Selling Away

Selling Away

October 18, 2022

11 minute Read

By Sheryl L. Jackson

One of the most difficult decisions a car wash owner has to make is when and how to exit a business that he or she has created and grown. When it’s time to step away, it is important to find the method that best meets the owner’s goals and aspirations for the business. Four car wash owners who have approached the sale of their businesses differently provide insight into the practical, emotional and financial sides of the decision-making process.

John Harkins

Jon’s Auto Wash

In May 2020, John Harkins initiated “Operation Opt-Out,” his two-year plan to sell his 34-year-old car wash business. Harkins realized the success of his plan in December of 2021. “I had a note up on a cabinet in my office to remind me every day what the mission was and to keep me focused on the big picture,” Harkins said. He gave himself two years to “polish” his business by ensuring his four locations looked good and were performing well so he could attract buyers. Pushing the Unlimited Club was key.

Harkins started his car wash as a side hustle in 1987, when he was 28 years old and working full time as an engineer. He started with a coin-operated self-service business and grew it to include three express tunnel washes and one that is a hybrid of self-service and express wash. Although he switched to full time car wash owner and operator, his love of adventure and seeing new places meant that he traveled a lot once he had good managers and staff in place. Even with a good team, he was still responsible for the business and was always available to answer questions, make decisions and solve problems, no matter where in the world he was. In the sale Harkins wanted to protect his key employees. “I wanted a buyer for all four locations, and I wanted a 100% cash purchase as I wanted to move on,” Harkins said. “At the time, I had about 50 employees, many of them young and working part-time, but I did want the buyer to offer positions to all of my employees as they were the greatest asset to the business.”

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Selling Advice

Harkins offers two pieces of advice to other car wash owners considering sale of their business.

  1. Define your own mission.

“I kept the potential sale very private and only shared my decision to sell the business with a couple very close and personal friends and the consultant I used to broker the sale,” Harkins said. “I did not want to create stress for my employees and I did not want to deal with the aftereffects if the deal fell through.” Two weeks before closing the sale, he told staff. “It was hard to tell them, but I have no regrets.”

  1. Define your retirement before you sell.“

I have always traveled a lot and plan to continue that along with enjoying my other hobbies and passions after the sale —I’ll be busy!” Harkins said. “I believe everyone should do some reflecting on what will come after the sale of their business that will continue to bring happiness, purpose and fulfillment into their life. Selling out was the right move for me. I have been asked many times what I will do now, and the best answer is, anything I want.”

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Jim Mulholland

Busy Bee

When he started exploring options to sell the car wash business, second generation owner Jim Mulholland wasn’t ready to completely quit working in the industry, but he was ready for a change.

Because no family member wanted to take over the business, Mulholland began exploring his options. At 60 years old, he wanted to “take my chips off the table” and relieve himself and his family of the financial burden of owning a business. “I still had gas in the tank, so I did not want completely out of the business,” he said. “I wanted to dim the switch as opposed to just turning it off as I transition to retirement.”

His solution was partnering with Mammoth, a car wash platform that acquired his three car washes, allowed him to reinvest in the larger entity and then offered him a vice president position. “I help with greenfield acquisitions and look for opportunities for other mergers that will expand the company’s presence in the greater Miami area,” he said. Mulholland sold his company but then reinvested in Mammoth, the parent company. “This was tailormade for me because I have a front row seat to a bigger operation, something I never would have experienced if I had not sold the business,” he said. “I don’t think an outright sale would have been right for me.”

One of the unexpected results of a sale is answering the question, “What now?” “You have to know what you’re going to do as you transition away from owning a business,” Mulholland said. “I can’t speak for everyone, but in addition to my work with acquisitions, I am part of the company’s business advisory council where we share best practices and discuss issues facing car wash owners. I’m enjoying myself more than I have in 10 years.”

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There is a lot of information about the financial part of selling a car wash, but Mulholland advises car wash owners to look past how quickly the sale can close and how high the business will be valued. “Think about what you want personally and professionally from the sale,” he said. “You will go from cash flow to a cash pile, but what will your purpose be everyday?”

Once the personal and professional goals are identified, hire a professional to handle everything, with your input. “Don’t forget that you are still running your business, so you don’t have time to market your business to buyers, field calls and oversee collection of information a buyer needs for due diligence,” said Mulholland. “It can be a daunting undertaking by yourself.” He is happy that very few employees left the car wash after its sale. “I wanted my people to be taken care of and they have been with a better 401K plan, improved health care plan and paid time off,” he said. “I know I made the right decision for me, but in my opinion, the biggest mistake many car wash owners make is not evaluating opportunities —even if they decide the offer is not right for them. As difficult as selling or partnering with another company might be emotionally, you will never know if the right opportunity is out there if you act like an ostrich and keep your head in the sand.”

Bill Martin

Metro Express Car Wash

After 50-plus years in the car wash industry and several experiences building and selling car wash businesses, Bill Martin has a good overview of what is involved in the sale of a family business.

Martin was one of the original founders of Car Wash Partners and has also been part of building and exiting other chains, such as Rain Tunnel Car Wash and Nu Look Car Wash.

“I did not fully understand the process when my three locations in Boise became the first car washes acquired by Car Wash Partners, which became Mister Car Wash, but I learned a lot as I stayed with the partnership, which acquired 35 locations,” said Martin. He left Mister Car Wash to start Metro Express Car Wash with his children.

