how to value a quick lube business
Keys to determine the value of a small business, Start with your pretax, pre-interest earnings. Finally, any current debts or future payments, called liabilities, are subtracted from the net income. Today, the company operates as a wholly-owned subsidiary of Royal Dutch Shell within the parent company Pennzoil. Our partners compensate us. We all know this chore requires ones hands to get dirty, and for this reason alone, many car owners are perfectly okay paying a quick lube business to do the job for them. Later, too, you can use this list to create an overview of your companys value for potential buyers. Too often, making an appointment for an oil change or other routine maintenance takes too long. Regularly getting the oil changed is one of the most important maintenance tasks you can do for your car, and fortunately, it's one of the cheapest. As a first time buyer, I had a lot of extra explaining everything in detail. Keeps supplies ready by inventorying stock; placing orders; verifying receipt. The profitability of individual companies depends on convenient location and good marketing. Our opinions are our own. into the automotive business. Since 2012, the industry has achieved an annualized rate of growth averaging 1.5%. Make sure your company checks these three boxes: You make steady profits. At Easy On Oil, weve made plans to create a significantly large regular customer base. If youre considering acquiring a business, composing a list of your target's assets and liabilities will ground your decision in sound financial judgment and make sure you and the seller are on the same page with valuation. (Thats why this number is subtracted from the SDE in valuation calculations.) The average age of a vehicle owned in the United States is 11.4 years. At some point, every vehicle requires ongoing maintenance to keep it functioning properly. Protect your EATS system with Delo 600 ADF. SHOP STATS: Midas Kalkaska Location: Kalkaska, Mich. . You should have already done your location homework, so landing the future home of your quick lube business should not be a problem. When evaluating offers, please review the financial institutions Terms and Conditions. 16% of the oil changes which occur within the quick lube industry feature Valvoline products. (Buyers might ask about your discretionary cash flow when you offer them your valuation, so be prepared to include and value each major expense or purchase.). Quick lube stations provide services ranging from basic oil changes to transmission flushes and windshield wiper replacements. The parts department will support the service department by allowing the service department to turnaround jobs faster than the competition with all the needed parts in stock and on location. One Independent Quick Lube w/RE in East-Central South Dakota! So, sellers should find out as much as they can about companies that are similar in size, business model, and revenue, if that information is available. Entrepreneurs looking to buy an existing business should also be familiar with valuations, and feel comfortable estimating value independently of the business owner or brokers asking price. Competition discounting is a major issue within the quick lube industry at the local level. Performing services on brake systems to coolant flushes. (Statista), #21. This allows the IC engine to focus on efficiency rather than trying to do everything as it does in an all-gas car. In the United States, about 450 million oil changes are performed each year. Additionally, franchising a business comes with an entirely different set of understandings and obligations. Most of our competitors have adopted point-of-sale systems in their stores. Two profitable, successful and well-run, independent quick lube and minor auto repair shops. : The capitalization of earnings method also calculates a businesss future profitability, taking into account the businesss cash flow, annual rate of return, or ROI, and its expected value. These conservative assumptions make for a more accurate estimate of real risk. Most likely, business owners will provide you with that number, so its important to understand how the business owner reached that value, and what these values reflect about the actual business. More on liabilities in a bit. On average, 2/3 of business comes from . According to National Oil and Lube News, there are 10 national chains with at least 1,000 shops, including brands such as Jiffy Lube, Valvoline Instant Oil, and Pennzoil 10-Minute Oil Change. Also our plans to make sure we maintain a referral network will give us the needed push in the industry. The higher your SDE multiple, as you might expect, the more your business is worth. Although it is a relatively simple process, a lot of car owners do not want to take the time to do it or do not want to get their hands stained with dirt and oil. The keys to success include having quality employees, efficiently managing costs of goods and location, and great customer service. Some locations may provide additional vehicle maintenance services, such as radiator flushes, brake line cleaning, and power steering fluid flushing. (Car Wash Magazine), #4. The quick lube industry focuses on providing oil changing services for automobiles. Cost for basic insurance policy covers, permits and business license $100,000, The cost of acquiring a suitable Office facility 6 months (Re Construction of the facility inclusive) $120,000, The budget for equipping the office (computers, software applications, printers, fax machines, furniture, telephones, filing cabins, safety gadgets and electronics et al) $10,000, The price of purchasing of the required software applications (CRM software, Accounting and Bookkeeping software and Payroll software et al) $12, 000, The Cost of Launching our official Website $4,000, Our budget for paying at least five employees for 6 months plus utility bills $70,000, Additional Expenditure (Business cards, Signage, repair equipment, Adverts and Promotions et al) $234,000. Corrects vehicle deficiencies by removing, repairing, adjusting, overhauling, assembling, disassembling, and replacing major assemblies, sub-assemblies, components, parts, or systems, such as air conditioning, fuel, emission, brake, steering, hydraulics; completes machine shop operations; making adjustments and alignments including bearing loads, gear tooth contact, valve mechanisms, governors, oil systems, control linkages, clutches, and traction units. (IBIS World), #2. Sources: New Constructs, LLC and company filings. www.ratchetandwrench.com is using a security service for protection against online attacks. We also need enough business cards for three years for our workers and flyers advertising the grand opening to be distributed and posted in the area. The average revenues generated by a single location in the quick lube industry reached almost $765,000 in 2013. Does becoming a quick lube business owner sound good to you? Drawing on her background in small business and startups, she covers lending, business finance and entrepreneurship. In 2016, 45% of consumers asked for premium products from their preferred quick lube business. Another 22% of operators combine