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Defining a Successful Sale

Before discussing the different methods, it’s important to define what a “successful sale” is. It would be inappropriate to take the overly simplistic approach of defining a “successful sale” as anything that results in the current owner no longer owning the car wash. There are too many confounding factors for this to be the case. Due to this, there is no universal “best” method for every owner, every car wash, and every situation. The main attributes that go into defining a “successful sale” include speed, involvement, price, confidentiality, post-sale conditions, and conclusiveness.

Speed

• Speed is how long it takes for the sale of your car wash to close. Not the length of time it takes for offers, talks, or any other intermediate steps of the sale process.
• Speed is not always inversely related to price – meaning it is not always the case that a faster and higher speed transaction must come at the sacrifice of a lower price. That is simply incorrect. In fact, sometimes the opposite is true. Whether by causation or correlation can be argued, but the truth is that many times the longer a process takes past the two month mark - the lower the sale price will most likely be.

Involvement

• Being the most straightforward of the factors, involvement is most simply and most accurately thought of as the amount of time a seller must devote towards the process of selling their car wash.
• This includes everything from creating marketing materials in the DIY method below, to creating financial pro-forma projections, to answering questions from prospective buyers, to walking people through their site.

Price

• Although price is seemingly simple, and it sometimes is, that isn’t always the case. Many times, price isn’t always as straightforward as a single number. Many times, it entails non-cash consideration such as rollover equity.
• The nuances of price are most pronounced and evident in multi-site car washes and / or higher volume tunnel car washes. Although not as prevalent in smaller or non-tunnel single washes, price complications can come in the form of financing contingencies and seller financing.
• It’s advisable for all owners thinking of selling in whole, or in part, for non-cash consideration to speak to an experienced advisor who has dealt with non-cash transactions. In these cases, it’s not as simple as just picking the largest number.

Confidentiality

• The degree to which the confidential information regarding your car wash, its financial performance, and its operations is safeguarded.
• This is of utmost importance for many reasons, but most notably to both keep information out of the hands of competitors and to not harm the current business if a sale process is not successful or the owner ends up deciding against selling.

Post-Sale Conditions

• This is another factor that is significantly more relevant and important to both multi-site car washes and to higher volume tunnel car washes.
• These types of conditions can include whether or not employees, managers, and owners stay on post sale and what the terms and conditions of such are.

Conclusiveness

• Conclusiveness is best thought of as hindsight comfort; or potentially better said – the degree to which there is an absence of seller’s remorse. Stick with us here as we explain.
• Seller’s remorse happens for two reasons; either the seller sentimentally misses certain aspects of their car wash, or the seller has a lingering feeling that the wash may have been able to be sold for more, with better post sale terms, or in different ways in regards to any of the sellers desired and prioritized factors which define a successful sale to them.
• Conclusiveness refers to the latter of those two causes of seller’s remorse. It is the degree to which on the day of close and thereafter, the seller can truthfully and earnestly say to themselves “I’m confident I got the best outcome possible.”

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Methods of Selling Your Car Wash

There are three main methods an owner can use to sell their car wash. Below we will walk through each of the methods and discuss them as they relate to the aforementioned defining factors of a “successful sale”.

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Option 1:

Broker Method

The broker approach is the most hit-or-miss method to selling your car wash. This is due to one simple reason; brokers themselves vary wildly and they themselves are very hit-or-miss by nature. Some brokers are wonderful, while others are horrible. Some brokers excel at certain geographies, some brokers don’t excel at any. Some brokers excel at certain types of properties and businesses, some brokers are just bad at all property and business types.

Using a broker is as strong and favorable, or as weak and detrimental, as the broker themselves. If you decide the broker approach is one you would like to consider when selling your car wash, it’s important to know a few more nuanced points of this approach.

Firstly, using a broker does not always mean openly listing your car wash for sale. A good and fitting broker will weigh out the specifics of your personal goals as a seller and your individual situation. From there, they will determine (and communicate to you) whether openly listing, or them running an off-market closed (structured or unstructured) process is the best approach.

Secondly, if you want to consider using a broker, it behooves you to spend time considering who the correct broker is for you and what broker or type of broker will be able to serve you best. For instance, it’s important to understand the difference between choosing an industry specific broker versus a geographic specific broker - and then deciding which is best for your specific situation and goals.

Speed

The speed at which a broker can sell your car wash is completely dependent on the broker, the car wash, and the type of sale process the broker is running (open vs. off-market, vs. structured and closed).

