Author Topic: Business Valuation?  (Read 482 times)

jleo

  • 5 O'Clock Shadow
  • *
  • Posts: 38
Business Valuation?
« on: July 15, 2018, 09:36:40 PM »
Looking into a car wash purchase.

600k asking price.

real estate is included and worth atleast 400k.

Net income- 120k

How would you calculate the ROI on this?

Does this seem like a good deal?

lemanfan

  • Pencil Stache
  • ****
  • Posts: 734
Re: Business Valuation?
« Reply #1 on: July 16, 2018, 12:21:49 AM »

bwall

  • Bristles
  • ***
  • Posts: 422
Re: Business Valuation?
« Reply #2 on: July 16, 2018, 12:23:59 PM »
Double and triple check the value of the real estate, as that makes up 2/3 of the sales price.

Now, to evaluate the business, back out the value of the real estate. So, you're paying $200,000 for a business that brings $120,000, with the caveat that you have to carry the note for $400k at the same time. Not too bad, so far. Can you verify the $120k? By verify I mean tax returns.

If it's not in the tax returns, then it didn't happen.

MarciaB

  • Bristles
  • ***
  • Posts: 395
  • Age: 57
  • Location: Oregon
Re: Business Valuation?
« Reply #3 on: July 16, 2018, 03:08:01 PM »
I might jump on www.BizBuySell.com (an online marketplace for businesses) and poke around and see if there are other car wash businesses for sale, and try to get a sense of whether the asking price for the one you're looking at seems reasonable. You could compare what is included in yours vs. what's included (or excluded) from others.

SeattleCPA

  • Handlebar Stache
  • *****
  • Posts: 1201
  • Age: 58
  • Location: Redmond, WA
    • Evergreen Small Business
Re: Business Valuation?
« Reply #4 on: July 17, 2018, 07:55:20 AM »
Double and triple check the value of the real estate, as that makes up 2/3 of the sales price.

Now, to evaluate the business, back out the value of the real estate. So, you're paying $200,000 for a business that brings $120,000, with the caveat that you have to carry the note for $400k at the same time. Not too bad, so far. Can you verify the $120k? By verify I mean tax returns.

If it's not in the tax returns, then it didn't happen.

+1

Also, I would add you can/should probably look at both income tax returns and sales tax returns if available because that gives you a couple of information sources that seller has reported to tax authorities.

Further, if you want to be really careful, it would not be a terrible idea to buy a copy of the BizComps database (Available here: http://bizcomps.com/ ) to see if they have car wash comparables... AND to see what comparables on other businesses look like.

Note: The average price to earnings multiple for a small business is less than 2.5.

Michael in ABQ

  • Bristles
  • ***
  • Posts: 420
    • Military Saints
Re: Business Valuation?
« Reply #5 on: August 10, 2018, 06:22:30 PM »
I appraised a car wash and at that time the typical multiplier for the business portion was 2-3x, 4x would be the absolute top end. Keep in mind that the building has basically no value for anything but a car wash. Usually the real estate value is almost all in the land. The equipment can vary great. The one I appraised was a express tunnel type, brand new construction, and the equipment package was around $700k. However, most of that had a lifespan of about 10-15 years with some salvage value.