rather unaffecting to you as a current owner and seller, this couldn’t be further from the truth. As briefly mentioned, depending on the type of sale process which a broker runs for you, the owner can feel negative repercussions resulting from such (depending on how such was handled). Having stale public listings, misinforming counterparties and potential competitors - there are many reasons and ways that the strategy chosen to sell a car wash can impact the owner in more than just simple price and time-to-sell. More on this will have to come in another article, but the point is that choosing the strategy for selling a car wash is arguably of equal importance as deciding on the price.
Broker Types – Ability to Strategize:
The difference in ability to strategize in comparison among different broker types is rather inapplicable. All brokers can theorize as to a pro and con list of the different approaches. It’s when deciding on which of the strategies to implement and in what order to implement such that the differences in these brokers becomes more pronounced. The main determinate is flexibility and knowledge of the car wash specific market dynamics. Again, here a car wash specific broker sits above the other options in ability to strategize. The only true way to confidently determine the optimal strategy for sale is to have in depth and topical knowledge of the counterparties in the industry; that being the buyers. Without such knowledge, determining the correct strategy ends up being a coin toss at best, and most often actually an exercise in determining the path of least resistance (which often results in the most detrimental option for the current seller).
The ‘Execution’ duty of a broker is exactly as it sounds - to successfully and optimally execute on the decided upon strategy. The true tasks involved in execution includes marketing, listings, contacting targeted buyers, and effectively conveying the opportunity being sold. The attributes that set apart ideal vs good vs bad execution are timeliness, responsiveness, accuracy, flexibility, creativity, and follow-through. To keep this analysis and discussion fair, it’s only appropriate to assume that the brokers that would be chosen, whether in any of the three category types, would be ideal in terms of these attributes. The difference between the types of brokers in relation to execution therefore surfaces in their ability to execute on the tasks themselves.
Overview of Listing and Marketing:
The listing and marketing portion of brokering is largely commoditized. It’s far from rocket science. There are instances where one broker will use a different font, maybe a different color, but that’s about it.
Broker Types – Ability to List and Market:
All the tasks involved under the listing and marketing portion of ‘Execution’ can be carried out to equal levels by all broker types. A great broker, regardless of whether they focus on all real estate, all businesses, or just car washes, can put up an attractive and well formatted listing.
Overview of Conveyance:
Conveyance is the “selling” part of a broker’s job. Conveyance is not the act of convincing someone who really doesn’t need an electric toothbrush that they would be crazy to not buy one. Nor is it the task of convincing someone that some infomercial product will save their life. Contrary to some people’s beliefs, unlike the act of selling discretionary low dollar priced knick-knacks, there is no place for “pushy” pressure selling when talking about multi-hundred-thousand to multi-million-dollar purchases. So if it’s not greased back hair, talking as quickly as physically possible, and weaving in subliminal messages to sign on the dotted line as much as possible, then what exactly is conveyance?
Conveyance is the task of properly, accurately, and meaningfully being able to convey the truth of a current situation and opportunity. It is being able to knowledgably converse as to how the car wash is currently performing, what its’ realistic potential is, and everything in between.
Conveyance is of very little importance when the buyer / counterparty is an industry veteran. A buyer that currently owns six different express exterior tunnel car washes does not need a broker to tell them that the wash should do $800k - $850k in pro-forma revenue and 55% EBITDA margins by raising the top wash package up a few dollars and pushing unlimited membership through e-marketing. Nor does a seasoned industry operator need someone explaining how traffic count penetration and conversion fits into this washes’ current population demographic and local competition profile.
However, this conveyance, and truthful conveyance, is crucial during the sale to less knowledgeable prospective buyers. Now, truth be told, most buyers will, and quite frankly should, do their own homework and cross-verify everything a broker tells them regarding a washes’ backstory, pro-forma potential, and all else. However, the key to successful conveyance by a broker is to be able to truthfully, accurately, and meaningfully convey these in a way that both assures rightful confidence in a buyer, and does not misrepresent what the buyer will later find out to be as the actual truth after doing their own homework. The truth is immutable, and the truth will always shake out in the end. But falsification during the interim, despite potential interest in the objective result, can absolutely lead to dropped sales and negative perception of a business and opportunity.
