The time from the moment you decide to enter the car washing industry to the day you wash your first car will typically be 18 - 36 months. The process from site selection (through architects and councils and real estate agents and landlords and builders and banks and car wash equipment providers) to opening day is long, complicated, and will certainly test your committment to owning a car wash.
Broadly speaking there are 10 steps to work through before opening the doors of your car wash business.
Entering into business is risky. It is important to enter into the car wash industry will realistic expectations about the start-up capital you will require and the return on investment that you will receive for the risk you are taking. The first step to undertake before entering the car wash business is to do your homework. The information you require to mitigate your start-up risks is out there - you just need to do some work. Speak with as many existing car wash operators, car wash equipment manufacturers, car wash builders, and car wash industry suppliers as you can. Visit as many car washes as you can. Build up the most detailed financial understanding as you can of how much it costs to set up a car wash business and what returns are possible (more importantly, what returns are likely). Then take this information to two financial advisors to prepare a detailed budget and cashflow analysis of the venture. Finally, ask them if the investment is worth pursuing in comparison to other investment options available to you.
A quick note on start-up capital. It will take far more than you think. It is better to be told at the outset that your finances won't stretch far enough, than to find this out 2 years down the track and then you lose all the money you've invested.
Please note: Autowash are not financial advisors. Any information we provide you must be independantly verified by your license financial advisor.
As a general rule hand car washing has far lower set-up costs and far higher ongoing operating costs when compared to automated car washing. Factors to consider when choosing between hand car washing and automated car washing are:
Hand Car Washing
1. Hand car washes are extremely labour intensive. Willing labour may not always be available in some areas and when the business is run legally, making money is very difficult paying lawful Award wages. Some would argue it is not possible except in very rare circumstances.
2. Customers will pay a significant premium for a hand car wash. They typically will wash less frequently (the average is about 42 days between washes) but will likely be prepared to pay up to triple (full interior and exterior detail) than they would pay for an exterior only machine wash.
3. The building works and start-up costs for a hand car wash are lower than an automated wash. Typically a cafe, office, bin room, storage and plant room, and shade sale structures are all that is required. In terms of plumbing, electrical and ground works this is also minimal when compared to installing an automated machine.
Automated Car Washing
1. Automated car washes have much higher set-up costs when compared to hand car washes. Furthermore, equipment typically needs to be replaced every 10 years (or more often if not well looked after).
2. Automated car washes can be completely unattended. Depending on wash volumes and machine selection we recommend employing 1-3 staff members, however the wages component of automatic car wash businesses is very low.
3. Hand car washing has a limit on wash numbers. When they are busy and waiting times are in excess of an hour customers drive past. Automated car washes have very short customer waiting times with some machines able to wash more than 200 cars per hour.
4. Automated car washes are cheaper for customers and result in more frequent washing.
5. The variable cost per wash for an operator of an an automated car wash is usually less than $1.
In summary, we believe that the only viable option for car washing in Australia is automated car washing or a hybrid of automated exterior washing with hand interior detailing. The regulatory environment in Australia plainly makes hand washing impossible with current hand wash operators taking significant risks. Autowash believes an industry wide crackdown is only a matter of time.
This can be a shrewd and safe way to enter the car washing industry. Car washes typically sell for a multiple of 1-3 times their yearly profit - irrespective of the amount of capital sunk into a business. Other factors that determine the sale price are the state of the equipment and the length and nature of the lease.
If a business is run down it will typically require an upgrade of most of its equipment. The next stage will be a rebranding and marketing exercise. Autowash are experts in car wash marketing. One of the services we offer is helping new operators with marketing initiatives to accelerate new businesses into the red.
The risk in purchasing an existing car wash business is that the location is inferior. For some initial thoughts on site selection please see the next point.
Site selection is an art, a science, and a gamble. As with all real estate decisions the key factors are: location, location and location. In our experience there are no decisive factors that guarantee that a site will be successful. Having said this some important factors are:
1. High traffic flows. Main road frontage is ideal with easy access to your site from both directions preferred.
2. Signage and visibilty. The bigger the sign the better and 30m visibility in either direction is very important.
3. Medium to high density residential area. Low density residential areas or part commercial/part residential areas can work but prime car wash sites typically are situated in higher density residential areas.
4. Demographics. Again this is no hard and fast rule but Bureau of Statistics data should be used to determine the average age of cars in your area, number of cars per household, use of cars as opposed to public transport etc. This data is publicly available from the Australian Bureau of Statistics. Extremely detailed information on the demographics of particular post codes is available with a little digging.
