Would You Pay $11M for Two Car Washes?

0:28Hey, everybody. just under a million dollars in free cash flow. Heather and I talk a lot about the different dynamics for this business, what drives value, what are the trends that might be impacting this industry. It's a really fun conversation. I hope you enjoy. Stick around after a quick word for our sponsors. We'll say to Acquisitions Anonymous. Hello, another episode of Acquisitions Anonymous. We don't have 100 % beers anymore. And thumbs downing on just the plus inventory alone. Hey, everyone, it's Bill. And I want to tell you about an event that's honestly become one of the highlights of my year.

1:03And that's Main Street Summit in Columbia, Missouri. I've been a speaker and an attendee at Main Street Summit for a couple years now. And I'm going to tell you firsthand, it's really not your typical conference at all. It's more like 1000 business owners, operators and entrepreneurs all gathering in Columbia, Missouri, for three days of practical and actionable business content. It totally takes over downtown Columbia. And they have probably 20 different venues. It's very cool. One of the things that really sets Main Street Summit apart for me is the relationships. I wrote on X after last year's event that it was great talking about business and life with people who really have become a much more than just conference buddies.

1:42You know, business really can be a great vehicle towards deep friendship if you're willing to go there with people. And that's exactly what happens at Main Street Summit. You're really not sitting in massive auditoriums. You're in intimate settings, art galleries, small classrooms, etc. with world-class business owners and operators who have lived the challenges that are keeping you up at night. So really, no matter what industry you're in, from plumbing to e-commerce, there are specialized tracks designed for real practitioners like you. Main Street Summit is coming up. It is November 4th through 6th, 2025.

2:12It is in Columbia, Missouri. Do not miss this chance to connect with people who really get what you're building. You can visit MainStreetSummit.com to grab a ticket and I will see you there. I'm speaking again this year. So if you find me, come up and say hi. See you at Main Street Summit. Hey, Heather. How are you? I am great. I just got back from a conference. So that's always energizing. It's fun to see people in person when we do so much online. Yeah. We were too busy making our travel arrangements. I'm going to be in person with Heather next week for our recording. But I forgot to ask, Because you were at the Buy Then Build conference.

2:48It was. How was it? The very first of their conference. Yeah, it was great. It was, you know, a smaller conference as some of them go, which I really prefer because you really get to talk to people a little bit more. And just a great group of people. I mean, all the who's who and some really great buyers. And it was really fun. Chelsea was there. Chelsea was there. That was her show. I mean, she put the whole thing on and she did a great job. It was really great. Did you ever met Chelsea in person? We record with her like semi-regularly. I've never met her in person. I did. I met her in person at a broker conference that happened to be right here where I live in Orange County a couple of years ago.

3:29She and Walker were there. And then this time it was in their home turf, which is St. Louis, which I have never been there before. So that was pretty cool too. That's awesome. Yeah. I brought a deal for us today and I've stumbled on a broker. I think we're going to, we're not going to name brokers unless they sponsor us. So I'm not going to name this one, but it'll be on YouTube for people who are on YouTube. But this broker, I was like just poking around and they have like a really, really high number of car washes. And so I just kind of started going through the list and being like, okay, what makes a good car wash?

4:03What is a bad one? And so this one is two car washes. Uh, it's two car wash locations in Virginia and, uh, they're asking price is 10 million, 999 ,999 dollars. Um, I don't, I don't know the psychology behind that. I know like when you are buying a pack of gum or a bag of chips, like, you know, being under a dollar or two dollars matters. I don't know why$11 million is the wrong price for this business, but yeah. The cash flow that they list is$940 ,000. And it says this is a package of two car washes for sale in high traffic areas. Both locations offer touchless car washes and detailing services.

4:52The businesses include the properties and have been owned and operated for over 20 years, providing a strong foundation for new ownership. One location also offers lube services and other maintenance work, increasing potential revenue streams. Customers can choose from a variety of wash and detailing packages. Wash packages can be purchased as a monthly subscription, which provides recurring revenue for the business. These established car washes present a great opportunity for a buyer looking for a profitable investment in a growing industry. A signed, in all caps, a signed confidentiality agreement is required for the exact location.

