A car wash business can be a solid investment that allows you to be your own boss while at the same time providing income for years to come. If you are considering purchasing an existing car wash business, you may have questions about whether or not the current owner is asking a fair price for the business. There are a number of factors to consider when it comes to assessing a value to an existing car wash business and determining the potential costs that may be associated with the business.
Order a property appraisal through a qualified appraisal company experienced in business valuations. A proper appraisal will provide you with information regarding the value of the lot in relation to other businesses in the area. The appraisal will also show you the value of all buildings and structures located on the parcel of land, if applicable. A proper business appraisal could also provide important information about the value of any equipment, supplies and materials that would be included in the sale of the car wash.
Schedule an inspection of the property as well as all equipment present in the car wash. While an appraisal will help you calculate the fair market value of the property, an inspection can provide information about the condition of the property and the equipment. The inspection will reveal if the property needs repairs or remediation for things like mold growth, pest infestations or structural damage. Ask the inspector to provide repair estimates so you can determine the cost of any items that may need to be fixed or replaced. According to propertyvalu.com, replacing the equipment for one self-service car wash bay can cost $25,000 or more.
Talk with the current owner of the car wash business to get an idea of what you might expect to earn in annual profits. Ask to see annual receipts or business tax returns if the current owner is willing to share that information with you. Bizquest.com indicates that many car wash businesses operate on a cash basis that leaves a good deal of income undocumented, but it's generally fair to estimate approximately 30 to 35 percent of gross revenues as profit.
Enter the financial information into a spreadsheet, or ask your accountant to help you establish a true value based on the information provided. Take into account the sales price, the cost of building and equipment repairs, employee salaries, annual taxes and business license fees. Compare the total estimated costs to the projected annual profit margins, and determine whether the proposed value is acceptable to you as an investor.
Sara Melone is a mother of three and a graduate of UNH. With prior careers in insurance and finance, photography, as well as certifications in fitness and nutrition, Melone draws directly from past experience and varying interests. She contributes with equal passion to birth journals, investment blogs, and self-help websites.