Acquisitions Anonymous - #1 for business buying, selling and operating - A 10 Unit Car Wash Chain Ripe for Expansion - Acquisitions Anonymous 217

Episode Date: August 8, 2023

Girdley (@girdley), Heather (@EndresenHeather), and Bill (@BillDA) review a car wash chain that has serious growth potential.Today's deal comes from Axial.  Axial is a trusted deal sourcing platform serving professional acquirers in the American lower middle market.___________________Thanks to our sponsors!Acquisition Lab. Acquisition Lab and their team have been longtime supporters of the pod. Created by Walker DYEbel author of Buy Then Build: How to Outsmart the Startup Game, is an accelerator with a highly vetted cohort-based educational and support community for people serious about buying a business. A lot of our listeners tune in each week to our deal reviews, want to get in on buying a business, but don’t know where to start. Acquisition Lab exists to help people buy a business and navigate all the complexities of the process, as well as provide a trusted framework, tools, and resources to support you from search to close. If you are serious about buying a business check out acquisitionlab.com or email the Lab's director Chelsea Wood, [e-mail].-------------CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey everyone, welcome back to Acquisitions Anonymous. This is Bill Dallisandro, and I am here this week with Michael Gurley and Heather Anderson. This was one of my most recently, most fun episodes we've done. So we talk about one of the hottest things on Twitter buying a car wash. This is a 10 location car wash platform that is ready for scale. We think it's going to go for a bananas price. So I think you guys will like this one. We also have a little prefix on this episode about ways we have seen people steal money and in Bezzle money from small businesses. So if you get in the middle of the beginning of this episode and you're like, wait, I thought this was about car washes. It is. Hang in there. But there's a couple really interesting stories about how small businesses get stolen from and how banks get stolen from also for the first five minutes.

So I hope you enjoy this episode of Acquisitions Anonymous. This episode of Acquisitions Anonymous is sponsored by Acquisition Lab. Acquisition Lab and their team, they've been longtime supporters of the pod and they provide a really great service for people who are looking to acquire a business. So it's created by Walker Divell, who's become a friend, the author of Buy, Then Build, How to Outsmart the Startup Game. So Acquisition Labs is an accelerator with a highly vetted, cohort-based, educational, and support community for people who are serious about buying a business.

So a lot of our listeners like you, you turn in every week to our deal reviews, you want to get in on buying a business. You're on this podcast because you're trying to learn how to buy a business. But if you're not quite sure where to start, Acquisition Lab is a great place to start. So they exist to help people buy a business and to navigate all those complexities of the process, everything you hear us talk about on the show. They provide a proven framework, tools and resources that support you all the way from search to close. They do it. There's a whole bunch of educational material and support.

So if you're serious about buying a business, check out AcquisitionLab.com or you can actually email the program director, Chelsea Wood directly. Her email is Chelsea at buy, then build.com. Okay, so people steal from banks, though, like employees steal from banks? Yes, it happens. It happens. There's a lot of controls in place, obviously. It's not easy to get away with it. They usually, I mean, the ones I know about obviously got caught. Maybe some didn't get caught that I know about. I don't know about. But yeah, it happens. There are different types of accounts in banks, you know, such as where the customers give a deposit for a loan. And that goes into a special GL account. It was. accounts are always out of balance. Every bank I've ever worked for has a big problem keeping those in balance. And so anytime something's kind of not being reconciled, just like in a small business, it's an opportunity for somebody to steal. So like an earnest money deposit essentially where like somebody's buying a business or something and they put down 50 grand or something and then the bank.

Oh, not those deposits. The loan deposit. Like to get this loan in underwriting, you need to give us a deposit of $5,000 to cover your business valuation and the costs. Those go into usually one big GL account per department, which is almost always out of balance. If anybody works at a bank, you know I'm telling the truth. They're almost always out of balance. Because that account is the one that gets debited for like the invoice to the business valuation guy or whatever. It's all small dollars and no one's really paying attention.

And so people just forge invoices out of it to their own personal account essentially. I've seen it. And do they get caught or not always? The ones I know did get caught. So way back when I was a young banker a long time ago, they would have, you had mandatory two-week vacations for this reason. You had to take your two weeks consecutive because if you were out for two weeks, somebody would eventually find it.