5:29Business owners, we represent qualified clients that are very interested in buying all types of businesses. If you have any interest in selling your business, we keep it confidential, all these different things that they say. So they do give a little bit more info, but not a ton. It says the revenue, the combined revenue for these two car washes is$1.6 million, and the cash flow is$940 ,000. They don't list EBITDA, FF &E, inventory. And I think that's really it. That's all. Do they tell us what they think the real estate value is? They don't parse it out. They just say it's included. Yep. Okay.

6:07And all we have is Virginia, not even a city. Virginia, not Northern, not Southern, because they are like two different states, Virginia. Yes. Yeah. Yeah. Wow. Okay. Well, the real estate obviously has got to be a pretty big part of the valuation since the cash flow is only$900 ,000. And that would be almost an 11 multiple of or more than 11 multiple of the cash flow. So they've got to be asking you to pay a pretty fair penny for the real estate. But what else is this real estate good for besides being a car wash? Maybe you get lucky and it's like a seven acre parcel. you know, on a corner and the car wash only takes up like half an acre or something.

6:54Right. I'm so intrigued by this whole car wash thing because I'm going to tell myself I have a car wash subscription for our family mini bag. And I think it's like$30 a month and you can go once a day. And it's like$15 for a single car wash. To me, it's like the best bang for your buck. And I get it. They want recurring revenue and like they're willing to you know really uh incentivize that but i'm a huge fan of i mean we will just go when we had young kids we would just take them in the car to the car wash just so that they would you know fall asleep from the lull of the car wash yeah but they've got the crazy good vacuums you know i like vacuum out like you know a hundred dollars worth of chick-fil-a french fries once a week out of the minivan i think it's just a huge value proposition but But it seems like, and I don't know about where you are in Orange County, but at least in South Carolina, we went from having like, you know, sporadic kind of mom and pop car washes and like the occasional small car wash at the back of the gas station to now just a proliferation of these car washes and they're touchless or they're drive through.

8:09or you get out of your car, you stay in the car, there's self-service, there's full service. I mean, it is like, it's like a mad land grab for these car washes, like, you know, drive through coffee. Do you have that in your market? You know, I think because we don't have a lot of unused land, you know, we pretty much every parcel you can imagine is already built out into something. We didn't have that much of that. Like I do still have the, the old mom and pop car wash down the, down the road and they don't even offer subscriptions. And I do kind of always scratch my head when I'm there, like they could at least do that with, you know, what they've got, but they don't.

8:46So no, I haven't seen it as much, but certainly as a lender, I've seen it a lot in other areas and I get it. You know, there's the self-serve and there's the coin operated and there's, but they're all going for the subscription model. So that becomes your car wash. You take all the family cars there and you are the recurring, you know, revenue customer. And, You know, yes, recurring revenue is more valuable, obviously, than not. But is it this valuable? You know, I guess my question is, is private equity rolling these things up? Is somebody doing something that's driving up these values? It seems like the consolidators in this space are really just growing with new sites.

9:28I don't, I have not really seen, I've seen brand new car washes right next to old, like shuttered car washes, you know? And I think that the, I was with my kids the other day and we passed one and it was called an auto spa. Like, I mean, there's probably like hot towels, you know, I'm not sure what happens, but I do think that so many of them are like the aesthetics matter, the branding matters, like, And they're not going to move into the old one and spiff it up. They're rinse and repeat. They're growing through new de novo sites, and they're just a machine at sourcing the capital, allocating the capital, and project managing these sites and getting them open.

10:14But I think a lot of the mom and pop ones, at least the few that I know in our town, the real estate ended up being more valuable than the operating business. and they just ended up, like one of them that's right around the corner, it's like a stone's throw from here, they just bulldozed the building and sold the dirt for like several million dollars. The car wash was never worth that much. So to your point, let's just say the real estate in this case, it's$11 million asking price. Let's say the real estate is worth$6 million and the business is worth a five times multiple or something like that.

10:47I mean, this is such a tricky scenario to separate the real estate value from the operating business value because you cannot, you can't move next door without spending several million dollars to build a new car. No, there's no business if you move, basically. And this is what we call location dependent, right? There's a big risk, even if you could move, that the new location just isn't as good, the traffic count or whatever isn't as good as this one. So yeah, it has to be that you're buying this, if you would pay that much for the real estate, it has to be that a couple of things that you think that the real estate's going to appreciate and maybe you do sell it for some other use down the road, you know, home development or something like that.

