So you've decided to enter the car cleaning business. If you've decided on your concept, location, and legal status, it's time to move to the next stage - ensuring the profitability of your car wash.
The world of profit margins is a tricky one to navigate, but the good news is that there are multiple ways in which you can enhance your profitability.
To help you along the way, we've created this guide to share our top 6 tips for optimizing the profitability of your car wash.
Tip #1 to increase the profitability of your car wash: Consider your long term investments
The most important expenditures to be taken into account will be the investments needed to lift your business off the ground. Regardless of whether you decide to offer a quick cleaning or a specialised cleaning service, opening your car wash will require considerable investment.
If you'd like to open several car wash bays within your premises, don't neglect the loan repayments and cost of equipment maintenance and renewal attached to these. If you opt for a more environmentally friendly concept, however, your costs may be slightly higher.
Before you launch, carefully consider how these costs will impact the profitability of your car wash and actions you can take to balance out the effect.
Tip #2 to increase the profitability of your car wash: Control your payroll
Your payroll costs will depend on the concept you've chosen for your car wash.
You might, for example, decide to open an automatic drive-in car wash. This will mean you don't require any on-site staff.
In this case, your costs will consist of maintenance and renewal of on-site equipment. Going with this concept will also provide you with the possibility of running a 24/7 car wash service, giving you a significant advantage in terms of your car wash's profitability.
Operating with no employees might also enable you to reach a higher volume of sales since customers can wash their own cars themselves. If you choose to offer a hand wash service, however, you'll probably need to hire one or two members of staff to meet the demand.
You should bear in mind that you'll be able to charge more for a manual rather than an automatic service, so don't let the responsibility of paying a salary to one or two members of staff deter you from hiring them. Weigh up the demand for manual vs automatic car washing to get a better understanding of the most effective way to keep your profits high.
Tip #3 to increase the profitability of your car wash: Keep an eye on your overheads
Overheads are your car wash's administrative, commercial, and payroll expenses.
You can begin by estimating the number of car washes you expect to operate a week, giving you an idea of how much your water and electricity bills will be.
The more car washes, the higher your bills will be. To minimise utility costs, you could opt to offer a waterless cleaning service - where staff wages and the purchase and renewal of special cleaning products will overtake as the main costs. This will appeal to any customers on the lookout for an environmentally friendly cleaning service.
Next, you need to factor in the cost of buying a space big enough to set up car wash bays. According to JBS Industries, you'll need approximately 650m² of land for one bay - so ensure you consider the cost and cash flow implications of renting or purchasing a space big enough to accommodate your desired number of bays.
When estimating the cost of water, electricity, insurance, equipment, and cleaning products, make sure you get in touch with several suppliers to compare quotes - and go with whichever supplier offers the best value deal for your business. This is especially important for the car wash business, as you'll be placing large orders on a regular basis.
Tip #4 to increase the profitability of your car wash: Diversify your services
As noted above, a car wash business's profit margin depends largely on the services offered.
If you notice that a single service isn't bringing in enough cash, why not enhance your car wash's profitability by diversifying what you have to offer?
This tactic will enable you to offer several services at the same time, and subsequently helping you attract different types of customers.
It's important not to be dependent on just one type of service, so ensure you use your knowledge from the market research stage to tap into any opportunities that your competitors haven't yet.
Tip #5 to increase the profitability of your car wash: Make a strong marketing plan
Your marketing strategy will also play a role in how much profit your business generates.
First, identify the different methods used by competitors to attract and retain customers. These methods could include anything from sharing information about discounts on social media platforms and handing out flyers on the street.
It is also important to differentiate between independent car washes and those affiliated with chains. The latter will generally have the benefit of a big marketing budget, with national campaigns and established brand identity. As far as independent car wash businesses are concerned, it is important to opt for a strategy that aims at getting their name out there.
You can choose anything from offering discounts at the launch of your car wash, setting up social media platforms, or even putting up a billboard ad in your town.
Don't forget to take into account the budget you will allocate to each action. A good idea is also to set up a car wash appointment system directly on your website. Providing your customers with the freedom to book their own time slot online will bring added value to your service, thus increasing the profitability of your car wash.
Tip #6 to increase the profitability of your car wash: Create a financial forecast to track your profitability
To accurately assess the profitability of your car wash and gauge exactly what impact you can expect from the different adjustments you've made, you'll need to draw up a proper financial forecast.
The financial forecast is an essential step in your car wash business. It enables you to:
- break each aspect of your business down into detail, while listing the costs with the help of quotes from suppliers
- check whether the business is profitable and what adjustments should be made to ensure this
- ensure that the company has sufficient cash flow to deal with any unforeseen events and meet its needs (such as loan repayments and equipment renewal)
A financial forecast is fairly technical and may seem relatively difficult to construct, especially if you have never done it before and have little or no knowledge of accounting.
You can, however, simplify things for yourself by using online financial forecasting software like the one we offer.
This tool will allow you to easily produce the entire financial forecast, including a projected income statement, cash flow statement, balance sheet, and break-even point calculation table.
All you have to do is let the software guide you through the ready-made tables in the financial forecast section, and follow the instructions given to fill in the blanks. Worried about making errors? No problem - the calculations are automated to prevent any mistakes. And if you have any questions, our support team will be happy to answer them.
You can try The Business Plan Shop software free of charge by signing up here.
So, is opening a car wash profitable? We hope that with our advice, you'll find that the answer is yes.
If you'd like advice on any of the points mentioned above or would like to speak to a member of our team about anything else related to optimising the profitability of a car wash, please don't hesitate to get in touch.
Also on The Business Plan Shop
- How to carry out market research for a car wash
- Business plan template for a car wash
- How to create a business plan for a car wash
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