Results from Better Business Management

Craig Burr, Multimedia Publisher offered comments and thoughts on business development and transition—then went to the “Brain Trust” and asked authentic industry leaders like Dave Dougherty (PDQ)  to share his expertise and experience.

Craig Burr offered his observations.

We all realize that the car washing business is changing. There are trends that are localized and shifts that are national or global in their scope. The business in many ways is becoming more complex. Labor laws and enforcement are causing change. Water shortages and use regulation is a big factor. Energy bills are a big impact. The entry of global grocers and big box retailers continues. Many other factors are in play as well.

One of the biggest changes in the industry is the growing number of generational shifts taking place in car care business ownership and management. The second and third generations of family owned and operated businesses are assuming control of both car washes and manufacturers. Surely this is a mixed blessing. Certainly one of the biggest incentives or motives in operating a successful family business is the hope that it can be successfully carried on by the family. Alternatively, there is the sometimes attractive option of selling the business and taking care of family without passing along the operational challenges to the next generation. We have seen both washes and manufacturers carry forward to new second and third generations, and we have seen some businesses sell off to new owners. In a couple of instances, families have expanded their business in generational shifts by actually acquiring other family businesses facing the same turning points. How does a business need to evolve today—under today’s New Rules?

As the faces of ownership change from generation to generation or that change is contemplated, what should business owners be doing to protect the ongoing vitality of their businesses? Whether preparing to sell-off or preparing to hand-off, what should the priorities be. Should these businesses demonstrate growth leading up to the exchange by establishing new sites, new products, new patents? Should the older generation be simply concentrating on the fundamentals and fortifying their business through simple smart business? What needs to be included or written down into a transition plan or in a business plan that would be shown to potential new owners? How much of the value of the business is tied into the Founder or the established family heritage?

All businesses face transitions these days. In the face of changing faces, should anything extra be being done to prep a wash business for sale? Is the best possible deal going to be found with the global grocer or the big box retailer? Or, perhaps should the business owner just concentrate on business-as-usual?

Of all the challenges confronting car care business owners today, which are most important to face? Is innovation and continuous improvement going to be rewarded? Or, is stability and consistency seen as a higher goal? There are a large number of family businesses on both sides of the equation in this industry. Many manufacturers are most certainly facing these transitions in the next few years. Will they survive, sell-off, transition to Junior or go public? Many more car washers are facing these challenges now. How does the accumulative knowledge and skill of the founder or current generation get passed along or better yet, what value is placed on it? Has the marketplace moved on so far that the founding generations have but little to contribute in today’s business which is governed by entirely new rules under which it was established or founded.

Dave Dougherty (PDQ)  shares his experience.

As the years roll on and generational shifts take place, which is of course inevitable, owners need to constantly be prepared for change. The successful generational transitions that I have seen have been very calculated and organized. Original owners that have brought the next generation into the game early have proven to be the most successful. Transitions typically do not happen overnight, thus it is a good idea for the two generations to work in conjunction with each other to learn what the strengths are of each other. Thus beginning the transfer of knowledge from one generation to the next. Having the second generation in control of the car wash with guidance or consultation from the previous owner can be a second step prior to a complete transfer to the next generation.

If a decision has been made to sell-off, either prior to a generational change or that decision is made by the next generation, there are several critical steps that should take place. First off, these decisions should not be taken lightly. The sales process may take six months to a year to become official, however the selling company should be planning or preparing for a sale for at least two years prior to the actual sale. If the decision has been made to sell-off, both generations should work together to determine and achieve its goals. Are the goals to maximize the sell price or are they to exit the operational issues quickly, more than likely it is somewhere in between. There are several approaches to preparing for a sale. Acquisition of sites can be successful if there are obvious holes in coverage. Purchasing a site that will quickly fill a void in blanketing an area can be a benefit to a potential buyer. An acquisition may also prove to be a quick shot of earnings, or even allow for movement of equipment from one location to the another which may maximize the strong sites within a network.

However, if ownership decides to focus on the fundamentals of their existing business as a means to improve their ability to sell, several items should be analyzed. The obvious direction that most companies that are looking to sell is cost reduction. Try to reduce as many costs as possible to show potential buyers that higher returns are possible.

Secondly, many companies try to skinny their operation, this can be a dangerous maneuver. The most important factor should be to not affect the customer at all, do not reduce or eliminate too much that the changes affect customer service. In fact, customer loyalty can be a major selling point in an acquisition process. Due to this, the selling companies should focus on generating as quickly as possible a strong customer loyalty program, demonstrating to possible buyers that their site has more value because of loyalty initiatives.

Strong companies are typically strong due to the founders or owners. That is not a coincidence. The owners ability to run a successful business is why there is acquisition interest. Transferring that knowledge is typically the challenge. In many cases owners will agree to an employee contract for a time period after a sale takes place, or in some cases a owner will consult when needed. These typically will add after the sale value to potential new owners.

It’s a balancing act.

Car wash owners find themselves juggling many issues. It almost becomes a balancing act for owners. Do I invest in my business, update my equipment, or do I hunker down and focus on providing my consumers the best possible experience. Unfortunately, the answer may be a combination of some or all of those options. I understand it is not a real answer, but I believe the answer to this question is different for every situation. If equipment is a limiting factor to growth, then purchasing the latest and greatest innovative products are easily supported by the upside they can produce. In this type of economy these decisions can prove even more difficult. However, a seven to 10 year old in-bay automatic may not be able to support the volume a site may be capable of producing. Thus, new equipment can be supported by a much faster ROI, or simply put, more cars per hour. Today’s in-bay automatics can wash more cars on an hourly basis than past washes. If a current owner can demonstrate that a recent investment will lead to higher future volumes, that may persuade a possible buyer by providing more value. That would be one less issue a new owner may need to face, thus increasing the value.

In many cases when a business is in a generation change situation it can be a sink or swim. There are many directions for current or new owners to turn. Local car wash distribution can prove to be an excellent source of information and guidance through transitions. They can give perspectives from past experience as they have typically been in the business for many years and have seen these situations in the past. They can also do site evaluations to determine the strengths of all equipment being used at a particular location. Their background and knowledge can be helpful.

In order for business to grow and be successful during a transition period, ownership needs to possess the knowledge and experience of the founding generations along with the fresh spirit of newer generations. The most successful transitions occur when newer generations have the respect and appreciation for the blood sweat and tears their predecessor put into the business and treat the business with the respect it deserves. Combining that respect and appreciation with the innovative ideas of new generations can prove to be a successful combination until the next generation is ready.

David Dougherty is the senior product manager for PDQ Manufacturing, Inc.  He can be reached at David.Dougherty @pdqinc.com.

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