11:30And there's sort of the financing component, at least if it was a little bit smaller, if it was SBA sized, a lot of the people that we see buy real estate like this look at the fact that they could finance the whole thing over 25 years as opposed to 10 years, which is what you'd get for an enterprise only loan. So in an SBA, if you're buying both and the real estate is worth more than the business, you can get the whole thing on a 25-year conversation. Okay. So it's not like a blended AM. It's all or nothing. On a$5 million SBA loan, if the real estate's worth 2.6, the whole thing gets a 25-year AM.

12:10Exactly. If the real estate's worth 2.4, it's a blended average term. If it's 2.6, it's a 25-year term. So - Interesting. Yeah, it's just one of the rules that SBA has. And so it tends to happen more in the West where real estate is more expensive or in metro areas where it's more expensive, where you find these businesses where the real estate is worth more than the enterprise. and so yeah the financing play can kind of make sense that way because you get the 25-year amortization but it's still a tricky sort of valuation because you still only have the cash flow that you're going to get your this is still 900 ,000 ish of cash flow and you know it's not very easy to grow that cash flow in a car wash you know not at all I think though you know this is one of those cases where most of the people are looking at this like a real estate play.

13:08And if you're just looking at this from a real estate cap rate scenario, this is a very attractive yield. The problem is this is not a passive business. This is not, I mean, maybe if it was a point operated, you know, and it was, you know, you wash your own car and this is just a stall that, you know, stalls that you pull into, but it's not that. It seems like there's employees, There's detailing. One of them has, you know, a maintenance, you know, and lube service. I mean, this is far from, you know, mailbox money. Yeah. And this is the kind of staff that it's not that easy to find and maintain and manage.

13:48And dare I say, at least in my part of the country, there are car washes who have had ice raids. Yeah. You know, right. So that's got even more difficult is, you know, do, do, are you buying, does the seller have the correct documentation, the I-9s and everything on all these employees? This is not the easiest labor pool to find and manage and make sure it is legal. Yeah. So yeah, there's, there's a, this is not collecting rents. So yeah, it seems like an attractive yield. Do you realize you're going to be working pretty hard here? Yeah. Yeah. I had this old client when I I was doing M &A work and wealth management.

14:27I had this client who owned a couple of car washes and it was, there's like a whole persona that goes with it. And he, one funny thing on the labor pool that just this reminded me of, I hadn't thought about since he would have, he had a work release program with the prison set up and they would bring inmates and they would wash the cars. It was like a full service, not touchless, not high tech. And they would bring the inmates and he was always having to fight with like, you know, the inmates took the change out of the, you know, people's car, you know, cup holder and all kinds of stuff like that.

15:09But I asked him just very like nonchalant and unknowing. I was like, you know, hey, how many cars do you guys get a day? And it was like, I had broken the golden like rule of carwash. You don't ask people their counts. He was like, we never talk about our counts. We are very tight lipped. Nobody talks about their counts. I was like, and I, I, then in hindsight, it kind of made sense. Like, okay, this is, you know, revenue matters, but I think it's more just that like, you know, his counts versus the guy on the opposite corner. Like they're so, you know, just judicious about that kind of thing.

15:46It was just really funny. I'll never forget this little, this little like 65 year old man. It was just like, we never talk about our guy. How dare you? Yeah. How dare you ask me that? Oh gosh, that's funny. I didn't know that. I probably would have asked the same thing. I, I'm like you, I go into all these small businesses and start thinking, why don't they, you know, have a subscription program? And I wonder how many cars per day, especially when you're sitting around waiting for your car to get washed. You start, you start observing. Yeah, you're like, I've seen 10 people. out of here. Like they must do a lot of business.

16:14Yeah. Yeah, exactly. So, so it's not an easy business to run. You've got two locations. They don't really tell us how far apart they are. And this is the kind of business also where density matters, you know, how close is the nearest competitor? Yeah. Is there, because this is such a booming, you know, trend, booming industry, is it possible a competitor is going to be putting a new one in near you? Yeah. You know, And you better look at the permits and look at what's going on around these locations to make sure you know about that. Because, you know, that's the other thing. Why are they selling?

