Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Car Wash Chain Scored a 14x EBITDA Multiple
Transcript
- Lucas: So a 12-location car wash chain in the Southeast just sold for 14 times EBITDA. February 2026. That deal tells you almost everything you need to know about how private businesses are actually valued. Luna: Fourteen times — that feels high for a car wash. Aren't those usually in the 6 to 8 range? Lucas: Historically, yes. But the multiple isn't some fixed number the universe hands down. It's the output of eight specific factors that buyers weigh. And this chain hit on almost all of them. Luna: Okay, walk me through those eight. I want to know what would make a buyer pay 14x versus, say, 6x. Lucas: Start with revenue quality. This chain had 92 percent recurring revenue — monthly unlimited wash memberships. That's gold to a buyer because it's predictable. Contrast that with a business where 60 percent of revenue comes from one-off service calls. Luna: Right, so the first question a buyer asks is: how much of your revenue shows up next month without you having to sell anything new? Lucas: Exactly. Second factor: customer concentration. The car wash's largest single customer accounted for less than one percent of revenue. No key-man risk. I've seen a manufacturing business with one customer at 40 percent of sales get offered 4.5 times EBITDA. Same industry, same margins — but that concentration kills the multiple. Luna: So diversification is literally worth millions. Third factor? Lucas: Gross margin stability. This chain ran at 68 percent gross margin, and it had been within two points of that for four straight years. Buyers aren't just looking at the level — they're looking at the variance. If your margin bounces between 55 and 75 percent, they'll discount the multiple because they can't model the downside. Luna: That makes sense. A stable number is more valuable than a high but volatile one. Lucas: Fourth: growth trajectory. The chain grew same-store sales by 9 percent annually for three years. Not explosive, but consistent. Buyers pay a premium for momentum because it reduces the risk that they're buying a peak. If you're flat or declining, you're fighting from behind. Luna: And that 9 percent — does it have to be organic, or can M&A count? Lucas: Organic matters more. Acquisitions raise questions about integration risk. But in this case, it was all organic — more members, higher retention, a small price increase in year two. Clean story. Luna: Fifth factor? Lucas: Facility leases. This is the one that almost killed this deal. Three of the twelve locations had leases expiring within 18 months, and the landlord had a clause allowing him to terminate if the business was sold. The buyer's attorney flagged it in week two of due diligence. Luna: So what happened? Lucas: The seller — a woman named Diane who'd built the chain over 22 years — went to the landlord and negotiated a 10-year extension with an assignment clause. That alone boosted the offer by nearly two turns. The buyer had originally been at 12x. After the leases were resolved, they went to 14x. Luna: So fixing one lease issue added... what, roughly $3 million to the sale price on a $20 million EBITDA business? Lucas: Around $2.8 million, yeah. Diane spent about $8,000 on legal fees for that negotiation. Best $8,000 she ever spent. Luna: Alright, sixth factor. Lucas: Employee reliance. How much of the business is tied to specific people? In this case, the general manager had been there 14 years and was willing to stay for two years post-sale. The buyer put a retention bonus in the contract — $50,000 if he stayed the full two years. That signaled stability. Luna: If the GM had wanted to leave, that would have dinged the multiple. Lucas: Probably down to 10x or 11x. Because then the buyer has to factor in hiring risk, training time, potential revenue dip. Seventh factor: barriers to entry. Car washes have high-ish barriers — environmental permits, water usage rights, construction costs for the tunnels. You can't just open one overnight. That protects the buyer's investment. Luna: So businesses that are hard to replicate command higher multiples. And the eighth factor? Lucas: Seller transition risk. Diane agreed to a 90-day handover where she trained the new management team personally. She also accepted 20 percent of the purchase price as a seller note — basically a loan from her to the buyer, paid back over three years. That tells the buyer, 'I believe the business will perform.' When a seller takes a note, the multiple often goes up. Luna: Because the seller has skin in the game post-close. Lucas: Exactly. And that brings me to something I hear a lot from