And I did see that happen a couple times. Someone went on their vacation and we started saying, why is this out of balance? What's going on? and dig, dig, and there you have it. Wow. So, like, yeah. I mean, everybody knows the two-week vacation is so they can catch your fraud, and they don't, like, clean up their fraud before they go on vacation?

No. I guess they can't, you know, I think that's what sort of, they sort of get into this painting themselves into a corner where eventually they're going to get caught. Right, right. It's like gets out of control, and like they've stolen too much money to pay back because they've spent it and, like, there's no way. Like even if they stop, they know that eventually it's going to get found. Yeah.

That's right. Yeah. Ironically, they would probably have a better chance of getting away with it if they actually rob the bank, right? Because most banks are insured against that, right? Like, if you rob a bank today, like, you go in there, you're like, give me all the money. They just give it to you and let you walk away. Like, they have insurance.

And maybe they catch you. Maybe they don't. Yeah, but they have good ways of catching you there, too. I mean, a lot of surveillance and they have the money packs that have tracking in them as well. So I don't think there's any good way to steal from a bank. They're all pretty bad. They all kind of lead to a really bad place, but it happens, embezzling happens in banks too. Yeah. I mean, I've heard, I've had friends that have caught people stealing hundreds of thousands of dollars, like over years, like their accountant or their CFO. And basically what you see is

they create a vendor that sounds innocuous. You know, it's like the Clinton. cleaning company or whatever, right? And they just bill the company 500 bucks a month, you know, or a week or whatever, forever. And nobody catches it until it's like, wait a minute, we don't have a cleaning company. It could be years. And then, and then, of course, the police get involved. It's not like they just get fired. I mean, they're like, this is theft. And the police too get involved and people will go to jail. We had one once where the bank was basically complicit. This person was like forging checks and deposits. And like, it was the one that kind of, I think, precipitated this discussion about getting robbed.

It's not a, when you're a small business owner, it's not a matter of if, but when somebody will steal from you and do what man or two. But yeah, we had one where like Bank of America and, like, Chase and these guys were basically complacent in it because they were taking like all of these like third party, like endorsed checks, like they weren't supposed to do it. And then when you try to go actually get them to help you, they're like, no, no, no. Like you're going to have to sue us for us to give you any information whatsoever. The bank?

You know, you're the bank, yeah. So you just sue the bank. Do you want to get Chase to do anything? You sue them. That's the way to get them to do anything. But that costs $30,000 for the complaint plus a couple hundred grand for discovery, right? Yeah, I mean, you know, depends on what kind of Southside San Antonio lawyer you hire, but yeah. We can do that.

Well, hey, to transition us, let me give you the best segue ever. we have a deal today that's so interesting, you'll think you stole it. Oh, very good. Bravo. So let me pull this one up. This is a deal. And so this is perfect.

Acquisitions Anonymous content because Heather, we didn't tell you which deal we picked. Yeah. And now you're here. So hopefully you know something about this because Bill and I are going to do good radio on this because we don't know anything about this type of market.

So that's good. That means the people on Twitter will tell us all the things we get wrong and we learned something about it. So, Bill, this is another Axial deal. So excited to get one from them because they're bigger, right? Well, yeah. And so this is, I'm glad, like, this is the type of deal I would like to go to Axial

for because, so, to spoil it, this is a car wash deal. So car wash is super hot. Car washes is the new self-storage on Twitter. Everybody's really into car washes. But it's very hard to find, like, scaled car wash platforms, right? But this, because it's axial, it's a bigger deal, these guys already have 10 locations. So, like, this, I think this is like a perfect example of the difference between like a biz by cell and an axial deal. Like, you go on biz by sell, you will find one car wash.

You know, this, the axial deal, and Michael, I'll let you read in a second, but they call it a scalable carwash platform. And it has 10 locations and the idea is like that you're going to buy this and take it from 10 to 30. Yeah. You know? So like that's kind of, it shows the difference between a place like Axial and a place like Biz Buy Sell. So I do know two things about Car Wash and I'll tell you number one is Twitter may have just discovered car washes this year. Private equity discovered it at least five years ago. So that will tell you something about as is the case with everything. Yeah. I love where Twitter's like, have you guys heard that Starbucks is like the world's biggest bank? They're not just a coffee company.

