Considering Buying a Car Wash, Gas Station or Bottle Depot?
The PROCESS (Financial Statements):
Please note that financial statements, in most cases, are provided by the owner/seller of the business. We cannot send out financial statements if we do not have the authorization of the owner/seller to do so. Owners will provide financial statements and other detailed financial data to serious buyers and after there is some information known about you, the buyer. We always provide revenue and expense information (relevant information from the financial statements), and in most cases, a lot of other important data, that can help you understand more about the business. If after you have received and reviewed this information and have had an opportunity to view the property, by either driving by, washing your vehicle or purchasing gas, we usually set up a meeting with the owner to discuss the business in further detail. There is a lot more to learn about a business than simply reviewing financial statements.
In some cases, the owners/sellers of a business do approve us to send out financial statements. If this is the case, we will request a signed confidentiality agreement.
If you are new to commercial financing, it is recommended that you meet with someone from the commercial lending department at your bank to discuss options. Financing a commercial property, especially a business, is significantly more difficult than securing a mortgage to purchase a home or multi-family investment. Generally, to purchase a car wash or gas station, a minimum of 30-35% cash down is required. Other costs include a bank mortgage fee, legal fees, an appraisal and and environmental report - these costs can range between $10,000-$15,000. Please note that financing cannot be secured without financial statements, usually 3 yrs of statements are required.
What is GROSS REVENUE?:
We provide potential car wash buyers with the GROSS REVENUE that a car wash is generating. Gross Revenue is the total income that the car wash earns in one year (income from the car wash, truck wash, dog wash, retail sales, water sales, etc). Every car wash generates different income and it is not necessarily based on the number of bays. Some car washes generate a lot of income, some only a little. There are a variety of reasons for this. Sometimes there are several car washes in the same area (competition), sometimes the car wash is newly built and has not yet reached it`s full potential, and sometimes a car wash is getting older and needs a little TLC to bring the customers back. In pricing a car wash, gross revenue is a component but not not the only factor.
The NET REVENUE is the income minus the expenses. All car washes have the same categories for expenses, these are: INSURANCE, PROPERTY TAX, UTILITIES, PHONE/INTERNET, REPAIRS & MAINTENANCE, SUPPLIES and WAGES. Generally, taxes and mortgage fees are not included. NET REVENUE is approximately 30-60% of the GROSS REVENUE.
Before you BUY a Business:
It is important to note that when considering the purchase of a car wash, gas station or bottle depot, that as a buyer you recognize that these are businesses and not investment properties. A successful business requires good staff, excellent customer service, long hours of operation and a commitment from the owner to oversee the operation on a daily or regular basis. Car washes, gas stations and bottle depots are attractive to business-owners because minimal staff is required, it is generally unskilled labour and fairly easy to find in any city or town, and speaking perfect English isn`t always required. They are also often a good investment in land and many can be lucrative businesses especially for a family who intends to operate the business themselves.
There's no doubt that buying an existing small business is less risky than starting one from scratch. Why? Because, unlike a startup:
- the business has equipment and inventory;
- the business already has a location that is known and established;
- the business has employees, most who want to stay;
- the business has customers, most of whom probably will stick with you; and
- most importantly, the business has a track record (history)--you can look at the business' books, financial statements and get some sense of how much money you will make.
But there's still a risk. Whenever you buy an existing business and look at its records, you're looking at the past. There is no guarantee things won't change in the future.
Items to consider before you BUY:
1) Analyze why you want to buy a business. Are you looking for greater independence or the possibility of increased income?
3) Work closely with an experienced commercial realtor, an accountant familiar with businesses in the same field and meet with a mortgage broker or bank/lender who is also familiar with this type of business.
5) Prepare a comprehensive business plan if you need to raise capital. Banks and other lenders will want to see detailed plans of how you envision future growth. Calculate what you can afford to invest.
6) Determine a valuation for the business. Most industries have a standard method and concentrate on a multiple of the previous year's revenue (the exact multiple will depend on the industry). If the business has a lot of capital equipment (a manufacturer, for example), the market value of the equipment is taken into account. Fast-growing businesses in a hot market are usually valued higher, as future potential is factored into the selling price.
7) Ask if the current owner will consider financing part or all of the sale. That can mean a low down payment and an attractive payment schedule for you.