5. Local Schools & Community Organisations. Successful car washes are constantly busy. Local schools and community organisations often mean steady trade inside typically work hours and are also often great partners in car wash marketing and fundraising initiatives.
6. Local Business & Government. Don't underestimate the value of the corporate dollar through monthly fleet accounts. Similarly local government agencies are often excellent customers (especially the healthcare sector).
These very preliminary pointers are designed merely to start you down the right path. For a more detailed conversation please contact us.
As you narrow down your site possibilities you will begin to enter into dialogue with real estate agents and landlords. The first question to ask is relating to the local council zoning of the site in question. You should then independantly verify this with council to ensure that the site is zoned for car washing purposes.
At this point it is again critical that you engage specialists including your lawyer, accountant, town planner and even perhaps a buyer's agent to negotiate the best possible transaction.
There are advantages to both owning and renting the land. Owning the land will give you certain freedoms and take some financial pressure of your loss making start-up period (depending on how heavily geared you are). Leasing the land will often mean you can negotiate an initial 6-12 month rent free period as well as a fit out contribution towards your building and construction from the landlord.
In step with the negotiations of point 5. and as a condition to them it is crucial that you prepare your Council submissions as early as possible. Councils are notorious for taking 6 - 18 months to approve development plans. This process can be extended further if local residents and businesses object to your plans. This is the number one problem area for blowing out business set up timeframes and can be extremely costly in terms of mortgage or rental payments.
Engaging a good town planner who is experienced in dealing with your local council and an architect with car wash experience is essential for as smoother ride through council as possible.
Building works often cost up to 3 - 5 times more than your car wash equipment; especially in remote areas. Autowash is not a car wash builder. We do however work with several highly experienced builders. We can put you in contact with one of our preferred builders. We also recommend that you obtain local building quotes for comparison and negotiation purposes. Fixed price quotations should be preferred.
A special note here on interconnecting plumbing and wiring which is a hidden and sometimes nasty cost. Car wash equipment suppliers will quote with interconnecting plumbing and wiring as an exclusion. This means that it is the purchaser's responsibility to bring all power and water to the point of connection to the car wash equipment. Make sure that you have specific instructions from your car wash equipment supplier and that your builder includes this in his quote.
For more information on car wash builders please contact us.
Remember that when buying car wash equipment you are entering into a 10 year relationship. While getting a good price on your equipment is important, far more important is not buying your machine several times over during the next 10 years in expensive service calls, over priced spare parts, and machine breakdowns that cost you sales and customers.
The above 8 steps will leave you with plenty of time (usually while you wait for Council) to investigate insurance, worker's compensation, car wash award rates of pay and all other legislated aspects of operating your car wash business. With the regulatory environment the devil is in the detail. If you are not a detail oriented person then employ someone who is to make sure that your business is compliant in every area. Do this while you are setting up the business as once it is off and running you won't have the time.
From an operational perspective three things are essential from our experience.
1. Be an owner operator for at least the first year. If you want your business to be successful this is the surest path. Alternatively, carefully select your car wash manager and have them invest funds personally in the business or in exceptionally rare circumstances gift them a share in the business. This alternative may be succesful but sits a far second to you being an owner operator.
2. Stay on top of the numbers. Have a bookkeeper send you weekly P&Ls and updated budget projections based on actual figures. Nothing motivates like making a loss.
3. Car wash marketing. Gone are the days that car washes simply open and make money. Work very hard on your marketing and make sure you have allocated a generous budget to it for the first year of operation. For year two and onwards continue to spend on the marketing iniatives that worked best for you in year one. Remember however that marketing is often less about the dollars and more about the leg work.
Car wash marketing is one of the most essential and most overlooked aspects when opening a car wash business. Effective car wash marketing is very broad in scope and involves a combination of owner legwork, traditional marketing techniques (leaflets, print media, billboard signage etc.) and online marketing (website traffic through SEO and Adwords, social media campaigns, Groupon style partnerships etc.)
Put in other terms, successful car wash marketing will enable you to reach your break even point far quicker and begin to make a return on your investment far sooner. One of the biggest unknowns when budgeting for entering into a car wash business is how much money will be lost before the business starts to pay its own way. The more focus and skill you apply in the area of car wash marketing the smaller this figure will be.
For more information please see our car wash marketing section.