It's like, yeah, I hear that every six months when people forget about it. Anyway, okay, so let me read this one. It is from Axiol. It is a scalable car wash platform with diversified drive-through service and high-growth subscription base. Summary, it is a best-in-class carwash platform that operates 10 locations throughout the Pacific Northwest, offering complementary drive-through lube,

detail, and coffee services to increase capture of local wallet share. Decades of... Sorry, I'm just remembering the lubrication episode we did, so you can't see me because my camera's not working today, but I am giggling. I am still a 12-year-old boy. Decades of brain recognition and successful acquisitions provide sustainable growth opportunities

for acquires to continue regional market consolidation. With a customer-centric focus in diverse flex-wash operations, the company is positioned for a seamless transition of ownership to become the market-leading platform in the region. As a community leader, the company takes pride in developing employees into knowledgeable long-term team members,

offering benefit programs and incentives that translate into high-quality services throughout the organization. Revenue in 2021 was $10.5 million, and in 2022 was $11.4 million, so it grew about 9%. EBEDA in each of those years was $2.8 million in 2021, so 27%. And in 2022, it was $3.1 million for 27% again. The transaction type that they want is a sale or majority change of control, and the geography is the Pacific Northwest, California, Oregon, Washington, Hawaii, Alaska, and the category that

fits in as car washes as well as automotive oil change and lubrication shops. So I think this leads as a car wash platform, but it sounds like they do car wash and coffee and other assorted stuff on those same premises. So that's the deal. Pretty big boy out of Auxiel. What do you guys think? I think this is going to sell for a ton of money. Honestly, I think this is going to be so competitive. I like it a lot. I do too. I like it a lot. I do too. I like it a lot. lot. They didn't mention subscription revenue or recurring revenue. And I would think something like this would have that, you know, sort of memberships or that kind of thing that seems to be the modern way of building a car wash business. So I would have thought they would have said something about that.

So I'd be curious. But I agree with Bill. This is, I mean, wonderful margins, consistent, growing, you've got 10 locations. I'm a little concerned about Hawaii and Alaska, how you're getting, you know, between those and managing those. But apparently, you know, it sounds like it's really probably a high-tech platform for management, I would guess. Yeah, I honestly, I think on actually,

you have to pick, like, which region you're in and they just picked the U.S. Pacific, which includes Hawaii and Alaska. I think they're probably just in the continental U.S. This reminds me of a business that we have, here in Charlotte, North Carolina, called Sam's Express Car Wash. And they, I think they've probably been around for like 10 years or so. I think they started in Charlotte with a couple locations. They're now up to 40 locations. They're in Charlotte and Durham and kind of Norfolk, Virginia and

Richmond, Virginia. But that's it, right? So it's still very regional, but they've got probably 40 locations and they probably crush it. Like, they're really well branded. Like, I've started to see them pop up all over. So somebody either owned it or bought it. and just took a system and started stamping them out. And I think once you have a system like that, you know, like a car wash is very replicable. You know, there's a certain CAP-X up front. You buy the same equipment every time.

It's not rocket science. You know, you can kind of do the math on what is a good real estate plot for this. And I would think the cash flows are pretty predictable. Like if you do it right, like I think it's rare you probably open a location that doesn't work. So the version of exactly that business here in St. Antonio is called the wash tub. It's exactly the same thing. You drive up, somebody like talks you into spending $50 for a car wash when you only wanted to spend 15 and you end up getting like tire cleaner and you get to pick which smell you want to deodorize your car. They put it through and then there's the people that hand dry it, make sure it's all good, and then you end up tipping them three or four bucks. So the funny story about the one here in San Diego, Newtonia is they have a really fascinating system to make sure they have no cash on hand. And the way they do that is they will let you get cash back on a credit card, which is super rare.

And in some cases, violates the terms of service for credit card merchant processors. But like, you can go in there and they'll be like, okay, would you like a $100 cash back back with your $20 wash? And I'll be like, yeah, sure. Like, I'll take the free miles. And they give me the guy. Yeah, it's great. I've never heard of that.

You're like, I can, I'm like, I'm like, I can. Yeah, I'm like, I could do math. So they have no cash deposits because they encourage everybody to, they basically pay their customers to take the cash out. And then it has an added benefit, which is their employers are happier because they make it so easy for you to get cash that then they give you singles and you go tip the people on the way out the door, the people who like hand drive the thing at the end of the, at the end of the wash.