automotive repair with quick lube services. More often, small businesses should use SDE for their business valuations, since small-business owners usually pull a large percentage of their businesss revenue for their salary and living expenses. The service requires full cookie support in order to view this website. Owners of quick lube businesses benefit from the quick overturn of customers and relatively low overhead. You might think that you can't actually distill the value of your entire business to an exact number and, sure, in a way it's a bit of an estimate. Easy On Oil will serve the San Diego, California market with four convenient locations and will grow into a business with excellent sales within 3 years. Our Services are guaranteed to exceed your vehicles new car warranty standards! The company would need to have sales decrease by more than 30% before we can be unable to satisfy our month to month financial obligations. (Valvoline). This is another opportunity to seek the counsel of a mentor or a professional advisor, who can provide insight into your businesss assets from a more objective perspective. Even though quick lube locations are seeing a reduction in the number of cars being serviced each day, the number of oil changes being performed is rising. The US automotive oil change and lubrication industry includes about 5,000 companies with combined annual revenue of about $5 billion. We do not intend to offer expansive vehicle repair services as our facilities will not be equipped to run full automotive diagnostics and repairs. We will give a guarantee on all our repairs for a certain amount of miles or time. Groups exist on the state and federal level to help with seed money. A valuation represents your companys total worth. It can gather data to . (Car Wash Magazine), #11. Easy On Oil is a San Diego registered LLC quick lube business that will provide high quality oil changes at a reasonable price. So how do we make money? 3. Intangible assets are crucial to your SDE multiple, so its important to identify and record their estimated value. All these were analysed based on per-unit revenue, per-unit cost, and fixed costs. Based on currently available information, Valvoline has a total of 1,595 system-wide stores. Also, the local craft brewing industry attracts an increasing number of visitors for beer tours and the annual San Diego Beer Week in November. Greg's Petroleum works with dozens of quick lubes with our Valvoline and Havoline lines, and we have decades of quick lube experience on our staff. He will be charged with overseeing the sales and marketing of Easy On Oil. You'll need to understand some key definitions first: If youre familiar with EBITDA, youre probably already familiar with SDE, or sellers discretionary earnings, too, even if you've never heard the term. Regardless of the option you pursue, get the word out with our help. But buyers arent exempt from this step in the process! It can be an especially useful approach for rapidly growing businesses and industries. A valuation is a suggestion of value, but your business model shows potential buyers how theyll actually reach their customer base to generate revenue if they purchase your company. December 16, 2021. (Car Wash Magazine) #7. The cost of an oil. The quick lube industry is growing rapidly. Our vision at Easy On Oil is to become the leading business that offers Quick Lube repair services and a well-stocked repair parts shop in San Diego, California. Pre-qualified offers are not binding. (Car Wash Magazine), #5. When the economy is weak, vehicle owners tend to complete these services on their own, to the best of their ability. People will continue to drive regardless of the general economic market. The business's cash-flow forecast is adjusted (or discounted) according to the risk involved in purchasing the business. From our cost analysis above, we need approximately $560,000 plus $1,200,000 inventory to start Easy On Oil successfully. Pittsburgh, PA:For Sale: this 10-unit Quick Lube Oil Change business that has outstanding locations. This means intellectual property, your production line, your delivery truck if its a part of your business, you'll either need to account for it as an asset or a liability. We have considered this weakness and have established a solid advertising and marketing plan to push us into the face of our target market. 1 in 3 vehicle owners decide to change their own oil after purchasing a new vehicle. If so, read on about what it takes to become one. Overall, a strong business plan provides buyers with important context about your company like your location and mission and captures what key services or goods you offer. Buying a quick lube allows business-savvy entrepreneurs a stable, revenue-generating opportunity due to the essential nature of the business. She was trained at Ford and later took a position at Chevrolet. (Car Wash Magazine), #8. Victory Lane Quick Oil Change. Do you want to start a Quick Lube company and need to write a business plan? Establishing a firm financial foundation will help you maintain realistic expectations about the value of your company (or the company youre hoping to buy). Make sure they know by having your license visible front-and-center. Through 2028, the quick lube industry is expected to see lower levels of growth than in the past 5 yeas. Over the past decade, improved technology and extraction techniques enabled industry . effective manner and I never once felt like I was in the dark. With the Multicare brand extension, Jiffy Lube is focusing on rolling out brake, diagnostic - and eventually tire - services to its customers. However, due to the confidentiality agreements stipulated by some of our current sellers, were not able This allows households to save a little money on the aftermarket needs of their vehicle. Check out our Website for Services and Coupons! Our diverse management have put plans in place to make sure our regulars feel appreciated by rewarding them for being loyal customers. Although there will still be many different tasks to complete with your hands, we will grow and advance with this trend by employing the services of a software engineer in due time. It's likely that any sellers you're working with will want to see your credit report and basic financial profile. ), Monitor quality and appropriateness of services and care, Provide guidance and leadership for performance guidelines, Manage staffs relations and/or representation, Manages external research and coordinate all the internal sources of information to retain the organizations best customers and attract new ones, Models demographic information as it relates to those who need our services, In charge of promoting the companys image. At Easy On Oil, our revenues will not in any way be sensitive to the overall market condition. Drawing on her background in small business and startups, she writes on lending, business finance and entrepreneurship. Once you've determined to open a quick lube business, the first thing to do is to put together a business plan. Re-opening a former auto repair or quick lube business can save significant time and money. 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