A valuable and fitting car wash broker will be able to sell your car wash as fast as all other methods, but the cold hard truth is, most brokers aren’t valuable nor are they fitting. Therefore, speed is highly variable depending on the broker you choose.

Involvement

A good broker will keep you as involved as you would like to be as a seller. Some sellers only want to be brought into the loop when a binding purchase agreement is on the table. Other sellers prefer to be informed on a more consistent and regular basis. Either way, a good broker will always sift out the non-serious buyers and will not waste the sellers time, while also not preventing or prohibiting any potentially serious and capable buyers from bringing offers to the table.

Price

In theory, a competent broker, through the ability to run a competitive process, whether that be a closed or open sale process, should be able to achieve a higher price for a car wash seller than any other method. This is of course dependent on the type of broker and specific broker which you choose.

The reason for this is that the broker approach brings multiple buyers to the table and therefore forces purchasers to make offers knowing that they could lose the opportunity to another buyer if they don’t put their best foot and offer forward.

Confidentiality

Confidentiality which a broker brings to your sale process when selling your car wash is also variable and based on both the type of process the broker runs (open vs. closed) along with trustworthiness of the broker themselves.

Post-Sale Conditions

Good brokers will be your advocate. They will facilitate equal, or better, situation specific post-sale conditions than would otherwise be possible with other methods of sale.

Conclusiveness

Once again, we have another factor that is completely dependent on the specific broker. A nimble, knowledgeable, and dedicated broker can provide you with a degree of conclusiveness that far exceeds any other method of selling your car wash. A less-than-fitting broker will provide you with absolutely zero conclusiveness.

When done correctly, a fitting broker will walk through all the options, layout what does and doesn’t make sense in your specific situation and will leave no stone unturned. You will know that you have optimized and received the absolute best offer and values regarding all factors.

A good broker will bring multiple parties to the table. In contrast, the other methods of selling often result in having only one potential buyer look at, and make an offer on your car wash. As can be imagined, this can never truly provide any conclusiveness. That’s like going to one contractor to get a price estimate – you have no point of reference, and even if you go with that contractor, you still wonder to yourself as to whether there was a better option out there. One point is always a point. Two points always makes a line. Three points are the minimum you need to confirm or deny whether you have a trend or randomness. A good and fitting broker will provide you with the maximum number of points, especially when compared to the other methods of selling.

Other Advantages

Obtaining Financing for Buyers:

• One advantage of a well-equipped and fitting broker is that they will facilitate financing for buyers for which financing is necessary. A broker can do this by arranging, at no cost to you, the financing for the purchaser. This is especially valuable and relevant when the purchaser is an individual and not a larger car wash company. Although not all brokers will do this, good car wash brokers will, and you should not be afraid to ask a prospective broker what they will be able to provide in this regards and whether they have preferred and capable lenders familiar with the car wash business and sector that can get capable and qualified buyers approved in a timely manner.
• As a seller, the last thing you ever want to do is get to the finish line and have a sale blocked due to not having the correct resources and connections to get the deal financed for the purchaser. And car washes are not as simple to lend against than other commercial real estate opportunity types, so having an advocate with connections to preferred lenders who are knowledgeable in this specific arena can be tremendously valuable to a seller.

Other Disadvantages

Fees:

• The absolute an undeniable disadvantage of the broker method is that it entails the payment of fees – which is typically paid by the seller.
• If a broker is not able to get a seller what they would have otherwise received, plus the fee, plus additional value (both monetary and non-monetary) above and beyond that, you have hired the wrong broker. A car wash broker is only worth what value they provide and if they don’t exceed what you otherwise would have been able to get with another method, they are simply put, a bad broker.

Conclusion – Brokers

Using a broker to sell your car wash can be either the best or the worst decision you ever make regarding your business. It entirely depends on what broker you go with.

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Option 2:

Do-It-Yourself Method

Selling your car wash on your own is always an option. Of all the methods and options available, the DIY approach to selling your car wash has the largest level of variability (arguably second to the broker method.)

Selling your car wash on your own can be as simple and easy as calling your neighbor or nearby competitor who’s bothered you every week for the past three years to sell your wash to them. On the flipside, selling your wash on your own can turn out to be a long, agonizing, drawn out, inconclusive, and even sometimes unsuccessful process.

Speed

This is completely dependent on the speed to which an owner wants to commit themselves to make a sale and transaction happen. The difference in speed of sale between the DIY method and other methods is completely situation specific.

