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.

 

[DeepReflections]

Just thought I would update this post. I sold my business for multiple six figures.
Why
It was 2 times my gross revenue and was jumped on in an instant because of the loyalty and quality of the delivered product.
I had an incredible customer base of high end customers in Silicon Valley that were very, very happy with my/our work.
Why
I managed to create an incredible website with SEO that brought in the best of the best. I had a stream of business that was simply constant and very high end. I have no idea who the clown was that constantly badgered me here over my website and tips I gave, but in the end, it was those tips that brought in that pipeline.
I was so busy I simply got burnt out.
More than anything we had an atmosphere in my shop of caring for each other and teamwork. We all jumped in to finish a car, or found issues that needed to be fixed before the customer showed up. No ego's, no drama just pride in delivery. We bent over backwards to make a customer happy and at times went way over and above what they were willing to pay for. That created an incredibly loyal customer base that in turn was willing to pay premium prices.
I moved more to Ceramics(Ceramic Pro Kamikaze, and Feynlab) and had a 9 week backup of $1500 - $7000 detailing jobs because my SEO concepts, and let's face it reputation was creating more business than I could handle. I partnered with a clear bra/wrap company and he jumped all over the opportunity to buy my business and expand it as he was present on a daily basis to see what was coming in.
Bottom line never, ever think that what you built was valueless.

 

[UncleDavy]

Just thought I would update this post. I sold my business for multiple six figures.
Why
It was 2 times my gross revenue and was jumped on in an instant because of the loyalty and quality of the delivered product.
I had an incredible customer base of high end customers in Silicon Valley that were very, very happy with my/our work.
Why
I managed to create an incredible website with SEO that brought in the best of the best. I had a stream of business that was simply constant and very high end. I have no idea who the clown was that constantly badgered me here over my website and tips I gave, but in the end, it was those tips that brought in that pipeline.
I was so busy I simply got burnt out.
More than anything we had an atmosphere in my shop of caring for each other and teamwork. We all jumped in to finish a car, or found issues that needed to be fixed before the customer showed up. No ego's, no drama just pride in delivery. We bent over backwards to make a customer happy and at times went way over and above what they were willing to pay for. That created an incredibly loyal customer base that in turn was willing to pay premium prices.
I moved more to Ceramics(Ceramic Pro Kamikaze, and Feynlab) and had a 9 week backup of $1500 - $7000 detailing jobs because my SEO concepts, and let's face it reputation was creating more business than I could handle. I partnered with a clear bra/wrap company and he jumped all over the opportunity to buy my business and expand it as he was present on a daily basis to see what was coming in.
Bottom line never, ever think that what you built was valueless.

I am glad that it ended well for you Steve. Not only did you sell your business but it sounds like your legacy of quality and care will be carried out by the new owners as well. Enjoy your leisure or your next adventure.

 

[sudsmobile]

That was me. And I've built a six figure business in less than a year running a two man mobile crew, so call me a clown all you want but your way isn't the only way to do things.

 

[DeepReflections]

That was me. And I've built a six figure business in less than a year running a two man mobile crew, so call me a clown all you want but your way isn't the only way to do things.

Never said my way was the only way, your monster ego interpreted it that way. I made some suggestions that worked for me that was just trying to help others out. You made it a personal vendetta for some odd reason that your ego could not handle someone actually posting ideas that were successful. Proven by the fact that you had to post the above comment. You could not resist trying to out do me, which I personally don't buy for a second, as I know many, many mobile detailers that can't even come close to your claim, in one of the most expensive areas in the US.
So why don't you tell the rest of the people here how you happen to be so successful rather than trash people that are willing to post up ideas that might help them.
Let's here how you did it!!!
I am no longer going to respond to this post, but I suspect 100% of everyone in it is interested in what worked for you since you claim to be so successful.

 

[DeepReflections]

I am glad that it ended well for you Steve. Not only did you sell your business but it sounds like your legacy of quality and care will be carried out by the new owners as well. Enjoy your leisure or your next adventure.

Thanks!!! Appreciate the sentiment. Hope everyone here becomes very successful and values what you built.
So I am done here as Deep Reflections, and off to a new adventure. Funny thing I am getting quite a demand in Southern California for Ceramics that I am not sure I want to pursue. Had my very first customer, who moved from Silicon Valley to Orange County ask me to do his car as he could not find anyone else that did his cars as well as I did. That led to others in the neighborhood and his/their friends contacting me to do their cars. I already have an 8 week backup. I am going to do some for something to do, as I really don't need the money.
I also have a world renowned restorer in Norcal talking to me about doing his cars. Funny how things pop up.

 

[gregpack]

Congratulations on your sale! I'm in the automated car wash business so my situation is different from most of you. There was an old business talk show by a guy named Bruce Williams I used to listen to. Many people would call about buying a small business and when numbers were discussed and the amount of time involved, Bruce would tell them "you're buying a job". It seems to me a lot of small detailing businesses are in that predicament, which will limit the amount of money someone will pay for it. However, if people ever want their business to gain significant value over the value of the assets their best chance is to implement systems in place that will allow a business to succeed in their absence. This involves hiring and training employees to do the grunt work. There is a book worth reading called the "E-Myth" by Michael Gerber that addressees the challenges of operating and then selling a small business.

 

[sudsmobile]

Never said my way was the only way, your monster ego interpreted it that way. I made some suggestions that worked for me that was just trying to help others out. You made it a personal vendetta for some odd reason that your ego could not handle someone actually posting ideas that were successful. Proven by the fact that you had to post the above comment. You could not resist trying to out do me, which I personally don't buy for a second, as I know many, many mobile detailers that can't even come close to your claim, in one of the most expensive areas in the US.
So why don't you tell the rest of the people here how you happen to be so successful rather than trash people that are willing to post up ideas that might help them.
Let's here how you did it!!!
I am no longer going to respond to this post, but I suspect 100% of everyone in it is interested in what worked for you since you claim to be so successful.

