If you’re an investor seeking new opportunities, you may have looked into car wash businesses for sale and wondered if they’re worth the investment. If you want to sell your car wash business, you may wonder how to price it. Whether you’re seeking to buy or sell, you need to understand how to value a car wash business to get a fair price.
In this article, we’ll guide you through the process of valuing different types of car wash businesses and some rules of thumb for car wash business value that can help you make informed investment decisions.
Automatic Car Wash Real Estate Valuation Explained
In the world of business brokerage, valuation is a process that helps business brokers, investors and business owners determine a company’s worth. It involves using objective measures and evaluating every aspect of the business to paint a complete picture of how much it is worth.
Understanding the real estate valuation of a car wash is a crucial step in assessing its investment potential. The following three factors can significantly impact car wash business enterprise value.
Revenue and Supplemental Valuation
Revenue valuation determines the value of a car wash business based on income from car wash sales. A supplemental valuation considers additional revenue streams from wash offerings, such as detailing services, fuel sales, or convenience store sales.
Revenue valuation uses average cash earnings from annual sales and applies it to a multiplier to establish a fair purchase price. A higher revenue indicates a thriving business with effective marketing and strong customer demand, which can translate to a higher return on investment (ROI).
Supplemental valuation is significant because it captures the value of other revenue-generating activities within the business. These additional revenue streams can help diversify and stabilize the business, making it more resilient during economic downturns or seasonal fluctuations.
When evaluating a car wash investment, consider revenue and supplemental valuation to fully understand the business’s financial performance and potential ROI.
Car Wash Facility Water Usage and Utility Bills
Next, you should consider the facility’s water usage and utility bills. These expenses can significantly affect the business’s bottom line and, ultimately, the ROI.
Average water usage varies among different types of car washes, which include:
- In-bay automatics
- Tunnels
- Flex-serve washes
Many automatic car washes use the same amount of water per wash, so you can estimate the revenues by multiplying the amount of water per wash by the average ticket price.
Utility bills for a car wash typically include electricity, water, sewer, and trash disposal fees. These expenses can impact the overall profitability of the business, and they should be factored into the valuation process.
Typical Valuation Ranges Based on Type of Wash
Once you’ve taken a close look at the monetary, water, and utility car wash valuation, you should also look at the valuation range based on the type of car wash.
A valuation range is an estimated spectrum of values within which the car wash business is likely worth. It is a starting point for negotiations and further due diligence, ensuring you get a fair price.
For example, after valuation, a car wash business may be estimated to be worth 2.0x-2.5x its current revenue. You would stay within that range to make a fair bid on the business.
Understanding the typical valuation ranges for different types of car washes can help you make informed decisions about which business model best suits your investment goals. Let’s explore the valuation ranges for full-service, express, and self serve and conveyor car washes.
Full-Service Wash
A full-service car wash offers a thorough cleaning experience, including:
- Exterior wash
- Vacuuming
- Detailing services
Customers typically remain in their vehicle while it moves through the wash tunnel and exit it for interior cleaning.
Full-service car washes have a lower valuation range because they are becoming less common as faster, more automated car washes rise in popularity.
Express Car Wash
An express car wash is a fast and convenient option for customers. It focuses primarily on exterior cleaning.
Customers remain in their vehicles while they move through the wash tunnel. The quick service and lower price points attract a high volume of customers.
Express car washes typically have a much higher valuation range than other car washes because they serve so many customers and have a range of wash prices.
Self-Service Wash
A self-service car wash provides customers with equipment and self-serve bays to clean their vehicles themselves. Self-service car washes have lower operating costs than other car washes because they require less labor and maintenance.
The valuation range for self-serve car washes is typically lower than full-service or express car washes, but the lower overhead costs can result in attractive profit margins.
Conveyor Car Wash
A conveyor car wash — also known as a tunnel car wash — uses a conveyor system to move vehicles through a series of cleaning stations within a wash tunnel. These car washes offer a fast and efficient cleaning experience and can process a high volume of vehicles per hour.
The valuation range for conveyor car washes tends to be higher due to their high customer throughput and ability to generate significant revenue.
Get Car Wash Investment Advice and Expertise
Understanding how to value a car wash business is essential for potential investors and business brokers. By knowing what to consider, you can make informed decisions about the best investment opportunities in the car wash industry.
If you’re looking to take your car wash to the next level, National Carwash Solutions is here to help. As North America’s largest end-to-end provider of car wash equipment, chemicals, service and support, we offer expert guidance and assistance.
Contact us today, and let us help you find the perfect products and equipment for your car wash.
