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Where is the car wash market today, and what will it look like in the future? Those two questions are at the center of Matt DeWolf’s interview with Jeff Pavone, which was featured on CAR WASH the Podcast and shared on Car Wash M&A, The Podcast.
Jeff shares some essential advice that benefits all car wash owners. Check out the highlights below, and tune into the full interview to hear all of Jeff’s thoughts.
THE RESETTING OF VALUATIONS
As Jeff and Matt discuss, the last few months have led to a reset of valuations within the car wash space. Between inflation and rising interest rates, the car wash landscape has drastically changed over the past several months, leading to a tightening of valuations.
However, Jeff states, “The good news is there are still good valuations being paid for good companies. The buyers haven’t gone away here; I’m getting calls on a weekly basis from groups that want to get in and buy car washes. They’re just being more selective. They’re making sure that their diligence is a lot tighter.”
Jeff reminds car wash owners that these headwinds are indicative of a resetting of valuations and that while there are still excellent deals happening for strong car wash operators, the market is tighter than it was at the beginning of the year, and it’s not likely to drastically improve anytime soon.
Jeff advises owners who are looking to stay in the business to work on improving their operations, and he suggests that owners who are looking to exit consider doing so sooner rather than later.
THE IMPORTANCE OF CUSTOMER EXPERIENCE
As the market tightens, operations are critical, and the customer experience is more important than ever. With increasing competition and tightening budgets for customers, providing a meaningful experience that goes beyond a clean car is becoming increasingly important. Protecting memberships and rewarding loyal customers is key amid tightening conditions.
Jeff shares, “At the end of the day, some of these businesses never focused on memberships. They’re going to have problems! The groups that have 5,000 to 7,000 members at a location, maybe they churn a little bit more, but that comes down to… how do you handle the churn of your memberships? We’ve got some great data from Retention Express about watching what their ROI is, because you’ve got to pay attention. You can no longer let that customer go into a phone box and not deal with them.
“Because when you’ve got difficult times, customers do have a choice about where to spend their money. This is a time that you’ve got to make sure that everything you do is your A game. And so paying attention to those people is critical today, way more critical than it was when money was just flowing.”
FUTURE PREDICTIONS AND ADVICE FOR CAR WASH OWNERS
Jeff recommends that car wash owners adjust to the valuation reset and keep doing the focused, hard work they know how to do.
As far as owners who are considering an eventual exit, Jeff advises car wash owners, “If somebody is thinking that at some point… they need to get out of this business, I wouldn’t wait another year or two. A couple people have said to me, ‘We’ll wait until interest rates come down.’ It’s not going to happen anytime soon! The bottom line is what we were living in before was not normal; what we’re living in today might be more normal, more the norm.
“I think with more increases in interest rates projected, that’s going to drive multiples down. For the people that are thinking about wanting an exit in the near future, I would say the sooner, the better, because I don’t think it gets better next year. You look at it, and it may be a few years before things change. I think they’ve got to learn to live with what they’re given, and focus on the operations going forward if they’re going to stay in this business.”
WHAT WE CAN DO TODAY TO BE BETTER TOMORROW
As Jeff and Matt wrap up their conversation, Matt asks Jeff about something he wants to do to be better in the future.
Jeff shares, “I can tell you, buying material possessions has probably given me less reward than I thought. And as a firm here at Amplify, we’ve seen a lot of people that need our help. And I would say as an industry, we’ve got a lot of lot of folks that made a lot of money. I’d say, at least for me personally, it’s focusing on the giving side.
“I’ve committed 20% of my personal time starting next year. We’ve gotten behind Boys and Girls Club recently a lot because of their needs… the needs of the community are going up dramatically. We look at the food kitchens now; the demand they’ve got us is under a lot of pressure. St. Jude is another famous, great organization we got behind.
“I can only tell you that we’ve been blessed as an industry. I’d love to see [us] giving back as best as we can. Because at the end of the day, you can’t take it with you. I would say look in the mirror, but I do think it brings great rewards and satisfaction well beyond anything you can buy for yourself.”
For more tips that Jeff Pavone shared with Matt DeWolf, check out the full episode of Car Wash M&A, The Podcast.
Want to dive deeper into car wash M&A information? View all Car Wash M&A, The Podcast episodes here:https://amplifywash.com/podcast