Valuing a Detailing Business?

[DeepReflections]

Has anyone gone through the drill of valuing your business? I have seen all kinds of formulas that work in theory but curious to hear from someone that actually bought/sold a detailing business.

[DavidM235ily]

I'm not a detailer nor bought/sold a detailing business, but did do mid market M&A for many years and currently manage/seeking private equity investments so happy to be of resource if I can.

Most detailing businesses would be tough to sell as the owner is generally the primary detailer and would have to go with the business to get it's best valuation.
If the owner wants out, you probably wouldn't get much of a premium over the value of assets which also is not likely to be particularly high unless the business has a very established reputation. A larger business with several locations and/or skilled detailers that would go with it would sell for much more.

Formulas really aren't good for valuing any business as qualitative forces can be a greater driver than quantitative - location, reputation, buyer motivations.

Are you looking to buy or sell? Feel free to PM me any details and I'd be happy to help.

[Calendyr]

I am thinking the business would only be worth something if there are a lot of clients on maintenance plans. Then you has so garanteed income. Otherwise the tools, products, equipment, website, and all those assets would be the primary value. If there is a big client database, this could also add to the value of the company. It is definatelly a case by case for sure.

[GSKR]

Has anyone gone through the drill of valuing your business? I have seen all kinds of formulas that work in theory but curious to hear from someone that actually bought/sold a detailing business.

Very hard to sell.I had a forum member contact me to buy his following. I said give me all your contacts and send me text or email on every customer that needs detailing done for the next 30 days and I will get back to you.He agreed,I got nothing but 20.00 carwashes and on full details he was charging cheap.Out of 50 calls the only customer that was profitable was a boat for 1300.He wanted 5k I offered 2500 he said no.The only value was his website the rest was grunt work and cheap customers.Anyone can start a car cleaning business nothing proprietary about it unless its realestate involved and a conveyor type wash system that can pump out 150 washes a day.

[Calendyr]

Very hard to sell.I had a forum member contact me to buy his following. I said give me all your contacts and send me text or email on every customer that needs detailing done for the next 30 days and I will get back to you.He agreed,I got nothing but 20.00 carwashes and on full details he was charging cheap.Out of 50 calls the only customer that was profitable was a boat for 1300.He wanted 5k I offered 2500 he said no.The only value was his website the rest was grunt work and cheap customers.Anyone can start a car cleaning business nothing proprietary about it unless its realestate involved and a conveyor type wash system that can pump out 150 washes a day.

Probably the reason he was selling. You can burn yourself out pretty fast doing 20$ washes.

[GSKR]

Him and his brother started a epoxy floor business. He wanted to recoupe the cost of the websites.

[DeepReflections]

Interesting thoughts. As the owner, I am not the primary detailer, I do the buffing on the tough ones. I have a crew of 4-5, with one person being in the front office with me as well as working details. We do have a stellar reputation with a good 40% of my customer base being repeat customers. We are the "go to" detailer for certain car shows, for instance in a show of 200 cars, we did six classic cars and all six won first place in their class. I now have booked in five cars for that show, with several others calling and discussing.
I do have a maintenance plan, with 22 customers buying into it. It is not something we push, but have discussed, as exactly that a stable income
Keep in mind I am in Silicon Valley in a monied area. Our complete details run $400 - $700, if black and paint correction is needed it can go as high as $1000. Our car washes are $50. Even at that price I have people knocking on my door almost daily for a wash.
We have recently gotten into doing Ceramic coatings, and that has had a large increase in revenue.
Not looking to sell, just curious to see if anyone has dealt with it.

[DavidM235ily]

You definitely have a saleable business here then.

As a base, most small businesses like this would be valued somewhere around 2-3 times annual earnings and 1x annual revenue. Since there isn't a lot of growth in a single detail shop, for most buyers it's all about how long until break even.

Because of your location and the type of business/clientele you receive it is very possible you could get a higher multiple from the right buyer.

If you can find someone with multiple locations that does high end cars that would like to expand, it would be a lot cheaper and easier for them to buy your business at a premium than it would to start their own new one and then have to compete with you. They could also get added value of further cross selling that would mean their revenue and earnings will be higher than yours and therefore the business is worth more to them than to you.

Given that you have a record of doing class winning cars, you could potentially find a golden unicorn that would net you the highest price - a very wealthy individual that would buy the business for the prestige. No way to tell you what that might be worth to someone as it's all about the emotion, but to a guy for which the difference of $100k and $5M is a rounding error on his bank account it just depends on how much you can sell the image of what his lifestyle would be like and how he can brag to his buddies at fancy car shows.

Identifying and selling this extra value is generally what the bankers will do, the lipstick on the pig, that earns their keep. Unfortunately this is too small a business to be worth the trouble for a banker.

You have the right frame of mind though, should never be looking to sell. Just be willing to consider offers
If the business is worth a lot more to someone else, last thing you want to do is throw out a number less than they would have come to.

That said, consider all the potential buyers and what additional revenue / cross selling / growth / marketing they would get from owning your business. Cost savings / synergies can be just as important as earnings. Add the cost savings/synergies to the earnings and the revenue/cross selling (at your current margin) to your existing earnings and use the multiples above. If they could get additional growth, increase your earnings across a 5-10 year period. Then discount those back at a 15% discount rate to a present value. You can use the PV function in excel. Put together a powerpoint book outline all this in the event their offer is lower than you'd like. Make valuations for these multiple buyer scenarios. This not only helps sell someone on the value of your business, but also helps show that you know it's worth. If you have an individual looking for a lifestyle business, this shows them that they are competing against companies that would value you higher and can often get them to pay up a bit more even if there is no other real buyer willing to pay more. Of course, if someone initial offer in the higher end/above this range.... shelve the pitch book and shake their hand.

[DeepReflections]

DavidM235ily,
Thank You that was a very detailed answer and I greatly appreciate the time and thought you put into it. I will do the Excel and PPT, that is a great idea. I also need to update my business plan, to show how I have stuck to it and have generated slow but solid growth. To be honest when we went through the customer list I was very surprised to see hw many return customers I have had. I was thinking more like 10% as a norm.

[Shawn Ashmore]

I can prob add on some things as well - you value a small business via
1. competition - are there a lot of competition? push that your margins and therefore your price
2. entrenched niche - something you are unique for in your market
3. goodwill - marketing/brand and reputation that are intangible.
4. profit margin - removing owner's salary / free labor as a factor.

Most small businesses are about 1-time revenue or low multiples on profit. So small business, unfortunately, are cheaply valued. If you can find a way to scale that - you can quickly snatch up a lot of small business and grow in size.