Broker Types – Ability to Convey:
It is here, also in the execution level responsibility of conveyance, that car wash industry specific brokers rise above the rest. Verily, and as mentioned, depending on who the end buyer ends up being, conveyance may or may not have impacted the result and timing of a successful sale. However, many times it does. And having a broker that is incapable or lacking the knowledge necessary to properly and accurately convey the opportunity and car wash being sold can result in a suboptimal, or even completely unsuccessful sales processes.
The reason why real estate brokers and business brokers are given such high ratings here, even though they clearly fall far short of car wash brokers is that they can, as long as said broker errs on the side of silence over misinformed information conveyance, do less damage as a result of their inability.
Overview of Proactive Buyer Outreach:
Proactive Buyer Outreach is where different broker types differ most in terms of their duty of execution. Proactive Buyer Outreach is best thought of as everything a broker does to sell your car wash without the potential buyer learning of the opportunity on their own. In other words, it’s proactively contacting the correct buyers. Although seemingly simple, this is far more complex and multi-layered than it may initially appear. The reason is, Proactive Buyer Outreach isn’t a single task. Rather, to be done correctly and effectively, it requires that the broker (A) Has the knowledge of the industry and dynamics to be able to determine who the most likely buyers are (which requires industry knowledge to determine why certain industry strategics, competitors, and financial buyers would or would not be interested in an opportunity on a case-by-case basis) and then (B) Has the lines of communication and relationships necessary to get the opportunity in front of the correct parties, and lastly (C) Is aware enough of industry dynamics to not contact parties that could do harm to the current owner and seller by just knowing that said car wash is for sale.
Broker Types – Ability to Proactively Reach Buyers:
Again, given the heavy reliance on industry specific immersion, car wash brokers again perform leaps and bounds ahead of the other broker types. Real estate brokers may by chance know a local party or two that could be interested in an opportunity. Chances are, these counterparties are as much interested in any good commercial real estate deal as they are in a car wash specifically. The same goes for general business brokers, with just the replacement of real estate with a generic general business of your choosing.
Overview of Closing:
Bringing potential and interested buyers to the table is most certainly a step in the correct direction in any sales process. That said, a deal isn’t done until the papers are signed, and the money has been transferred. People may be surprised to know that only a low percentage of letters of intent, or “soft” offers, turn into executed purchase agreements and completed transactions. This is equally true for deals of all sizes, whether for a multiple car wash package for $25MM or a single car wash business leasing the underlying land for $350K. An offer is truly nothing, and that’s all it is, until the deal is closed.
Depending on how the prior two main broker responsibilities were handled, along with the specific buyer in question, closing can be very painful, or just slightly less painful. It’s very rare that closing is easy. The reason is that it’s not until the money is actually about to go hard that people start second-guessing themselves and the absolute tidal wave of redundant and often rhetorically introspective questions emerge. “Why did utilities drop in February of 2017 again?” “How do you know it will make this much money if run this way?” “What is the optimal ticket price structure again?” “Are you sure that I can make the upgrades I want for $100K?” “How much did you say I could sell this for in one years' time if I only am able to increase revenue 10% instead of our planned 15%?” It’s when pulling into the final stretch that the car starts swerving and people start slamming on the brakes. And the best part, it’s not just the buyer who exhibit this behavior; let us not forget about the lenders as well.
It is in this final responsibility, in actually closing the transaction, that having an industry specific broker may be of the most advantage. Nine out of ten last minute concerns, from both the lender and the buyer, are not generalist questions. Closing is essentially the act of conveyance, but this time on steroids. These questions, which come out during the time when most deals and transactions fall apart, are the “hard ones”. These questions are the final exam for that crazy class in high school that you took with a “hip” teacher who thought the most appropriate way to grade an entire years performance was 95% weighted towards one test at the end of the year with stuff that was inevitably never actually taught to you. These questions are typically deep and car wash specific.
