At first glance, this Queens car wash looks impressive.
The business reports roughly $850,000 in annual cash flow on about $2 million in revenue.
Most buyers see that number and immediately assume it must be a great deal.
Unfortunately, that is where the story starts, not where it ends.
The asking price is $5.45 million.
That works out to a 6.41x cash flow multiple.
For comparison, car washes often trade closer to 3x cash flow.
In other words, buyers are being asked to pay more than double what many comparable businesses sell for.
That is an enormous premium.
Once you run the deal through the BizHub calculator using realistic financing assumptions, things get ugly.
After debt payments, the buyer is left with only about $170,000 per year.
That means over $680,000 per year is being consumed by debt service.
The business may generate strong earnings, but most of that cash flow never reaches the buyer.
A lot of buyers might assume a valuation this high includes valuable New York real estate.
It does not.
The listing specifically states that the property is not included.
You are still paying approximately $9,500 per month in rent, plus roughly $70,000 annually in property taxes.
If the real estate were included, there might be a stronger argument for the premium valuation.
Without it, the price becomes much harder to justify.
The DSCR comes in at only 1.09.
That is below what most SBA lenders want to see.
Because of that, a buyer would need to bring significantly more cash to the table.
Instead of a normal 10% down payment, the deal requires approximately 23% down.
That is roughly $1.3 million out of pocket.
And after writing that check, the buyer is still only earning around $170,000 annually.
The cash-on-cash return drops to roughly 13%, and the down payment takes more than seven years to recover.
The seller points to future upside.
They believe the next owner can extend operating hours and launch a monthly membership program.
Maybe they are right.
But when a seller is asking top-dollar pricing, buyers should be careful about paying today for improvements that have not happened yet.
At this valuation, I would rather see those growth initiatives already implemented and producing results.
BizHub scores this deal a 3 out of 10.
The business itself may be perfectly fine.
Margins are strong.
The industry has a low default rate.
And the operation includes multiple revenue streams from the express wash, detailing, and repair services.
The problem is not the business.
The problem is the price.
This is a business being valued as if all the future growth has already happened.
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