However, in general the DIY method is the slowest in speed of all the methods. The reason for this is that owners and operators don’t spend all day everyday selling car washes and talking to buyers. Both the other methods of selling involve the use of a party which does spend all day doing this. With the broker method - a good broker (at least a car wash specific one) spends all day everyday speaking with buyers and has an actionable rolodex to show for it. Due to such, they have the ready connections and buyers waiting. With the Unsolicited and Direct Method - direct buyers are actively seeking opportunities by nature. The typically car wash owner and seller isn’t spending all day everyday lining up lists of buyers who are ready to go for specific opportunity types (nor should they be or else their car wash businesses would most likely not be doing all that well.) Inherently, and generally speaking, the DIY method is the slowest of all methods for selling your car wash.

Involvement

Involvement is where the DIY method of selling a car wash stands out as most different from the other methods. The DIY method requires, despite whether voluntary or desired, the largest amount of involvement and time commitment from the owner and seller.

Price

Price, though variable based on the seller themselves, is typically not optimized through the DIY method. The reason for this is that sometimes the market is “hotter” for a specific wash type and opportunity type in a given geographic market than even the wash owner is aware. In this case, the DIY method may yield a lower price than going with either of the other methods of selling.

On the other hand, sellers are at an immediate advantage when selling their wash using the DIY method when compared to that of using a broker, as there is no commission. As discussed, a broker is a bad broker unless they can get the seller a price higher than otherwise possible (all-else-equal) in an amount that more than compensates over the amount for which a commission is due. But there is no denying that theoretically speaking, a broker does cost money, and selling a car wash yourself as an owner does not cost money.

Confidentiality

Confidentiality of a DIY process is of the highest level. With the car wash owner running their own sales process, said owner is fully in control of every single person and party who receives information on the opportunity and the degree of information which said person or party receives.

Post-Sale Conditions

Post-Sale Conditions for DIY processes are a mixed bag. This also comes down to the seller themselves, but even more specifically, whether the seller knows what they want in post-sale conditions and then subsequently their ability to both convey and negotiate for said conditions.

Conclusiveness

Although it may seem like a no-brainer that running a sale process as the owner should lend itself to the ultimate degree of conclusiveness, it’s not quite that simple.

As already discussed, conclusiveness is largely a factor of what degree no stone has been left unturned and all options considered. This is often difficult to do while say… running a business like a car wash on a day to day basis and making sure it is successful and operating at its highest level. In other words, given that running a successful business is time consuming on its own, it’s often the case that exploring all options (or even being aware of all the options that exist) through the DIY method is sometimes difficult due to time restrictions.

Other Advantages

Ultimate Control:

• There is no denying that a self-run process provides zero risk of anyone but yourself ever being in control of the process. For some sellers, this is an extremely important aspect and worth the cost of giving up some of the advantageous of the other methods of selling.

Other Disadvantages

Ability to Execute on Financing:

• Typically, car wash sellers are not well equipped to handle, nor do they want to handle, arranging the financing for a purchaser if need be. Although not always, this sometimes can act as an otherwise avoidable hurdle to getting deals done and sales completed in certain cases.

Conclusion – Do-It-Yourself

Selling your car wash yourself provides the absolute ultimate level of control. Depending on how much time you are willing to spend and what your goals are for the sale, taking this approach may be the best and most fitting option.

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Option 3:

Unsolicited and Direct Method

Anyone reading this knows that the car wash industry is more active than ever. There is more activity, more consolidation, more new entrants, and more money in the car wash space at the current moment than there has literally ever been before. Along with this comes great demand from current operators, expanding car wash companies, and external investors who are actively searching for acquisition opportunities. Simply put, it is a wonderful time to be a car wash seller.

This high level of demand manifests itself with many of these current car wash players constantly cold calling car wash operators in hopes they can directly acquire them. As a small business owner, it’s a great spot to be in when what you built is in such high demand and viewed as being so valuable that you receive a constant and incessant stream of unsolicited offers from external parties.

This direct reach out and unsolicited offer process can be further split in two separate categories. There are external investment groups, and there are industry players. Although these two types of buyers may have similar methodologies in their approach, they are very different from each other. These differences will be highlighted in more detail below. However, for this piece, both these will be referred to as the “Unsolicited and Direct” method.

Speed

This is where the Unsolicited and Direct Method has the potential ability to excel. Unsolicited and Direct is the only approach where a buyer is the impetus for the sale, not the seller.

Industry buyers need no edification on the industry and most likely very little information on your wash. You can bet these individuals have done their research and have a good idea as to top line, car count, and their own future vision for your wash. These industry players can make offers and close as quickly as anyone. This may or may not be true of external investment groups, but for the large car wash players in the space, this is undeniable.

