When it comes to being a carwash owner the only guarantee is that you will not own your carwash forever. At some point, you will either sell your carwash, retire or die, and that means you need an exit strategy.
The beauty of an exit strategy is it lets you leave your business on your terms. You have a plan for what will happen to your carwash when you are done running it and you can walk away comfortably. The last few years have been difficult for most business owners, including carwash operators. Inflation increasing the price of goods, higher costs of labor and overall elevated operating costs means it has never been harder to be profitable. These challenges may motivate you to get out of the market right now. However, doing so without having an exit plan will not set you up for the best outcome. Don’t leave out of desperation; leave on your terms.
Here are the important things to consider when creating an exit plan for your carwash.
Make the business turnkey
It is important to understand that buyers are interested in buying functioning and hassle-free carwashes. No one wants to buy a carwash they have to invest even more money just to get it to a customer quality standard. This means an important step in planning your exit strategy is making your business turnkey. A turnkey carwash will have an established customer base, business processes, and a few long-term employees and managers.
The benefit of this to the buyer is that when they purchase your business, they can instantly switch ownership with very little barrier to day-to-day operations. Investors don’t want to invest in a carwash so they can work 40 hours a week. The benefit to you is that you can sell your carwash for something more than assets.
The success of your carwash means prospective buyers must account for the success of your business in the valuation of your carwash. A turnkey operation even benefits you if you are only looking to retire but still own the company. This type of carwash means you can easily step down and put one of your managers or family members in charge.
A good rule of thumb for knowing if you have a turnkey business is to ask how much you are working and what you are working on. A turnkey business owner should be working about five hours a week on their business and not 40 hours a week at their business.
Set up a retirement fund separate from your business
One of the biggest mistakes carwash owners make is assuming the amount they sell their business will be enough to sustain their retirement. Do not make this assumption. It will lead to bad outcomes such as helping the new owner run your old business. So often business owners sell and they don’t have enough to retire on. I highly recommend opening a retirement fund that is set up for the life of the business.
You can open an IRA or a solo 401k, whatever you want as long as you are putting some of that money you make off your carwash into a retirement fund. Map out your financial future considering how much you can afford to put in that fund each month and how much you need to realistically retire. Remember, creating an exit plan means exiting on your terms. You are not doing that if you have to go back to work after you sell your business.
Do your research and set realistic expectations
Nobody cares about your carwash more than you. After all, this is a company you nurtured and grew. Naturally, any business owner is going to value his or her company more than any buyer on the market. Even if a buyer did love your carwash as much as you did, they would 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. Know how much carwashes are selling for in your area, talk to carwash owners who have sold their business and look for the reasons why a particular carwash sold for what it did. Don’t just assume because one carwash sold for $1 million your carwash will sell for that much.
There are a variety of factors that impact the value of a business from financials and location to staff. Your carwash may not have those things to the same degree as your competitor that sold. Know your financials, know your market and set your expectations accordingly.
If you feel like you have a turnkey carwash and aren’t getting the right value for your company then you have the option of waiting for the market to improve while you continue to grow your business.
You also don’t have to go into the selling 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 outsider’s opinion on the health of your carwash.
Don’t feel pressured to sell your company if you don’t want to, but also don’t let your pride keep you from a good deal.
Creating an exit strategy is a great way to prepare your carwash for a sale or for the time you take a step back and let your team manage it. A strong exit strategy will increase the value of your carwash and give you better financial stability in retirement.
However, a good exit plan does not occur overnight. You need to spend at least three years growing your business, growing your savings, and improving your processes before you think about selling or stepping down. Do these things and your exit plan will help ensure a graceful exit and bountiful retirement.
Adam Spooner is a co-founder of Pareto Impact Consulting. A business consulting firm helping small to medium business owners grow by delivering customized solutions that drive growth, increase profitability and create a lasting impact. Contact Pareto Impact for more information.