So it's a double whammy there and it keeps all the cash out of the place. I think it's kind of smart. Interesting. So, Heather, do you know much about Carlin? If you ever finance one of these? I've looked at a few chains. And I'm sorry, I have to correct myself. They did say high growth subscription base.

So sorry I missed that. But, you know, I have seen a few. And the challenge has been the real estate, actually, because it's usually pretty small value each unit, each car wash. And the cost of financing can be pretty high because you've got to do appraisals and title and environmental on each one. That's the one I remember as being just, it almost wasn't worth it. The financing cost was so high for each specific location.

I wonder if these are leased. They might be, but real estate seems to be a pretty important part of one of these. It's a really important part of these. I bet you don't own your real estate in any of these. I bet they've leased all these premises. And I bet maybe they're long-term ground leases, which is part of why this is trading for 27% EBITA margin, as opposed to where I've heard Carwifax. are typically trading, which is like five or eight caps, if not lower, is where they're trading

in the market because of all the capital that's flooded in there. Well, yeah, but that's, Mike, that's 27% EBITDA margin, right? This might still trade for a five cap. Oh, definitely could. Yeah, that's a great point. Yeah, I mean, I think this will, in fact, trade for a five cap, which, which for those who are not familiar with that term, that would be 20 times EBITDA, right? So real estate uses cap rate, which is like the inverse.

of a multiple. Right. So it's like if you pay for a million dollars for a thing that yields $50,000 a year of cash flow, that is a 5% return on your million bucks. It's called a five cap in real estate, a cap rate in real estate terms. And car washes usually trade on cap rates rather than businesses which tend to trade on multiples because the car wash, because it's kind of like so predictable and they're often, and it's like, you know, capex to buy the equipment and then maybe the real estate and it's like a yield on your investment, it tends to trade at much higher multiples more like real estate than it does like an operating business. Now, Bill, would that valuation assume that they own the real estate or that they lease it

or does it matter? I am not sophisticated enough in Car Wash world to tell you, but I think kind of either way, it still trades at crazy multiples because even if you lease the real estate, you're going to have hopefully a long-term lease. I honestly think that most of the time people buy it just because you're building, this is like a very specific build to suit. Like it's a car wash. It's never going to be anything else unless you level it.

And there might also be environmental considerations. Like once you put a car wash on a piece of land, I don't know how easy it is to make it not a car wash in the future. You know, like the worst business to put on a piece of land is a laundromat because then it can like actually never be anything else ever again because the laundromat chemicals. but maybe carwatch is just as bad, I don't know. So I think usually they do own the real estate because it's kind of single purpose build. So you're getting, it just trades more like real estate because there's just like cash flow

yield to it forever. All right, taking a quick pause here. I have something to tell you. This is Michael. I hate bookkeeping. I hate bookkeeping. I hate doing HR. I hate doing all that kind of stuff.

But for bookkeeping, I have found a solution. It is my friend Charlie's business called cloudbookkeeping.com. So that's cloudbookkeeping.com. They are your perfect partner if you want to get bookkeeping out of your hair and focus on making your company, your customers happier and more successful. So please give them a call, call Charlie, cloudbookkeeping.com, tell them we sent you. They're a great way. If you're a business buyer, if you're a business owner, you're tired of hassling with getting

your bookkeeping done. He's got a whole fleet of people that are. well-trained and work for him. He's located here in San Antonio, so I can tell you because of that, he's awesome. And they're a great partner for you to potentially call to help with all your bookkeeping needs so you can do the important stuff in your business rather than worry about getting your books right. So give Charlie a call, cloudbookkeeping.com, and now back to the episode.

It's interesting. I looked at a handful of the self-service ones, which are the ones that are unattended, which is different than the model I talked about. and there's a couple here in San Antonio that are trading for, I saw one selling as a 12 cap for an unintended one, yeah. Yeah, which it was probably a five cap two years ago. Definitely possible. I mean, rates are up, right?

So you can't sell real estate for five caps anymore because you might as well just buy treasury bonds, which is the insane thing still about the real estate market and we should not digress it to that. But there are still people trying to sell industrial buildings for five caps. and it's like, yo, I'll just buy a treasure bond, literally. Same yield. Oh, you and your crazy math, Bill.

