Many investors are willing to pay a substantial amount for established auto detailing companies with excellent potential. If you own an auto detailing company and are planning your exit strategy, then this guide is for you. We discuss the sales process and how to determine the worth of your auto detailing company.
About The Auto Detailing Industry
The auto detailing industry involves cleaning, washing, and waxing automotive vehicles, including but not limited to passenger cars, trucks, vans, and trailers (Business Reference Guide). This includes cleaning and detailing the interior and exterior of vehicles. Many auto detailing companies offer additional services as well, such as auto body repair and the sale of floor mats, seat covers, and other products.
Phase 1: Determine The Value of Your Auto Detailing Company
The first step is to determine the worth of your auto detailing company. Business brokers will use a market-based business valuation to determine your worth. This involves a review of your seller’s discretionary earnings (SDE) and other financial metrics as well as the use of rule of thumb data (also called acquisition multiples). As a rule of thumb, auto detailing companies sell for 40% to 45% of the company’s annual sales plus inventory. Here is additional rule of thumb data that your business broker may use for your market-based business valuation:
- Auto detailing companies sold between 2.37 and 4.91 times the Seller’s Discretionary Earnings (SDE)
- Auto detailing companies sold between 2.67 and 4.83 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Auto detailing companies sold between 0.66 and 1.37 times the annual net sales
Your broker will also consider additional factors beyond your financials. For example, a company in a populated area with relatively low competition is usually worth far more than an auto detailing company in a rural location. Your growth potential and reason for selling may also play a key role in your valuation.
Phase 2: Create a Personalized Sales Strategy With Your Broker
Your business broker understands the best time to sell. They can help you create a personalized strategy that gives you the best chance to maximize your auto detailing company’s sale price and ensure all additional goals you have are met with the sale. Notable goals that you may have for the sale include:
- Achieve the highest possible sale price
- Find a buyer the company will embrace
- Sell the company before a specific date
- Minimize tax obligations with the sale
- Ensure employees are kept on staff
Every seller has unique goals. The discussion of your goals takes place early on in the planning and preparation stage. You should also take your time and ensure you choose the right broker who understands your goals and works on your behalf to ensure they are fulfilled.
Phase 3: Market Your Business, Review Offers, and Negotiate
We recommend only seeking a buyer for your auto detailing company after you have prepared your exit strategy. Your broker ensures you can maintain confidentiality. In doing so, they will only utilize private sale methods (i.e. private databases, networks, connections, etc.). If necessary, your business broker may recommend blind listings. This involves only posting your company’s industry, revenue, and number of employees; your business name and location are not listed with private listings.
In many cases, business brokers can advertise your auto detailing company to hundreds (if not thousands) of potential buyers without going public. You may receive numerous offers during this third phase of the sale. Your broker can screen the offers and negotiate on your behalf. Ultimately, this phase ends with a signed letter of intent (LOI) from the buyer you prefer.
Phase 4: Choose a Qualified Buyer and Complete The Due Diligence Process
Securing a buyer is a great step toward completing your exit strategy. However, the work is far from complete. The buyer will need a chance to review all of the details of the sale and verify your financial data. Due diligence should follow a structured process that involves providing the buyer with all requested documents promptly. The buyer may also request a walkthrough or meeting with key employees to learn more. Although the seller should be accommodating to the buyer’s requests and needs, it should move efficiently so that both parties can close sooner.
Phase 5: Transfer Your Auto Detailing Company to The Buyer and Close The Sale
The final step is complete the purchase agreement, which involves attaining the final signatures. Your attorney, the seller, and the seller’s attorney all are present at the closing table; your broker may attend as well. During closing, the final details of the sale are reviewed, and the signatures are attained. The payment is also confirmed. Notably, the purchase agreement includes:
- A description of your auto detailing company
- The purchase price (and related details)
- Covenants such as no-compete clauses
- Conditions and contingencies for the sale
- Payment terms and financing information
In addition to the purchase agreement, you will transfer the ownership of your auto detailing company to the buyer. The steps that this entails depend on the specifics of your company. For most owners, this involves updating insurance information, notifying employees of the sale, notifying long-term customers of the sale, and providing the buyer with access to online data, buildings, etc.
Considering Selling? Contact Our Business Brokerage and Consultancy Today
Here at Sigma Mergers and Acquisitions, we help auto detailing company owners sell for fair market value. Schedule a consultation today to learn more and get started with the sales process. During the consultation, we can provide you with a free, no-obligation business valuation.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!