So you’ve decided to start a car wash business. There are many steps in the process and each needs to be implemented correctly or your business will not be all it can be. We will outline here the process that needs to be taken and the sequence in which they should be undertaken. This should not be seen as a race and haste will lead to mistakes. Your goal is to open and operate a successful car wash business not to open one in a hurry that has limited success. Maximise your return with a judicial plan and carry out that plan to success.
You will first need to decide if you are going to go it alone or will you buy a car wash franchise. Buying a franchise may be easier as the experts will presumably already have opened other successful franchises and will have a road map for you to follow. If you decide to go it alone or even if you take the Franchisee route you would still need to be mindful of the steps to follow. With any franchise offering you would seek out the franchisors disclosure document. This document, amongst other purposes, must outline all the expected costs that you would expect to incur in starting or running your car wash business. You would also be able to seek independent accounting and legal advice to ensure that anything you didn’t understand could be explained to you. Generally a car wash business requires a substantial investment of your capital. A professional can assist you develop your business plan. Amongst other things this plan can assist you with a cash flow analysis to determine what cash reserves you will require. If you have selected a franchise these details are outlined in the disclosure statement of the Franchise you have selected to buy. Expected costs of various items including rental, legal costs, operating costs etc will all be outlined in the disclosure document provided to you by the franchisor. Contact details of existing franchisees and past franchisees will also be in the disclosure document and you can supplement your own research by calling these people to determine costs and returns to be expected commensurate with your level of input to the business.
You would need to determine the type of business you will operate. You can elect to run a hand car washing operation or set up a machine or tunnel wash. Obviously technology will reduce your labour requirements but it comes at a significantly higher set up cost to that of a simple hand wash business.
The advantage of the manual wash is that customers will pay more for the perceived quality of a hand wash, wax and polish than they would a machine wash. This can also lead to detailing work for regular customers, which can significantly add to the profitability of your business.
With tunnel or machine washes you would also need to factor in depreciation of equipment and the refurbishment or replacement of machinery at end of life.
You can circumvent the uncertainty of setting up your car wash business by buying a business that is already established. This would sell on a multiple of 1 to 3.5 times net annual earnings and although you are paying a premium over setting up your own new business at least you would be assured of ongoing customers and revenue.
You would need to determine if you were going to operate in a shopping centre, multi level car park, or private lease. In either choice you would need to negotiate a lease term and rental. These figures are important as they impact on profitability greatly. Careful thought is required here. Again if you have elected to buy a franchise then a lot of this work is done for you with site selection and lease negotiation usually offered as part of your franchise investment.
Once you have decided on all these options you are well placed on the type of car wash business you want to buy.
By Sanam Ali