When most people think of Private Equity firms, they think of companies that specialize in the buying and selling of massive corporations. Some are surprised to learn that in most cases, private equity firms will specialize in the buying and selling of smaller regional businesses. Among the kinds of businesses that are purchased by private equity firms, car wash businesses have become an increasingly popular choice. In this post from the Car Wash Advisory blog, we’ll discuss why the car wash industry has become a hotbed for private equity firms across the United States.
In recent years, private equity firms have expressed great interest in the car wash industry. It’s common for investors to spend as much as 18 to 20 times the earnings of car wash businesses before depreciation and amortization, interest, and taxes when purchasing a car wash business. This is largely because the car wash industry has been known to be recession resistant in the face of a US economic downturn. But, private equity firms had little interest in car wash businesses until recently. Initially, private equity firms were not interested in car wash businesses for a few reasons, including:
With the rise of prepaid car wash memberships, revenue became more consistent across the car wash industry. Since car wash businesses can automatically charge a customer's card for a car wash subscription package, a rainy week’s poor sales can be balanced out by monthly memberships.
Additionally, improved car wash technology means that fewer staff members have to be on-site for the business to run smoothly. With the increase of prepaid memberships, many car wash businesses now use automated technology so members don’t need to speak to a staff member when they come for their car washes. In turn, car wash business owners can hire fewer staff members, increasing the amount of money they can put into their pockets. These factors combined made it so that car washes are overall more profitable and easier to run and maintain, leading to the increased interest in car wash businesses from private equity firms. If you’re interested in learning more about private equity businesses and the car wash industry, we encourage you to check out this article from the Wall Street Journal.
At Car Wash Advisory, we specialize in helping car wash businesses sell, whether it’s to a private equity firm, an individual, or another car wash business. To learn more about Car Wash Advisory and how we can help sell your car wash business, give us a call or contact us online today.