How to Value a Women's Apparel Store
Posted on January 12, 2013
(SIC No. 7542)
(NAICS No. 811192)
A. Nature of the Business
Car washes are either full service (i.e., fully automatic) or coin operated/self serve. They may or may not sell gas and impulse merchandise. Some include a convenience store and offer “oil/lube” services. Some automatic car washes without full service conveyors also have self-service bays.
The primary factors in a car wash’s success are location and the number of days open per year, both of which determine traffic count. Obviously, unfavorable weather adversely impacts sales volume by effectively forcing closure.
In 1989 there were approximately 22,000 car washes in the U.S., about 55% of which were full service. Annual car wash volume is estimated at $2.5 billion (including gasoline, which is sold by 70% of car washes). The average car wash served 81,000 customers in 1989. The industry employs 300,000 people and spends an estimated $80 million on equipment each year. About 90% of car washes are owner-operated. The investment in a car wash operation averages:
Conveyer Type $300,000 – $7 million
Self Serve $100,000 – $500,000
(depending on the number of bays)
B. Industry Statistics
Dun & Bradstreet’s Industry Norms & Key Business Ratios (1992-1993) surveyed 163 car washes, and the average car wash in 1992 had net sales of $470,538, gross profit of $278,558, and net profit after tax of $32,467. Profitability figures show an average of 6.3% return on assets, 5.2% return on sales, and 10.2% return on net worth.
In 1996, 136 car washes were surveyed, and Dun & Bradstreet’s report showed the average car wash had $1,274,696 in net sales, gross profit of $712,555, and net profit after tax of $59,911. Profitability figures show an average of 3.9% return on sales, return on assets of 9.4%, and 14.9% return on net worth.
The typical conveyor-type automatic car wash operates on a lot ranging from 35,000 to 38,000 square feet. A 1989 survey of over 1,300 self serve car washes reported that only 15% are on leased property. Existing lease terms are an important consideration.
If there is a minimum of 15 years remaining on the lease and the rent is fixed (or virtually so) at a below-market rate, a valuation at the high end of the range may be justified.
As noted above, this is an equipment-intense industry: fixed assets represent more than 60% of total assets. Typical equipment includes conveyors (where applicable), tire brushes and chemical applicators, prep guns, forced air dryer, various other brushes, arches (presoak, wash, and rinse), and an undercarriage washer.
D. Income and Expense Pro Forma - $500,000 to $2 million
1. Net Sales 100%
2. Operating Expenses 84.1%
3. Operating Profit 15.9%
4. All Other Expenses 9.2%
5. Profit Before Taxes 6.7%
The concept of value appropriate for a fully automatic car wash is going-concern value (the value existing in a proven property operation). According to Jeremy Hall in his article entitled, “Valuation of a Fully Automatic Car Wash,” in the October 1990 issue of The Appraisal Journal, such value represents the total of (1) the market value of the real estate, (2) the contributory value of the special-purpose improvements and other fixed assets, and (3) the business value. These amounts can be estimated using the income capitalization approach. For the component elements it may be appropriate to use capitalization rates which differ from the overall capitalization rate. See also Section I, Chapter 5, “How to Value a Service Business.”
Any valuation analysis should be preceded by a comprehensive study of the neighborhood, an identification of the market, and a survey of similar car washes to measure the subject’s performance. The average monthly traffic count outside the facility is critical information. In reviewing comparable sales, it should be noted that coupon usage (higher volume with lower average receipts per car) may skew the results.
Full Service Car Washes (valuation multiples include the following) 
1. 1.75 to 2.25 times annual adjusted net profit, add fixtures, equipment, and inventory.
- 1 times annual gross revenues.
Coin Operated Car Washes
1. 1 times annual gross revenues.
2. Fair market value of fixtures and equipment
Rules of Thumb may or may not be industry averages. They are usually applied to sales in some form. They result in an example of value for a business having that level of sales. Please see Section II, Chapter 5, for a discussion of Rules of Thumb and their limitations.
The values of fixed assets are generally included in Rules of Thumb; however, they are sometimes added in separately. Working Capital (e.g., cash, inventory, less payables), debt and real estate are many times not included. These three are generally valued separately and added to the formula value. Intangible Assets including goodwill and leasehold may be included, but normally only in Rules of Thumb based on earnings/cash flow.
H. Sources for Further Statistical Information
(See also the bibliography at the end of this book, “Recommended for Reference.”)
International Carwash Association
401 North Michigan Avenue
Chicago, IL 60611-4267 www.carwash.org
(312) 321-5199, (888) ICA-8422; Fax (312) 245-1085
Car Wash Owners and Suppliers Association
1822 South Street
Racine, WI 53404
2. Trade Publications
Entrepreneur Business Start-up Guide No.â 1076 (Car Wash)
Success for Less – 100 Low-Cost Businesses You Can Start Today
Entrepreneur Media Inc.
2445 McCabe Way, Suite 400
Irvine, CA 92614 www.entrepreneur.com
(949) 261-2325, (800) 421-2300, (949) 261-0234
American Clean Car Magazine
500 North Dearborn Street, Suite 1000
Chicago, IL 60610-4946 E-mail: email@example.com
(312) 337-7700; Fax (312) 337-8654
Professional Carwashing and Detailing
13 Century Hill Drive
Latham, NY 12110-2113 www.carwash.com
(518) 783-1281; Fax (518) 783-1386
America‘s Car Care Business
P.O. Box 25310
Scottsdale, AZ 85255 www.workhorsepublishing.com
(480) 585-0455; Fax (480) 585-0456
Auto Laundry News
2125 Center Avenue, Suite 305
Fort Lee, NJ 07024 www.williamspublications.com
(201) 592-7007; Fax (201) 592-7171
Modern Car Care
3300 North Central Avenue, Suite 2500
Phoenix, AZ 85012 www.moderncarcare.com
(480) 990-1101; Fax (480-990-0819
 RMA Annual Statement Studies 1996. (Philadelphia: RMA, 1996), p. 688.
 West, Thomas L., and Jeffrey D. Jones, eds. Handbook of Business Valuation. (New York: John Wiley & Sons, Inc., 1992), p. 119.
3 West, Thomas L., and Jeffrey D. Jones, eds. Handbook of Business Valuation. (New York: John Wiley & Sons, Inc., 1992), p. 119.