16:49Yeah. Yeah, they don't tell us anything about it. I mean, this broker, when you look at their listings, I mean, I think there were like 400-something listings. And at least 75 % of them were car washes. And they're all over, which is really interesting to me. Like, this one is in Massachusetts. there's one in there's another in virginia that says it's a trophy asset um it's seven million dollars there's the self-serve and tunnel laser car wash i'm not sure what that is it's four hundred thousand dollars a tunnel laser car wash i need to know what this is 37 000 of cash flow uh that one's in ohio so one in connecticut three million dollar asking price 228 of cash flow.

17:37I mean, they're all over the place. So it's a broker that's specialized in industry, which I love. I love seeing more brokers do this because as a lender that looks at lots of different industries, you get a few that you start to get pretty good at after you've seen enough of them. But every industry is so different and it's nice to have a broker that really gets it all the way through. And probably they're less likely to put things out at crazy valuations that we sometimes see. Although this one does feel that way to me. I hate to say. No, but I mean, you know, if like, maybe that's what they trade for.

18:16And you're right. These guys know, like they probably, you know, control a lot of the market and a lot of the market in this case could be like 5 % of the market. Hey everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called Capital Pad and it is the thing that I wish existed when I started my journey of operating and investing in small businesses. So Capital Pad is a marketplace for acquisition entrepreneurs, that is people who want to buy a business and need capital to list their deals and solicit capital from other people who want to invest in acquisition deals.

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19:32It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out CapitalPad.com and tell them that Acquisitions anonymous sent you. This one is interesting. So this is the laser tunnel thing and it doesn't really tell us what that is, but, um, it's 55, this one, this one's, uh, no employees. It's like self-service or you just drive through. Um, it's 24 seven. That's also kind of interesting, but it's a 55 ,000 in revenue and 37 ,000 in cashflow.

20:12So, I mean, our, I thought ours that we started with was high margin at, you know, basically like 50-ish, 55%, you know, net margins. This, they can be much more than that. So it's kind of intriguing. Yeah. I mean, that's laser must be just be just totally automated. And it makes the laser sort of guides the car through or something like that. Yeah. Interesting. Wow. Have you ever seen, Heather, those like freestanding self-serve ICE kiosks? No. so we have them here that you know they're they're almost like the size of like a small shipping container um and they're like permanent they're not on a trailer they just get like installed um you know on a concrete pad and it's like three dollars and you can go get uh like a 20 pound bag of ice whereas if you go to a gas station it's like a 10 pound bag of ice is yeah oh so is it like a machine like an ice machine it's an ice machine yeah and like it dispenses a bag and then like you know you put the bag at the bottom and it fills it up they're you know they're in kind of random locations but like a lot of like by we have a big lake here um that's like a big recreational area there's a bunch of them around there yeah yeah wow cool i looked at them uh at one point and i think it was like maybe around if i remember right it was maybe around like 90 000 um to buy one of these and and they kind of they're all kind of branded i think they're all kind of branded a little bit different.

21:44I think this one was called twice the ice, which is like the big name in that space. And it reminds me of this a little bit because it's just kind of like this covered land play a little bit. Like there's good cashflow. The ice things take up like no space. You could put it in like somebody's out parcel, you know, in their parking lot if you needed to. But the like lingering fear that I had with the, the ice, uh, kiosk was, you know, you're constantly like doing like refrigeration repairs and like your freezer is going to go down. And like, what if the bill dispenser or the credit card scanner goes out and like a lot of these people end up owning like a portfolio, you know, they own like 10 of these things.

22:26And I just thought, I don't really know enough about refrigeration in order to maintain it. But it's in this kind of same category of like kind of quasi passive, but, you know, So it could definitely teeter more on the line of like very hands-on at certain times. Yeah, right. I mean, small business is not really ever passive. No. Right? Everyone wants it to be, but it is not. And yeah, anything that's kind of going 24-7 too, that's another level because you're not going to be able to sleep at night sometimes and have to go out in the middle of the night to go repair things and deal with the problems.

23:05But that is interesting. I'll have to, I have to look around and see if they have those and I just haven't seen them, but that's pretty cool. They're fascinating. Yeah. The nice thing about this business though, going back to the car washes, you know, there's probably almost no inventory. You know, they're like buying soap and wax and, you know, probably air fresheners and stuff like that. um the i i would be really curious like what their water bill is i mean they've got to just use a crazy amount of water and and then maybe the utilities too like depending on like if it's a touchless dryer and like some of these are like heat you know power dryers and things like that i would be worried and i'm sure the industry has some like threshold for this and it's a known thing, but what if you mess up somebody's car?