The three main topics that these questions seem to circle around are (1) Prevailing car wash specific market dynamics (2) car wash financial questions (3) car wash operating and equipment questions. You may notice a theme here; all three of these topics are car wash industry specific. They are not real estate specific, not commercial property specific, and not small business specific… they are car wash specific.
But even furthermore, these questions at this stage tend to be “deep”. What is meant by this is that the core to these questions seem to hinge on the “why” and not the “what”? It’s not the robotic regurgitation of single recorded numerical figures that are required. The questions being asked are not “remind me what the pricing of the different wash packages under the current ownership are?” They are not able to be googled, they are not able to be read – even in a 140 page third party appraisal. These questions asked during this final stage are questions derived to try to find a way to read between the lines, not in an effort to acknowledge what’s on the lines.
Broker Types – Ability to Close:
The key to a successful closing is to have the intermediary in the transaction be a party who can honestly, knowledgably, accurately, and confidently answer these questions. Needless to say, the ability of an individual who deals with car washes everyday all day versus that of a generalist will be far better suited in this task. Once again, we have a gradient of ability to achieve spanning from a roll of the dice to that of a high level of confidence.
When it comes down to it, there are times when a car wash specific broker won’t be able to do better than a generalist local commercial real estate broker. This is the case when the car wash being sold is as much just a piece of generic commercial land as it is a car wash business. In these instances, the buyer is not buying the business for the business, nor for the 110 ft new conveyor, nor for the sweet new pay stations and canopies that were just installed; the buyer is just buying a commercial real estate investment. This is most often the case with low volume in-bay automatic and self-serve car washes. The ability to, and level of potential differentiation for these wash types, is generally less (with exceptions of course) and require the least involvement and strategic decisions from an owner.
When the overwhelming majority of a car washes' value is real estate and not the business itself, a real estate agent is worth considering as a broker type to sell your car wash.
A car wash broker is typically the best broker type to sell your car wash. There are of course exceptions to this. And as mentioned throughout this piece, and will be more specifically covered in its own article soon enough, the specific broker selected trumps that of even broker type. However, in most scenarios, a fitting car wash broker will produce results above and beyond that of the both general business brokers and real estate brokers. The reason for this is not “feeling”, but rather the simple and resounding logic that a car wash specific broker, with a real estate license, can do everything both other broker types can to the same extent and level, but can do more in addition to this which the other brokers without specialized industry knowledge and focus most likely cannot.
A car wash broker is most likely the best choice if the car wash you are selling has specific value as a car wash, above and beyond that of its' value as simply commercial real estate and / or generic business.
It makes the most sense to pick a generalist business broker when you are making that decision based solely and specifically on the broker themselves, not the fact that they are a business broker. Sitting in between that of a general commercial real estate and car wash specific brokers, generalist business brokers sit in a proverbial and noncommittal purgatory where they do everything okay but are the best at nothing at all.
A general business broker may be the best broker type if you know an absolutely incredible business broker on a personal level and if the car wash you’re selling is largely generic and its value to a prospective buyer lies just as much in the fact that it is a business, as it does in that it’s a car wash.
The choice of what broker to use when selling your car wash can seem overwhelming.
This piece was written with the goal of providing a non-biased analysis as to the factual differences between broker types. The reason the results may seem overwhelmingly skewed towards the car wash broker option is because one of the largest variables in the overarching question of what broker to select has been held constant; the individual broker themselves. Truth be told, a seller is in better hands with a wonderful real estate broker than a bad car wash broker. So, although determining the type of broker should be the first question asked, just know that the specific broker is equally, if not more important, than the type of broker you choose. Stay tuned for our upcoming piece that will detail what to look for, and be alarmed of, when evaluating different individual brokers, regardless of broker type.