Sparkle Lane Business Plan — Returns

What the founders and growth equity investor earn across the horizon, and the return on each site built.

Returns

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Measure	Value	Basis
Founder equity	R1.40m	At inception
Growth equity	R2.40m	At the second site in Year 3
Total equity subscribed	R3.80m
Year 5 EBITDA	R1.36m	Three sites, the third contributing a part-year
Group EBITDA once all three sites are mature	R1.40m	Reached in Year 6, outside this window
Net debt at Year 5	R2.26m	Loans outstanding less cash
Enterprise value at a 5.0x exit	R6.82m	Applied to Year 5 EBITDA
Terminal equity value	R4.55m	Enterprise value less net debt
Project IRR	13.0%	On free cash flow to the firm with a terminal enterprise value
Equity IRR	4.9%	On the two subscriptions with the terminal equity value
Money multiple on equity	1.20x	At the central exit assumption
Exit multiple at which equity returns its subscription	4.45x	Net debt plus subscription, over Year 5 EBITDA

Exit multiple	Enterprise value	Terminal equity	Project IRR	Equity IRR	Money multiple
3.5x	R4.77m	R2.51m	0.2%	-10.7%	0.66x
4.0x	R5.45m	R3.19m	4.9%	-4.6%	0.84x
4.5x	R6.13m	R3.87m	9.1%	0.5%	1.02x
5.0x	R6.82m	R4.55m	13.0%	4.9%	1.20x
5.5x	R7.50m	R5.23m	16.5%	8.8%	1.38x
6.0x	R8.18m	R5.91m	19.8%	12.4%	1.56x
6.5x	R8.86m	R6.60m	22.8%	15.6%	1.74x

The third site is built inside the window and paid for inside the window, but only earns outside it

That single fact explains most of the gap between the project return of 13.0 per cent and the equity return of 4.9 per cent. Site three costs R2.29 million net in Year 5, is funded by a R1.40 million term loan and R890 000 of accumulated cash, and contributes roughly half a year of trading to the Year 5 result. The equity carries the full cost of an asset that has not yet done its work. Measured to Year 6, when all three sites are mature and the group runs at R1.40 million of EBITDA on a full-year basis, both returns improve materially. An investor should decide whether they are underwriting a five-year window or a business, because the two give different answers — and below an exit of 4.45 times Year 5 EBITDA the five-year window does not return the R3.80 million subscribed at all.

18.1 What a buyer is actually buying

Asset	Year 5 position	Comment
Subscriber base	1 000 members generating R3.52m a year	The one genuinely saleable intangible a car wash can build
Three compliant sites	Recycling verified, permits held, drainage compliant	An informal operator cannot replicate this at any price
Site works, plant and equipment	R4.45m net book value	The visible asset, and the smallest part of the value
Trained detailing capability	Six technicians across three sites	The highest-margin work in the building depends on them
Trading record	Three sites, five years, a working roster model	In a market where the average establishment lasts under four years
Leases with negotiated allowances	R180 000 per site of landlord contribution	Evidence of a landlord relationship worth inheriting

The net book value of the sites at Year 5 is R4.45 million against an enterprise value of R6.82 million at five times EBITDA. That gap is the subscriber base, the permits and the fact that the business has survived past the four-year point at which the average South African car wash disappears.

Previous section17. Implementation Timeline

Next section19. Key Performance Indicators