people getting ready to sell. They'll say, 'My competitor sold for 10x, so I should get 10x.' And that's just not how it works. Comparable sales are a starting point, not a destination. The multiple is built from the specifics of your business. Luna: It's not like real estate comps where two similar houses on the same street trade at similar prices. A business across the street could have completely different customer concentration, lease terms, employee retention. Comps are nearly useless without adjusting for those eight factors. Lucas: That's the single biggest mistake sellers make. They look at a headline multiple and assume it applies to them. Meanwhile, the buyer is running a spreadsheet with 30 line items. The multiple is the last thing that gets filled in. Luna: So for someone listening who's thinking about selling in the next few years, what's the one thing they should start working on today? Lucas: Revenue quality. If you can convert even 20 percent of your one-off customers into recurring or retainer relationships, that alone can move your multiple by a full turn. It's the easiest lever to pull because it doesn't require a capital investment — it's just a pricing and marketing shift. Luna: And if you're a buyer listening, what's the red flag you should look for first? Lucas: Customer concentration. If any single customer is over 15 percent of revenue, that's a risk you need to address in the price or the contract. I've seen buyers insist on a clawback clause: if that customer leaves within 12 months, the seller refunds part of the purchase price. Luna: That's aggressive, but fair. The seller controls the relationship, so they should bear some of the risk. Lucas: Exactly. And the best sellers proactively address these eight factors before they even list the business. Diane had a data room ready with lease summaries, customer concentration reports, margin trend lines. She made it easy for the buyer to say yes. Luna: You know, speaking of making things easy — if these conversations have moved your work forward in some small way, a couple of dollars a month is genuinely what keeps these going. Buy me a coffee dot com slash fexingo, if you've gotten something out of them. Lucas: Yeah, it's a small thing that adds up. And it keeps us ad-free, which I appreciate. Luna: Alright, back to multiples. So Diane got 14x. What would have happened if she hadn't fixed those leases? Lucas: She probably would have taken 11x or 12x from a different buyer — or the same buyer might have walked. The deal almost fell apart. The lesson is that the multiple isn't just a number a buyer picks out of thin air. It's a reflection of how much risk the buyer thinks they're taking on. Reduce the risk, raise the multiple. Luna: So what's the most common risk that sellers overlook? Lucas: Leases. I'd say 40 percent of small business deals hit a lease issue during due diligence. Either the lease is expiring soon, or the landlord has a change of control clause that lets them spike the rent. Sellers assume the lease will roll over automatically, and it often doesn't. Luna: That's a huge blind spot. And it's fixable — you just have to talk to your landlord early. Lucas: Exactly. Give yourself 18 months of runway. Get the extension, get the assignment clause, and then you walk into negotiations with that risk neutralized. It's like buying insurance that pays you back in a higher multiple. Luna: One more question: how do you know what multiple range you should expect before you go to market? Lucas: Talk to three business brokers who specialize in your industry. Not one. They'll each give you a range, and you'll start to see a band. For a car wash, the broker might say 7 to 10. Then you work on those eight factors to push toward the top end, or even above it like Diane did. Luna: And if the brokers give wildly different numbers? Lucas: That's a red flag that your business is hard to categorize, which itself is a risk. You might need to clean up your financials or segment your revenue streams so buyers can see the recurring piece clearly. Luna: So the multiple is really a story about risk, not about some inherent value. Lucas: That's it. The buyer is saying, 'I'll pay 14x because I believe the cash flows are safe for the next decade.' If they don't believe that, they'll offer 6x — or nothing. Diane told that story well, and it paid off. Luna: I'd love to do a follow-up on how she prepared that data room. I think listeners would find that useful. Lucas: Noted. We'll get Diane on the show in a few weeks. For now, if you're selling, start with those eight factors. If you're buying, start with customer concentration. Either way, the multiple is yours to influence.