What you need to know when selling your car wash business

When it comes to owning a car wash, the only guarantee is that you won’t own your car wash forever. At some point, you will either sell your car wash, retire, or die, and that means you need an exit strategy.

The beauty of an exit strategy is that it allows you to leave your business on your terms. You have a plan for what will happen to your car wash when you’re done with it and you can walk away comfortably. The past few years have been tough for most business owners, including car wash operators. Inflation driving up commodity prices, higher labor costs and overall increased operating costs mean it’s never been harder to be profitable. These challenges may motivate you to exit the market right now. However, doing this without having an exit plan will not set you up for the best outcome. Don’t leave in despair; leave on your terms.

Here are the important things to keep in mind when creating an exit plan for your car wash.

Make the business turnkey

It is important to understand that buyers are interested in purchasing working and trouble-free car washes. No one wants to buy a car wash, they have to invest even more money just to achieve the customer’s standard of quality. This means that an important step in planning your exit strategy is turning your business into a turnkey business. A turnkey car wash will have an established customer base, business processes, and several long-term employees and managers.

The benefit of this to the buyer is that when they purchase your business, they can immediately change ownership with very little barrier to day-to-day operations. Investors don’t want to invest in a car wash so they can work 40 hours a week. The benefit to you is that you can sell your car wash for more than assets.

The success of your car wash means that prospective buyers should consider the success of your business when evaluating your car wash. A turnkey operation even benefits you if you just want to retire but still own the company. This type of car wash means you can easily step back and put one of your managers or family members in charge.

A good rule of thumb to find out if you have a turnkey business is to ask how much you work and what you work on. A turnkey business owner should work about five hours a week on their business, not 40 hours a week on their business.

Set up a retirement fund separate from your business

One of the biggest mistakes car wash owners make is assuming that the amount they sell their business for will be enough to support their retirement. Don’t make that assumption. This will lead to bad results, such as helping the new owner run your old business. So often business owners sell and don’t have enough to retire on. I strongly recommend opening a retirement fund that is designed for the life of the business.

You can open an IRA or solo 401k, whatever you want, as long as you put some of the money you earn from your car wash into a retirement fund. Map out your financial future by considering how much you can afford to put into this fund each month and how much you need to realistically retire. Remember, creating an exit plan means exiting on your terms. You don’t do this if you have to go back to work after selling your business.

Do your research and set realistic expectations

No one cares about your car wash more than you. After all, this is a company you nurtured and grew. Naturally, any business owner will value their company more than any buyer in the market. Even if the buyer likes your car wash as much as you do, they will never tell you because their job is to buy your business for as little as possible.

Do your market research and set realistic expectations based on that research. Find out how much car washes in your area are selling for, talk to car wash owners who have sold their businesses, and look for reasons why a car wash sold for what it did. Don’t just assume that a car wash sold for $1 million that your car wash will sell for that much.

There are various factors that affect the value of a business from finances and location to staff. Your car wash may not have these things to the same extent as your competitor is selling. Know your finances, know your market, and adjust your expectations accordingly.

If you think you have a turnkey car wash and you are not getting the right value for your company, then you have the option to wait for the market to improve while you continue to grow your business.

You also don’t have to go into the sales process alone. Working with a business broker will give you the help of a professional who can guide you through the process and give you an outside opinion on the health of your car wash.

Don’t feel pressured to sell your company if you don’t want to, but also don’t let your pride get in the way of getting a good deal.

Creating an exit strategy is a great way to prepare your car wash for sale or for when you step back and let your team manage it. A strong exit strategy will increase the value of your car wash and provide you with better financial stability after retirement.

However, a good exit plan is not created overnight. You should spend at least three years growing your business, increasing savings and improving processes before you consider selling or retiring. Do these things and your exit plan will help ensure a graceful exit and a generous retirement.

Adam Spooner is co-founder of Pareto Impact Consulting. A business consulting firm that helps small and medium business owners grow by providing customized solutions that drive growth, increase profitability and create lasting impact. Contact Pareto Impact for more information.

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