Shark Tank is a business reality television series where a panel of angel investors decides whether to invest in a business as entrepreneurs make presentations on their company or product.
The panel often finds weaknesses or faults in an entrepreneur’s company, product, or business model.
Some of the weaknesses include inflated valuation, not offering enough equity, insufficient sales, weak value proposition, and over-estimating market potential.
On the other hand, private investors typically pitch a car wash project to a bank.
The initial presentation may include a pro-forma site analysis to demonstrate the potential of a location.
If the lender is interested, the borrower would be encouraged to apply for a loan. This requires working through a process beginning with a credit application and review.
Here, the borrower would need to produce a laundry list of documents. This includes but is not limited to a business plan, fully executed real estate purchase contract, loan application package, statement of personal history, and so forth.
The business plan must provide a detailed narrative explaining how the money will be used and how future projections will be realized.
Here, lenders have two primary concerns. The first is whether daily operations will generate enough cash to repay the loan. The second is whether the management team has the knowledge and skills to deliver the business model.
The key to cash flow is trip generation. Sufficient trips require a site with great visibility, access to high volumes of pass-by traffic, and proximity to a large number of households and daytime workers.
To illustrate, I recently came across a car wash in my area that had just been repurposed from full-service conveyor to express exterior. My history with this car wash goes way back to when it was first built. Back then, I thought it was a mistake.
The subject is a site measuring more than 1 acre that consisted of a full-service tunnel, detail shop, oil change, and a self-service facility with spray bays, in-bay automatics, and coin-op vacuums.
The property is located along a six-lane divided highway with posted speed limit of 50 mph. Daily traffic count is 54,000. There is a traffic signal present but it is located 500’ downstream.
Consequently, the west-bound traffic is accelerating rapidly from the signal towards the site. Whereas east bound traffic has to make a U-turn to access the site and then another U-turn on exiting the wash to return to their original travel direction.
The key to cashflow is trip generation. Sufficient trips require a site with great visibility and access to high volumes of pass-by traffic.
Density is also an issue.
For example, south of the highway is mostly wetlands and Old Tampa Bay, no homes. The population within a 1-mile ring is only 4,000, but 50,000 within 3-mile ring. In other words, the property is located in something of a lull.
There are only several retail stores located nearby, the highway traffic often exceeds the speed limit, and most folks live towards the periphery of trade area boundaries.
In other words, it is a difficult site and one where my car counts over the years and the recent repurposing of the property seem to bear this out.
This brings us to the second primary concern we mentioned: the management team. Does this team have the knowledge and skills to knock down one multi-million-dollar asset and replace it with another one, successfully?
There is no doubt about the former because the wash is now open for business, and time will certainly tell on the latter.
Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.