23:53You know, what if like, I know that they have solved for it and, and that's just like kind of the cost of doing business in this industry. But you know, what if the machine gets like a little off kilter and instead of the brush rubbing against the first ADs, you know, G-Wagon, it's, you know, it's this like mechanical arm that just gashes the side of it. Like those things have to happen. It's not an, it's not a matter of, you know, If it happens, it's just when. And probably there's insurance for it, I would imagine. But the car wash that I go to, I have a Tesla, and it's got these little automatic kind of touch doors.

24:28They will not let my car go through the car wash. It has to be hand wash. And I was like, oh, no, I don't need a hand wash. And I'm like, no, we won't allow it. And I'm like, what happened? Well, of course, one of those doors opened up and caused a bunch of damage. And so that's what can happen. And I think the more modern cars can cause problems, you know, going through these, these car washes. They put pressure on the, on the, uh, the button that opens your door and the door opens up. Yeah. Oh man, that's interesting. Yeah. I had not thought about that. Yeah. Cause like, you know, there's always like the old cars, it was like you would unscrew your antenna, you know, before you went, it wasn't even a retractable antenna.

25:09You'd unscrew your antenna before you went. I remember that. I have a ladder rack on my truck because of work. And so I can't, I can't really go into a car wash in my truck, but yeah, this would be one of those things. It'd be probably just really interesting to talk to the broker and just go, Hey, enlighten me, you know, maybe it's not this specific listing that you have, but just enlighten me on the industry as a whole. And, you know, who are the big like movers and shakers who's consolidating, you know, what are the trends? these industries would have like, I'm sure there's like, everybody's kind of chasing the, like, it's probably a small TAM.

25:47So they're all chasing, like, how do we edge out our competitors? Yeah. And what's the new thing that gives us some little bit of competitive advantage to kind of drive it? It'd probably be a really fascinating industry. I used to say this, I think it's not true anymore because of the way credit cards are used. But way back as a lender, we would mostly not lend on car washes because their tax returns never showed hardly any income. And they'd say, but no, no, we really make X. And we're like, well, that's cash and you're not reporting it. And therefore we can't underwrite to what you don't report.

26:26But that used to be very, very, very common with, with, uh, car washes to the point that like as lenders, we kind of considered them non-financeable. Wow. Yeah. Yeah. But I think that's probably changed a lot now. That is, that is in line with the, the former client that I had. He, he was that way. It was like, you could tell he had like cash under his mattress, you know, and, uh, he, he would cut cash deals with people left and right. We tried to manage a portfolio for him and it was just like, his personality just did not handle, you know, liquidity very well. And, and like riding, you know, the, uh, the market, uh, so.

27:04I always thought the, the business owners that I ran across that I knew they had a lot of cash and what they were doing, I always thought it would be kind of scary. Yeah. You know, like they're living on the edge with all this cash. Where is it? It's in their house and, you know, I, I, in the walls, who knows, but it, it, it probably makes them a little paranoid because they constantly, you know, they, they're hiding it from everybody you know yeah no kidding weird so you think this is probably financeable but not sba obviously because the purchase price and well it could go sba there is a scenario here where if you put enough equity it could go sba because you could use a full 5 million 7a you have 5 million 7a when you do another program that's just for real estate it's called 504 you get effectively like another like three million dollars worth of real estate loan you know could go into the 504 the way that it works yeah so maybe there is a play here for a 7a 504 combination but you'd be kind of shoehorning it in a little yeah yeah yeah but there's no way right that it would like debt service coverage there's no yeah right that's right right so i wonder i mean I wonder if a lot of these, uh, I wonder if a lot of these car washes just change hands, like with little to no financing.

28:24If it, if just the math, if it doesn't pencil, you know, maybe, maybe they're all like 50%, you know, loan to value deals and that's the only way they get done or just a hundred percent financing. And it's just kind of still mom and pop. Yeah. I think maybe a lot of seller financing or, you know, kind of a, a private real estate lender does the real estate piece and they figure out seller financing on the enterprise, maybe something like that. Yeah. Yeah. Huh. It's very interesting. I've never really looked hard at a, at a car wash, but now it makes me wonder like, which ones would be for sale in my market, you know, and how frequently do they change hands?