Involvement

Involvement from the seller in this method is significant in the way that you are representing yourself, but also brief and swift in the way that these buyers often know exactly what they are looking for and have pre-conceived and formed thoughts on valuation, expectations, and what they are willing to pay before they even approach you. Again, this may or may not be true for external investment groups that approach you, but for most industry players, this is the case.

Price

This method will almost never yield the best price. Sometimes the difference between the best price and an offer is small, but sometimes it’s several millions of dollars. It’s both very simple as to why this is the case and very clear as to the rationale; they have no incentive to offer you the most they are willing to pay when they are the only party making an offer. When was the last time you purchased something without an explicitly stated price and offered your absolute best top price right of the bat? Never – that’s when; and for good reason.

Let it suffice to say that if one group is giving you an unsolicited offer, there are several other groups that would be interested in doing the same. When that is the case, which is nearly always, this method will always yield subpar results in the way of maximizing price. If maximizing price is a goal, sellers are better off running a competitive process with multiple potential buyers. The fear of losing out on a buyer due to refusing to agree to exclusivity is not a real risk and should have no weight placed in it.

Confidentiality

The level of confidentiality which is achieved through the Unsolicited and Direct Method is high. Typically, a buyer that is going direct to seller is not looking to publicize anything they learn or glean even in the event of an unsuccessful or failed purchase. We are fortunate in this industry to have absolutely wonderful national players. They are fantastic people and great companies.

That said, external financial investment groups are a mixed bag. Some are just looking for info and have no real intent. Some have even less savory intentions. However, there are some that are absolutely fantastic as well.

Post-Sale Conditions

The Unsolicited and Direct Method of selling is the most hit-or-miss and binary in the way of post-sale conditions. The reason for this is that in this method of selling, the seller is dealing with one party – the unsolicited party which has approached them and offered to buy. Every buyer has different requirements for post-sale conditions. It is dangerous to generalize regarding this, but let it suffice to say that as you can imagine, industry operators are far less inclined to need the owner to stay on post sale as they have direct and ample industry experience. This may not be the case for an external investment group. For an external investment group, it may be a hard requirement that not only does the owner stay on post sale for at least a pre-determined period, but also that they roll some portion of proceeds from the sale into the pro-forma resulting company.

Depending on what the seller’s goals are regarding post-sale conditions, any of these may be perfectly fitting, or a complete non-starter for a sale transaction. The one downside of this approach is there is little flexibility in this way, as the seller is dealing with one buyer and post-sale condition requirements are either a fit or they aren’t. When using this method, there isn’t a line of other capable and willing buyers, with other post-sale conditions, which are in the fray and ready to make an offer.

Conclusiveness

Conclusiveness is minimal with the Unsolicited and Direct approach. Simply put, how can a person be certain that they have maximized an opportunity when they only deal with one counterparty and accept their first offer. They simply can’t.

In fairness, that doesn’t mean that there aren’t times when this approach is most favorable. If a seller doesn’t care much about price, but has the two primary objectives of selling their wash as of yesterday, and to have not a single soul outside of the buyer and themselves know that it is happening, then conclusiveness might not be a relevant or meaningful factor worth considering or valuing in this instance.

Conclusion – Unsolicited and Direct

The Unsolicited and Direct Method is a good when it works. The most inherent and pronounced trade-off a seller makes when using this method is optimizing for perceived speed at the cost of achieving best price. The largest risk this method of selling poses is counterparty risk. If you are fortunate enough to have a reputable and serious buyer, then it can often result in an acceptable outcome depending on your own goals as a seller.

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Summary

There is no right or wrong method of selling a car wash. However, there is an ideal method depending on what your goals are as a seller. Car Wash Advisory has the view that knowledge and awareness is always the most important starting point for any seller. Knowing your options and knowing the advantageous, disadvantages, and the differences between your options is where all sellers should start. Car wash owners spend years of their lives building wonderful businesses, and they owe it to themselves to at least consider the options available to them.

Although Car Wash Advisory is a broker, we are always more than happy to speak with any seller about their current situation, discuss their goals, and talk through what makes the most sense for them. Truth be told, the answer is not always going with a broker, whether that be us or another broker; and we aren’t afraid to lose business if a non-broker method would result in a better and more ideal result for the seller.

Regardless of the specifics of your situation, there is one ultimate truth - the key to successfully selling your car wash starts with defining what a “successful sale” means to you.

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