“My kids were not involved in the first car wash business I sold back in 1997, but I worked with one of my sons to create Metro Express,” he said.

In 2013, Martin was thinking about retirement, and his son encouraged him to sell because he was not in a position to take over. So, he sold his locations to Mister Car Wash. “Retirement did not last long, so I asked for the name, Metro Express, back from Mister Car Wash, and all three of my children and I started the business again in 2014.”

The family has set an ambitious goal of opening 25 stores by 2025. “We are better than half-way there,” Martin said.

Even though everything is going well, he is always testing the waters and exploring other options. “Timing a sale that is beneficial to owners, employees, and customers is dependent on market conditions,” he said.

“It is never in the best interests of anyone to ignore what is happening, especially if the price and valuation of the company are high.” Martin’s experience on both the sale and acquisition side of the car wash business led him to become a founding partner, along with Jeff Pavone of Amplify Car Wash Advisors. There, he advises clients on operational strategies to maximize the value of their business and helps them find the right purchaser or partner when they are ready to explore options.

“One of the most commonly overlooked aspects of selling a car wash business is failing to go through a thorough evaluation and a competitive bid process,” said Martin. “Owners who talk to a major platform or are approached by someone without first positioning the business to get the highest value will not get the best possible offer. When I sold my first car wash business, there was only one major buyer. Today, there are over 25 private equity firms or car wash platforms in the car wash space, and they are looking to scale quickly.”

“There are three reasons people exit their car wash businesses –aging out with no family to take over, reluctant to take on financial risk to grow the business, and excessive competitive growth in the marketplace,” said Martin. Competition is the greatest risk to many owners, because as competition increases, it is important for an owner to remain competitive, or risk being taken over by new entrants.

“If you don’t or can’t compete, cash flow to the business is reduced, which decreases the value if you decide to sell,” Martin said.

The other major item overlooked by most sellers is what they plan to do the day after the sale closes, said Martin. “Many owners are focused on the pot of gold at the end of the transaction, but they need to know how they will spend their time, protect their financial well-being, and enjoy their lives after the transaction is complete.”

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Martin has set up his business with a well-designed transition plan and a family trust for his three children. “If someone has a family business and family members who want to be involved, a trust is a good way to protect the legacy,” he said.

If the decision is to sell the business, there are three main options, said Martin.

  1. Cash and carry. The owner completely leaves the business.
  2. Sell a small percentage, up to 49%, and continue to run the business with the new financial partner.
  3. Sell over 80%, keeping the management team involved, eliminate personal guarantees, and have access to a credit facility to grow and expect a second transition down the road.

“Sellers who want the highest value for their business should plan to stay with the business or ensure that their management team stays with the business,” said Martin. “This ensures that the physical assets, the buildings and equipment, along with intellectual assets, and the people that make the business successful are in place to maintain the value of the car wash.

“Selling a car wash is more than just selling a building. It is not a real estate transaction; it is an enterprise transaction. It makes sense to have someone on your side who understands your business, the car wash business, the buyers and the marketplace. Someone who can provide you with the level of service and value that you deserve.”

Bruce Milen

Jax Kar Wash

Jax Kar Wash was a family-owned business founded in 1953 that grew to nine high-volume car wash locations in the Detroit area. Bruce Milen, son of founder Jack Milen, is now chairman of Jax Kar Wash and his son, Jason, is the chief executive officer after partnering with a private equity firm.

“We wanted to expand our business, and the timing was right to bring in partners who could invest in the business, provide expert advice and allow us to continue operating the family business,” said Bruce Milen. “It was also time for me to take a back seat and move my son to the CEO position.”

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Milen began working in the family business by pumping gas at the car wash when he was 12 years old. Finding the right investor was a process of working with Amplify Car Wash Advisors to identify a company that allowed the Milen family to continue expansion while retaining the company’s commitment to excellent customer service. Both he and his son hold seats on the board of directors.

“This is not the first time I’ve sold the business,” Milen said. “Twenty-five years ago, I sold to a consolidator, but it didn’t work out and I bought it back in 2001.” This past experience gave him a unique perspective for what he and his business needed from partners.

“We wanted to maintain family involvement and to keep our staff,” Milen said. “Many of our employees have been with us for many years, and we saw the expansion as a way to offer more opportunities for location managers to become district managers, other employees to move up to location manager and administrative staff to grow.”

Because it takes years to develop a top-notch car wash manager, Milen was open with his staff about the intention to bring in partners who could help them expand, but he also reassured them that the family would still manage the business. “You have to take care of your employees and your customers to stay successful.”

There were no surprises, but anyone who goes through the process has to understand that due diligence takes time, said Milen. “You do have to be prepared and should take a few months

before beginning the process to make sure your financial, staff, building and equipment records are in order,” he said. “Your accountants and attorneys will be busy.”

Milen also advises car wash owners to have personal advisors in addition to professionals involved in the sale, partnership or other arrangement. “You want to receive funds that will allow you to continue your same lifestyle so be sure to have your own financial and legal advisors who will protect your interests,” he said.

In addition to compensation as a partner in the new business, Milen serves as chairman and consultant for the company. “I help grow the business by finding new locations,” he said. “My wife has commented that she thought I was getting out of the business, but I like what I’m doing and I have more freedom since I’m no longer CEO.”

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