Starting a Car Wash Business Part 2

The Car Wash That’s Right For You

If you haven’t done so already, now is the time to think about what type of car wash you want to own. Some of the factors to consider in making your decision include:

  • The amount of capital you have at your disposal
  • The amount of time you want to spend running the business
  • The amount of money you’re hoping to make

In general, the type of car wash that’s going to require the biggest investment from you, both in terms of time and money, is a full-service wash. That’s also the type that tends to generate the most revenue. But unless you have Php1 million or more to invest upfront, it’s probably not the best choice. Moving down the line, an exterior-conveyor car wash is the next highest in terms of start-up costs, followed by an in-bay automatic car wash, and finally, a self-service car wash.

The four basic types of a carwash business

1. Self Service Carwash – This carwash business model is favored by many interested in starting a carwash business. Customers wash their own vehicles in individual wash bays. These bays can either have self serve equipment or in-bay automatic equipment in them. Starting a carwash business of this type offers the advantage of low labor costs and it can be open twenty four hours a day, seven days a week.

2. “Stand Alone” Automatic Carwash – When lot size is limited, a carwash business that uses only the in-bay automatic may be preferable. This model consists of one or two in-bay automatics and a vacuum and vending area. Primary considerations in starting a carwash business of this type should be based on local competition, demographics, traffic counts, and lot size.

3. Carwash and Convenience Store Combination – In-bay automatics and self-service carwash equipment can be a profitable addition to a convenience store operation, adding significant revenue to the entire operation.

4. Full Service Carwash – This carwash business option is a conveyor wash system with attendants. Anyone considering starting a carwash business of this type should understand that this model is labor intensive and more expensive than the other types.

Frequently Ask Questions

Q: Do I need experience in the CarWash Business to be Successful?
A: No. Some basic business sense, and the motivation to consistently deliver the highest level of quality service in order to maximize Customer satisfaction.

Q: Who do I start with in the process of building a self-serve car wash?
A: The best place to start is the equipment supplier. The potential supplier should be able to direct you to, or obtain for you, all the necessary resources to locate, design, build, and market your car wash project. The equipment supplier will have experience with what services sell best in which areas and how to lay out your facility for maximum appeal. You should choose a supplier with demonstrated capability to service and support your business after completion and well into the future.

Q: How long can I expect it to take to recover my Investment?
A: Obviously this can vary tremendously based on the success of your business. A good rule of thumb in the retail business world is a 15-20% ROI(return on investment) or a 5-7 year window. You should work within this window to build your business volume so that the profitability is rewarding after the initial investment has been amortized and to make the business attractive for potential resale, lease-out, refinancing, or as collateral for the finance of future projects.

Q: What kind of financing is available for a car wash project?
A: As with any start-up business, capital can come from numerous sources. Banks tend to have the most attractive rates but the most demanding terms. Other government subsidized loan programs are available and should be explored thoroughly. Venture capital can come from family, partners, or even venture capital firms. Equipment can typically be leased and there are tax implications to each type of financing. A CPA or financial advisor can be invaluable in helping to assess your options. You can expect to need up to 20% of the project financing in cash and be prepared to provide extensive business and personal financial information. Lending institutions will require a detailed business plan that will include proposed equipment quotes and projections of revenue and costs. Your equipment supplier should be able to provide much of this information.

Q: How long will it take to build and start-up a self-serve car wash facility?
A: This will vary widely depending on the scope and location of the project. Be prepared to spend 3-6 months in the design to permit phase and another 3-4 months from permit to completion of the construction. Weather and contractor scheduling usually represent the biggest challenges. A number of activities must occur simultaneously so an experienced project manager and a detailed plan are essential. An equipment supplier that can provide a dedicated project manager is a tremendous asset and will prevent unnecessary delays and costs.

Q: How much should I plan to spend to open a self-serve car wash?
A: There are probably more variables involved with this question than any other yet it is the most frequently asked question. If you are going to invest in a business your first question should be “How much money can I plan to make with a self-serve car wash?” The biggest mistake you could make is to under-build for the location since it makes it more difficult to evaluate or recover your investment and leaves the door open for a competitor to move in and take away your customers with a nicer facility. Again, a competent equipment supplier can advise you on expected costs based on the area, the scope of the project, and average or typical experiences of their customers.

How do I start?

  • STEP 1: Find a location that needs a car wash. A high-profile location, such as a busy street with good visibility, is a necessity for a business such as this to succeed.
  • STEP 2: Contact the city or county department that handles business licenses and request an application.
  • STEP 3: Inquire as to what other requirements there are for opening a business. You may be required to provide insurance or follow certain restrictions for the area.
  • STEP 4: Contact the Franchise Tax Board to get a wholesale permit, if required. This will allow you to purchase goods without paying taxes if they are to be used in your business.
  • STEP 5: Research car washes. Decide whether you want a fully automated car wash or a partially automated one that requires workers to complete part of the washing and drying process.
  • STEP 6: Decide if you want to purchase a franchise or open an independent business.
  • STEP 7: Make a business plan. You’ll need to have all of the aspects of opening and running the business worked out for the short and long term.
  • STEP 8: Get financing. Unless you have a lot of money lying around, you will need to borrow money to build the business.
  • STEP 9: Advertise your new business. Use creative marketing to draw customers, such as a coupon book or a frequent-washer program.
  • STEP 10: Hope for rain. Rain creates mud, mud makes cars dirty, and you’ll make them clean.

Tips & Warnings

  • Consider the ups and downs of the car wash business. There may be certain seasons when people are more or less likely to get their car washed. Expect a seasonal business.
  • Talk to owners of existing car washes. Ask them what problems they’ve had, what they would do differently if they could, and whether they want to sell their business. Buying an existing business is a lot easier, but could be more expensive.
  • Make your business investments wisely. Don’t get soaked.

Estimated Car Wash Expenses

  • 13.0% Electricity
  • 7.0% Fuel
  • 6.5% Water
  • 8.5% Soap/Wax, Chemicals
  • 5.3% Sewer
  • 2.2% Pit Cleaning
  • 8.0% Replacement Parts
  • 1.8% Vandalism
  • 5.3% Insurance
  • 11.0% Property Taxes
  • 25.0% Attendants
  • 2.5% Waste Removal
  • 3.9% Miscellaneous

100.0% Total

sources: hillandfoss.com, smallbizbooks.com, ehow.com, dultmeier.com, photo from ensogo.com.ph

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