Let me dissect this piece by piece.

You don't have any kind of vendetta against me, it's me with the "vendetta", yet you came back six months later to brag about your sale and call me a clown. I have news for you, that's a exactly what a vendetta is.

As for what you THINK, well you're wrong. And I live in one of the most expensive areas in the US. How did I become successful? I've posted about it many, many times. Here you go.

First, I'm not undercapitalized like most businesses started on a shoestring budget. Second, when I started this business, I looked like a successful business. Shirts, wrapped trailer, nice clean late model Tahoe pulling it, business cards, credit card processing, custom phone number, beautiful website with tons of pictures and the ability to book online. People often mistakenly think we're a chain because we look professional compared to what they're used to seeing from mobile guys. Third, we've never missed an appointment in almost a year. We never been more than 5 minutes late without calling or texting, despite having 5 or 6 jobs on some days. We've never traded one job for a better one and screwed our customer. Very common here. Fourth, for the first six months we didn't say "no." If you called, we came. We took every job on every car. If a customer wanted to give me money, I took it. I don't think I'm too good for anything. Fifth, we show up, we do a great job, we're friendly, well groomed and personable. Sixth, our pricing is fair. We provide what I'm assuming people think is a great value for their dollar.

When my business pulls up to the curb of your house, we look like we're there to make money.

Do you believe me? I really couldn't care less what you believe. You're obviously a petty little man that holds perceived make believe grudges for months just to come back on here and brag about your "success." I'll gladly break open my books for you if you'd like. You know how much of this business is a "cash" business. I average $4500/month on Square. That's CC processing ONLY. I also end up taking about $1000-1500/month in checks. In the first 8 months of this year, I've averaged just over $8k a month in sales. I did $9200 in May. I also did $6500 only in July because I was by myself half the month and it was very hot.

The reason mobile detailers don't make that much money is because their average ticket is like $50. They don't ask for the sale. The don't upsell. They don't understand that this business is sales, not car washing. My average ticket is creeping around $170. Last month, I had a unusual number of "small" jobs. My average ticket in August was still $148 spread over 55 jobs. I'm the king of showing up and turning a $50 job into $150. Hey, you know, we should probably get a nice coat of wax on this. Have you thought about cleaning up those headlights? Here, check out my site look at these headlights I did yesterday. Oh, I bet we could get this interior looking new again with a little work. People don't know what they need, you need to tell them what's going to make them happy.

The bottom line is, the money is there. You have to do several things to get it. You have to make the phone ring. You have to take the jobs from the customers that call you. You have to be flexible and willing to work when the customer wants the job done, not when it suits you. Perfect example, I did two jobs by myself on Saturday. Easiest jobs ever. I made $330 in 4+ hours. I was "done" for the day. About 3:30, a guy called and my son answered it. He wanted his boat washed and it had to be done TODAY because he was going fishing first thing Sunday morning. Even though I was done, we went and knocked that job out. More money and happy customer, that's why we're in business. Sunday, a guy called me and wanted his Aston Martin (picture posted on this site yesterday) detailed for a show. He told me the guy across the street would do his 1975 Corvette Stingray (wash & wax) too. I went and got water and off I went. Did both jobs, made $300 and booked the Stingray guy for a full one step on his wife's Honda Accord and booked the Aston Martin guy for a full detail on his Jag for Thursday morning. People mention wanting other work done, I don't leave without additional bookings. I pulled out the polisher and hit the trunk lid of that Accord, the guy's wife was sold. She said set it up with my husband whenever you want to do it.

Like I said, the bottom line is, the money is there. Is every detailer, mobile or otherwise going to be able to get it? Doubtful. I can sell. I've always been able to sell. If you can't sell in this business, you're going to starve. If you can't sell in any sales business, you're going to starve. Period.

 

[sudsmobile]

Congratulations on your sale! I'm in the automated car wash business so my situation is different from most of you. There was an old business talk show by a guy named Bruce Williams I used to listen to. Many people would call about buying a small business and when numbers were discussed and the amount of time involved, Bruce would tell them "you're buying a job". It seems to me a lot of small detailing businesses are in that predicament, which will limit the amount of money someone will pay for it. However, if people ever want their business to gain significant value over the value of the assets their best chance is to implement systems in place that will allow a business to succeed in their absence. This involves hiring and training employees to do the grunt work. There is a book worth reading called the "E-Myth" by Michael Gerber that addressees the challenges of operating and selling a small business that is worth reading if you want your business to have marketable value when you get ready to move to other things.

That's a good point. Most people don't want to buy a job, they want to buy a business that just makes money with it structure already in place. When I'm out of this business, which is probably five years or less, I'm going to bring a young go getter in for the last year at minimum wage. I'm going to sell him the job as eventually being his own boss with a business that is already in place to make a great living for a young guy. I'm going to show him the ropes and take him around with me every day. Introduce him to all my customers, regular or new, as the guy that will eventually be the man doing their jobs. I'm going to give him every opportunity to succeed by showing him how to do the jobs right, how to interact with customers, how to do all the day to day stuff to ensure he's always ready to go and make money. Then when I'm out, I'm out. I'll hand him the keys to the trailer and say "Have a nice life, my friend" and just give him the business.

I don't need the money. I never started this for the money. I started this for my son. He does it but he doesn't love it. He wants to work at a desk like every other overprivileged kid his age that was born with a silver spoon in their mouth.