Does anyone keep a basic list of items to check as they work through the buying decision process? For example, I was looking at a car wash and the numbers looked good, then I discovered that some vacant land was purchased just down the road which will soon have a brand new car wash on it. So the seller’s motivation became obvious. I can’t come up with every little thing to look out for, but I’m sure some of you have learned hard lessons that I would like to avoid. It would be great if some of these things could be listed on this forum. Thanks
Did you look at the last 2 years operating expense? What is the DCR ?
Debt Coverage Ratio? The higher the better.
Yes, the numbers were good, but I don’t expect them to stay where they are. I’ve considered updating the building, but I’m not sure that it will stay competitive with the new one. I just don’t have a good feeling about it…
Figure out where you stand if you lose 50% of your revenue, do the numbers still work? Figure out what your max offer is with 50-60% less revenue and make that your take it or leave it offer.
In a recent example near me the existing car wash lost probably 75% of its revenue. They were charging $6 a wash before the new place next door opened. Now the new place charges $3 so they had to drop down to $3 to compete. That alone if they did the same number of washes halves their income. Couple that with half their customers (or more) going next door to the new place with all advertisement and coupons being thrown about. They lost I would guess 75% or better. They are also more outdated looking and don’t have a catchy name like the new place. The finnicky crowd of that town will go to the new place and slowly the old place will wilt away. You don’t want to be in that situation.
Hell if I were you I would even go so far if he has no other offers to make an offer for the land value only, that way you can scrape and build something else if the new place really kills you. If he has other offers that won’t work but if he doesn’t he may have no other choice.