How To Buy A Car Wash Business
Purchasing an existing car wash business might be the easiest way to get into the industry, especially if it is a good location or is already popular in the community. This allows you to also most likely inherit most of your needed equipment, especially with automated car washes.
how to buy a car wash business
Purchasing and running a business is no small task. Each time you consider buying a business, there should be a considerable amount of research done. While buying an existing car wash location may seem easier than building a new one, it could come with surprising challenges.
One of the first things you should look into is why the business is for sale. If the previous owners were struggling to keep profits up, you could meet some of those same hurdles. Depending on the sale you might just be acquiring the property and facility, or you could be purchasing the entire operation complete with employees and existing branding. Each type of sale comes with its own challenges.
There are many legal aspects to becoming a business owner. If you plan to buy a car wash you must also account for getting a business license, acquiring any needed permits and filling out required paperwork.
The most crucial thing to consider is all of the financial aspects of your decision. You need to weigh how much the business is going to cost versus how much you will be making over the years. This will vary drastically based on what kind of car wash you purchase.
In-bay automatic car washes and self-service car washes do not cost much to operate each year and therefore you get to keep a great deal of your profit. Conveyor and full-service car washes cost more to operate but the revenue is higher.
Owning a car wash can be profitable, as long as you have done your homework and properly price each wash. Although different types of car washes will require a different type of initial investment, expect to pay a minimum of $80,000 per bay. Obviously, costs will scale up for larger operations. Here is a four-step process to consider when buying a car wash.
Before you even begin to look for a location to buy, think about the feasibility of owning a car wash. Consider the upfront costs to purchase a car wash, then figure the costs to run and manage the car wash, as well as operation and maintenance costs. Buying an existing car wash may be appealing, because everything is already there, but consider why the existing owners are selling and whether or not you will be left with problems, such as equipment that needs replacing or a declining customer base.
When it comes to considering the money needed, look at your resources, which includes personal assets, access to capital and creditworthiness. If you haven't planned for the initial costs, operating expenses and upgrades, you could fall short in negotiations or you could fail in the first years of business.
No one should consider starting any business without writing a business plan. Your basic industry feasibility data will be incorporated into this plan. Additionally, consider the type of car wash you want to own. While another type may come available on the market, it might not meet your business goals.
Be clear about the mission and vision of your company. Evaluate your strengths and weaknesses and examine the competition. Know what other car washes in the area are doing and how busy they are before you invest your money.
Define a marketing strategy that might include coupons, school fundraisers and early bird specials. Establish baseline car wash prices to determine your break-even points based on average expenses in your area. Remember that expenses such as property leases, utilities and labor vary from city to city.
Start shopping for a location. Since you are buying an existing car wash, you may not have a lot of options available and it is possible that you had a specific opportunity in mind when you started your feasibility study. Even if you did, see if there are any other sites for sale in your area. There could be a better opportunity just a few miles away.
Make sure the site is properly zoned for a car wash and that it meets all city and county regulations. Don't rely on the existing owners' information. Contact your local Small Business Administration office to ensure that the site meets all requirements.
If you don't have enough money to cover the purchase, upgrades and at least one year's worth of expenses, you will need to get an investor or lender to fund the purchase. Most businesses fail because they are under-capitalized. Make sure you have enough to properly conduct marketing, while also meeting all monthly obligations.
Update the business plan with details specific to your selected site location. This plan is the foundation of what is required to show investors, and even lenders, along with an application process. Think about any initial financing needs, long-term lines of credit or land purchase requirements, if applicable, as well as any leasing of machines.
With more than 15 years of small business ownership including owning a State Farm agency in Southern California, Kimberlee understands the needs of business owners first hand. When not writing, Kimberlee enjoys chasing waterfalls with her son in Hawaii.
According to Detail Pro POS there are over 60,000 car wash businesses in the US alone. Car wash businesses can range from a passive model with no employees to a full service premium car wash model. My goal in this article is to help you compare the different types of car wash businesses, the startup costs, revenue and profit potential of each model so that you can determine what type of car wash business you should start.
Now it is possible to mix and match these 3 business models as well as add additional services like interior cleaning, detailing, etc, but for the sake of simplicity we are going to focus on these 3 models.
A self-serve bay car wash is simply an open bay that allows you to pull in your vehicle, pay for the type of wash or amount of time you need in the bay, and then provides equipment like a sprayer, brush and vacuum to allow you to wash your car on your own. Typically, this is the cheapest car wash option for a customer. This model will also have the lowest startup costs and operating costs when compared to Automatic or Tunnel based car washes.
Although a Self-serve bay car wash is probably the lowest start cost and the most passive business model, it is likely the least popular car wash model with consumers. Your upside will be lower, but you will also have less downside risk with this model.
The startup cost will be greater per bay than a self-serve model, but the revenue opportunity will also likely be higher because you can charge a higher rate per wash for an automatic wash compared to a manual wash.
A tunnel car wash allows a driver to pull onto a track that will then move the vehicle through a tunnel with equipment washing and drying the car along the way. A tunnel car wash will have the highest startup costs of the three car wash models, but it will also likely have the highest capacity and revenue potential.
The startup costs for a tunnel car wash can range from $2.5 million to $7 million according to Car Wash Advisory. Those startup costs can be broken down into the following categories that we have built into our car wash pro forma template:
Now that we have taken a look at what it would take to start a new car wash business, you might want to consider buying a car wash instead. There are a few key questions related to buying a car wash that I want to hit on:
Fortunately there are many car wash businesses available for sale and easily accessible. BizBuySell lists hundreds of car wash businesses available for sale. As you can see from the screenshot below they have different types of wash businesses available including self wash, automatic tunnel washes, semi truck wash businesses and everything in between.
I found this huge range of pricing simply by sorting the car wash businesses available for sale on BizBuySell by price. The lowest priced single car wash was a 3 bay self service car wash priced at $40,000 up to a single unit tunnel car wash built 3 years ago that was listed at $11 million.
Once you find a car wash that you are interested in, you will need to find a way to finance the acquisition. My favorite financing option is an SBA loan. The SBA 7a loan program will allow you to borrow up to $5 million to acquire a carwash business. You should expect to invest 10% of the purchase price into the deal from your own savings or from outside investors that you are bringing into the deal.
We have been highlighting our car wash specific financial model so far, but if you are acquiring an existing car wash, our acquisition financial projection spreadsheet will serve you well. You can enter historical revenue and expenses and use that as a base to forecast your financials from. This model will give you everything you need in order to apply for an SBA loan.
According to Dultmeier it takes a population of 1,000 to 1,500 to support a single bay self serve car wash. They estimate that a self-serve car wash can generate roughly $1,000 to $1,500 per month in revenue per bay. According to Grandview Research, the US car wash industry generates $14.21 billion in revenue annually. With a US population of 332 million, this means the average American spends roughly $43 per year on car washes. Based on that per capita spending, the Dultmeier estimate of roughly a dollar per month per capita for a self service car wash seems to be reasonable.
An in-bay automatic car wash can generate more revenue than a self service car wash because it can charge a higher rate per wash and will take less time per wash which means the revenue capacity is much higher.
Many modern tunnel car washes offer an unlimited wash membership plan. Our car wash financial model allows you to enter in a conversion rate of active customers that you can convert into unlimited wash members as well as distribute between different membership levels if you have more than one membership level offering. 041b061a72