How dare you do math? It's nuts. It's nuts. Yeah. Anyway, I digress. And this is not a real estate podcast, but it's... Yeah, for good reason. You know, the trend I've seen around me is there has been significant growth of these,

what I would describe as the full service. Like, you drive up $25, $40, like, you go sit at a nice, air-conditioned thing and you come out and your car is done. And, you know, at least in the area around me, we went from one of those to three of them within two miles and they're all from this same company called the washtub. And those guys have just kept building and building. And then I've watched the pattern here, at least in San Antonio, the self-service ones are going more by the wayside. And you're seeing more automation being, you know, higher price being kind of the trend, at least around me here in San Antonio. Yeah.

Well, and that's the trend in self-storage, too, right? People want it more and more automated, more and more self-serve, no attendant on site because the attendance obviously are the huge expense. So if you can take the human labor out of it, you can offer a much cheaper car wash, right? And it doesn't have to be as much cheaper as you save. So I'm saying the opposite. I'm saying the growth around me appears to be at the higher price point full service, not the self-service show up and there's a sprayer and all that kind of stuff. Like those, if I look at the ones for sale here on LoopNet in San Antonio, there's like 10 of those for sale. None of the full service type where you show up and it's like, you know, we run you through a machine, we hand clean it for you. We spray the stuff. Like you show up, you pay your money and then you walk out with a clean car. Like that is the thing that's growing, that $40 thing, not the how do I spend $8 to clean my car thing. Not the Auto Bell style like drive through and keep it moving.

Nope. Interesting. Yeah. And I don't see those, I don't see those getting used as much. anymore. Meanwhile, I go by the full service thing and people are like, yeah, I don't want to clean my car. Like, they're packed. Yeah, I guess it depends on whether you care. See, me, I just, the $8 drive-thru is good for me. Like, just get the bird poop off. I'm with you. I'm with you. I want to drive through, do something else while it's happening. I don't want to sit there,

but I agree. I think this is growing. People do seem to really like it. I wonder if it's making the old school car washes, if it's taking a bite out of their market share, you know, because because you see a lot of those trying to sell and get SBA loans, and that was always kind of a cash cow business. I wonder if they're feeling the pressure of the growth of these subscription-based kind of nicer car washes these days. Well, the nice thing I would think is if you have an unattended car wash, it's probably not that hard to change it to an attended car wash.

You know, you just hire a dude with, and you give them some terry cloth towels and like a bucket, you know, and you do it in the parking lot. Like you drive through and then he hand drives it or you drive through and then he details your wheels. Like I would think you could probably layer these services on pretty easily. Probably. I would guess so. So this may shock you. But on Twitter, there is a guy who runs a Twitter account called Car Wash Guy.

Oh, I know. I follow him. Yeah. I do too. And one of the things he has talked about is, you know, if you own a business, right, and you have passive income from that business, you have a problem, which is you have to pay taxes on that money. I know this is crazy, guys, but the IRS and the U.S. government needs money from us to do this stuff. But there are certain types of real estate that are very attractive in terms of giving you

this level of what's called depreciation, so bonus depreciation, to offset that passive income. And as somebody who is very interested in reducing my personal taxes, not evading taxes, I just want to avoid them, so the legal thing. I have been told that car washes are actually one of the best for bonus depreciation. You're able to depreciate a ton of the stuff when you buy it, and you can use that to offset income through from other stuff. Yeah. Do you know why that is, or can you explain why that is to the listeners?

I don't know. I think you'd do a better job. So the way this works is, let's say you have a business that is throwing off a bunch of taxable income and you don't want to pay taxes on it. What do you do? well, and you also would like to invest your money and make a return. You buy a car wash. So let's say you buy a car wash.

I'll just simplify it for a million dollars. You buy a car wash for a million dollars. And then when you buy it, you do a purchase price allocation. So when you buy any business, right, that million dollars gets allocated. If you buy a typical business, most of it's going to end up allocated to like inventory and probably good, whatever assets the business has, whatever hard assets, and the rest will be goodwill. right and usually as a buyer of a business what you try to do is allocate as much of the purchase price to assets with quick depreciation schedules as possible right because if you allocate a dollar

to goodwill the depreciation schedule and goodwill is 15 years i believe for 20 years long right so you only get one 20th of it and time value of money like money now is better than money later right so you don't you get that dollar back as a tax shield over 20 years if it gets allocated to goodwill if it gets allocated to inventory, you get it back all at once as soon as you sell the inventory and recognize it. If you allocate it to a forklift, maybe the useful life forklift is three years, and you can depreciate that forklift over three years, you get your dollar back faster. The cool thing about a car wash, though, is it's got a crap load of equipment, right? So you can take, when you buy a car wash, you can put a ton of that purchase price. You can allocate it toward the market value of the actual equipment.

