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BUYING A SMALL BUSINESS

Dirt-Track Speedway Needs Tune-up

An overview of a red-clay racetrack offered for sale, including the price, an outlook on the racing industry, and a few suggestions for jump-starting the track's lagging earnings.
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Business For Sale

Does your corporate existence seem humdrum? Then switch gears. This 32-year-old auto racetrack, built with red clay rather than slower asphalt, boasts average speeds of more than 100 miles per hour and plays host to demolition derbies and other Saturday-night competitions. Located near a midsize Southern city, this half-mile track can hold crowds of up to 6,000. With tickets ranging from $5 to $15, it attracts a family crowd; think of it as a less expensive alternative to buying your own minor-league baseball team. Plus you have the chance to meet the Winged Sprint Outlaws every time they visit. The current owner of 15 years is ready for life in a slower lane, but he's willing to train a successor. Most of his 65 part-timers should stay on for the long haul.

OUTLOOK: U.S. car racetracks had record attendance rates of more than 15 million last year. To floor the accelerator with this speedway, which currently gets filled to only one-third of its capacity, you could boost the advertising budget, woo community groups, and pursue promotional revenues from local businesses. Be prepared for a part-time business with plenty of quirks, such as the biggest expense (liability insurance) and most labor-intensive activity (watering the dirt track four days a week).

PRICE RATIONALE: According to the National Race Track Clearinghouse, about 15% of the United States' 2,000 car racetracks change hands each year...with little rhyme or reason when it comes to sale-price valuations. But if you invested $680,000 in a mutual fund instead of doing this deal in cash, you'd easily clear more from the fund's earnings than the speedway currently throws off in recast earnings; finance it instead and you'll likely hit the wall because current earnings can't cover both interest charges and an owner-manager's salary. But don't dismiss this track as a loser: if you can schedule more high-profile races, boost crowds and promotional revenues, and maybe even land a television contract, you might wind up in the winner's circle, even with a purchase price in the $500,000-to-$600,000 range.

PROS: How many businesses offer nearly as much fun as mud wrestling, plus the upside potential of this long-shot contender?

CONS: You'll crash and burn if you don't rev up spectator attendance rates quickly.

THE BUSINESS: Southern dirt-track speedway

PRICE: $680,000 (five-year financing possible with 50% down)

*Before depreciation, interest, taxes, and owner's compensation
FINANCIAL SUMMARY: 1994 1995 1996
Gross revenues $458,000 $435,000 $410,000
Recast earnings* $45,200 $41,300 $39,400

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Bob Morris of Sholar Business Associates at 910-854-8722.

Last updated: Nov 1, 1997




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