So you have much less goodwill. And so now you've got a bunch of equipment on your balance sheet, right? This hasn't helped you yet, but it's about to. So then you can use what's called accelerated depreciation. And there's a cap for accelerated depreciation, and you can try to kind of squeeze it. You can say like, okay, maybe I don't know the cap, but let's say it's 50 grand, anything under 50 grand. Well, instead of allocating the whole purchase price to like the car wash equipment, you allocate $10,000 to this brush, $10,000 to this sprayer, $10,000 to this drug. higher, et cetera, and then they all become depreciable as discrete assets.

So basically, let's say buy a car wash for a million bucks, you might get 800K of it allocated to the equipment. And then you break down that 800K, you might need a cost segregation study to do what I just described to break it down individual pieces. But you basically can depreciate that whole $800,000 in year one. So you basically were able, you bought a carwash for a million bucks and you got an $800,000 tax yield in year one. Right?

And so that's why it's such a great investment. And now you own a car wash, right? So your effective purchase price is so much lower because it's the value that 800 grand is probably 400 grand at tax yield. Right. So it's essentially like a $400,000 discount on your million dollar purchase of the car wash. So I pulled up Car Wash guy's Twitter, which, by the way, I want to document because this is, this is like perfect Twitter stuff. So Car Wash guy, here's his narrative. He gets on Twitter.

he sees, oh, you can buy self-storage because that's been discovered by Twitter. So he goes trying to buy self-storage. He fails at that. So then he buys his first car wash. And that's great. So then he did the most Twitter thing possible, which is after one deal, he decided to release a course on how to buy car washes. So Twitter.

It's like, way to go. Twitter. Like, yeah. And how many followers does he have? Let's see. car wash guy, I think 17, 17.7,000. Yeah, 18,000 people. Good on car wash guy, aka Chris Berg tweets. Can I say something about car washes and, you know, the small ones, not the one we just looked at, but the ones that might get SBA loans. For lenders for many years, you know, had a tough time and still do, to some degree, lending on them because of the cash.

Because it was sort of most of the deals that we would see, they would say, well, here's our tax. turn, which is very low, low income, low revenue. But here's what we really make. And won't you, you know, lend on what we really make, which is, you know, we're not reporting. That was a big deal with car washes for a long time. So one of the things I've learned now that I'm doing more overseas business is how much the fact that nobody really people, it's very rare to cheat on your taxes like that. Like, but if you go to a country like Argentina, for example, like everyone, every company cheats on their taxes. So you're like, okay, well, but that's just normal.

Like people underreport everything, and there's two sets of books and that's just the way it operates. Here's the problem, though. Like, it makes your economy super insular in the case of Argentina because foreign companies can't do business there because they're not competitive.

Because can you imagine like, hey, like, hello, Mr. Swiss company. Welcome. I hope your flight from Zork was great. Oh, you want to buy this division of our company or you want to buy this business here or open a division? you're not going to be competitive because you're not going to cheat on your taxes because you're

Swiss or you're American. Like we have foreign corrupt practices. We can't do that. And so it's a situation where like it's such, it's one of those things that's like beautiful and great about America, but we don't really think about it or talk about. It's like, no, no, do you know how bad this could be? Imagine if people still cheated on their taxes wholesale because of cash like they did 40 years ago. Like it's such an advantage for America, but something we don't even really talk about.

Because if you buy that Argentinian firm, you have to immediately stop cheating on your taxes, which will make you uncompetitive in the market, right? Because your profits are going to cut in half. Yeah, 100%. Yeah, 100%. But the same thing was kind of happening with car washes and other industries. When a whole industry kind of cheats wholesale, they become sort of stuck, too. They couldn't trade.

They were all doing it. There were no financing coming in. Same thing kind of happens in different industries. Right, because you had to cheat in order to be competitive of all the other car washes. but then you also couldn't sell your car wash to anybody that wasn't willing to cheat, like from an outside industry. And by the way, we're not saying that this business is cheating on his taxes at all. We're not even saying that the car wash industry as a whole is still doing that.

That was the way it used to be a long time ago. Heck, we're not even saying we know anything about car washes. It's going great. This is a great episode. My car's not even washed. I don't even wash my car. I don't even wash my car. So what I do really like about this, and this is why I think this deal is going to trade for a bananas multiple, is because it's not one car wash. It's 10. And it is poised to be 40. Right. And that is what you're buying here. Like this thing has a brand, a set of standard operating procedures. It probably has already paid architects. Like if you want to build another car wash, you already have the blueprints. Right. You already know what the site plan is going to be.

You already know how to permit it. Like you already, like, you're ready. You've done 10 of them. You are ready to rock. You have a sign guy. You have a pavement guy. I mean, you have a, you know where to buy the car wash equipment. You know how to configure it.

Like, you are ready to go. So I think private equity is going to see this and just see dollar signs and go, we're going to buy this business. And what it gives you, and this is, by the way, if you're a business owner, this is how you sell your business for banana money, right? is you set it up so the buyer can deploy more capital into it predictably. Right. And that's what this is.

And that's why they use the magic word platform in this listing. A platform means you buyer can buy it and expand it predictably. Like we have a way where you can just pour more capital into it. It's de-risked. I can show you the last five we built and the exact rate of return on the capital we spent to put those five in. I already have all the blueprints from the architect. Let's go.

And also, by the way, if I'm owning this thing, what I want to do is keep 35% of it and sell 65% of it to private equity who's got to do that. And then have a second exit in five years. So there's a way to even juice that multiple even more, which is you go to private equity and have a bow on it. Like you do the first part of that next step for them. You call everybody else that you know who is complimentary to your business. You go get them under LOI at a price that you know private equity. going to like, and then you go in and you pitch private equity and say, okay, I've got the deal for you. And here's the three boltons ready to go. So not only do I have I done the platform,

I also have the deal for low. You literally just have to bring the capital. Yeah, your platform risk, I've just taken all platform. I've taken all M&A risk off the table for you because I've already done that first step and called everybody. They trust me. We're under LOI and I've set price in terms with them and you'll like this price. And here's your financial model. Come on in. Just write a check. And usually that price, like let's say you've got them all under LOI at, you know, a 10 cap, right, if it's car washes. And you go, you're going to pay the 20 cap for me, right, a double or rather five cap for me. You can pay a five cap for me, right, twice the multiple, right, a much higher price. But you're going to average down that multiple on day two because you're going to buy all these other ones.

And by paying, overpaying for me, I'm the platform that lets you buy all the other ones cheap and buy down under multiple. All right. So I'll give you one more badass structuring on this. So what you do is you go buy this. If it includes the real estate, you buy the business and then you go find somebody, you get the, you get the business plus the real estate under contract. You go take the real estate, you flip that to a real estate investor and you sign long term ground leases with them. Use the proceeds from that as either the down payment or all of the payment to buy the business. And potentially, if you're able to create enough arbitrage between the cap rate you're paying, when you buy the real estate and what you sell up for to the investor,

you can potentially generate enough free cash that you're not coming out of pocket with much to get a business like this. The sale lease back. Yeah. Amen. The sale lease back at closing. Pretty pro move to do it at closing at, you know, contemporaneously with buying the business on the property.

100%. But you don't tell the seller that you're flipping their real estate. You don't mention that part. You just kind of keep that to yourself. Which is a little hard though, right? because, oh, seller, my environmental guy has got to come due diligence on the property. You know, so it's a little tough sometimes to keep it from the seller. Yeah.

But at least you don't want to rub on a handpiece, even if you can't keep it totally secret. Amen to that. All right. Well, this was a good one. I hope Car Wash guy will listen to this and retweet it and tell us all the ways we are wrong, as well as all the other Car Wash dudes on Twitter. But this is hot. It's a cool industry because you get all the different.

appreciation. You have predictable cash flow yields. I think probably people on Twitter, people on Twitter won't say this, but I think this is probably the case. Car washes are a great way to stay rich, tough way to get rich because you need to plow a bunch of capital in. Million percent. Well, unless you do real unless you do car wash private equity, right? Like that's OPM. I think that's where a lot of people end up on this stuff. Or you pivot to selling courses. Do a couple of business as a car wash as a person selling courses. Please buy my course hashtag.

I will tell you it's a better business than car washes. The American way. All right. That's it, guys. Please join us next week for another episode of Acquisitions Anonymous.