How to create a financial forecast for a car wash?
Developing and maintaining an up-to-date financial forecast for your car wash is key in order to maintain visibility on your business’s future cash flows.
If you feel overwhelmed at the thought of putting together a car wash financial forecast then don’t worry as this guide is here to help you.
We'll cover everything from: the main objectives of a financial forecast, the data you need to gather before starting, to the tables that compose it, and the tools that will help you create and maintain your forecast efficiently.
Let's get started!
Why create and maintain a financial forecast for a car wash?
In order to prosper, your business needs to have visibility on what lies ahead and the right financial resources to grow. This is where having a financial forecast for your car wash becomes handy.
Creating a car wash financial forecast forces you to take stock of where your business stands and where you want it to go.
Once you have clarity on the destination, you will need to draw up a plan to get there and assess what it means in terms of future profitability and cash flows for your car wash.
Having this clear plan in place will give you the confidence needed to move forward with your business’s development.
Having an up-to-date financial forecast for a car wash is also useful if your trading environment worsens, as the forecast enables you to adjust to your new market conditions and anticipate any potential cash shortfall.
Finally, your car wash's financial projections will also help you secure financing, as banks and investors alike will want to see accurate projections before agreeing to finance your business.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
What information is used as input to build a car wash financial forecast?
A car wash's financial forecast is only as good as the inputs used to build it.
If you are creating (or updating) the forecast of an existing car wash, then you mostly need your accounting information, key historical operating non-financial data, and your team’s input on what to expect for the coming years.
If you are building financial projections for a car wash startup, you will need to have done your research and have a clear picture of your competitive environment and go-to-market strategy so that you can forecast sales accurately.
For a new venture, you will also need a precise list of the resources needed to keep the car wash running on a day-to-day basis and a list of the equipment and expenditures required to start the business (more on that later).
Let's now take a closer look at the elements that make up your car wash's financial forecast.
The sales forecast for a car wash
From experience, it is usually best to start creating your car wash financial forecast by your sales forecast.
To create an accurate sales forecast for your car wash, you will have to rely on the data collected in your market research, or if you're running an existing car wash, the historical data of the business, to estimate two key variables:
- The average price
- The number of monthly transactions
To get there, you will need to consider the following factors:
- The local weather conditions can have a significant impact on your car wash's average price and number of monthly transactions. During rainy or snowy months, customers may be less likely to visit your car wash, resulting in a decrease in both price and transactions. On the other hand, during hot and sunny months, customers may be more willing to pay for additional services, such as waxing and detailing, increasing your average price and number of transactions.
- The state of the economy can also affect your car wash's sales forecast. During times of economic uncertainty, consumers may be more cautious with their spending and opt for more affordable car wash services. This could lead to a decrease in your average price and number of monthly transactions. However, during periods of economic growth, customers may be more willing to splurge on premium car wash services, increasing your average price and number of transactions.
- The condition of your equipment and facilities can also impact your car wash's sales forecast. If your equipment is outdated or in need of repairs, it may result in a decrease in the speed and quality of your services, leading to a decrease in customer satisfaction and, ultimately, a decrease in your average price and number of transactions. On the other hand, if you invest in new and efficient equipment, it could lead to faster and higher quality services, resulting in an increase in both price and transactions.
- The competition in your area can also play a role in your car wash's sales forecast. If there are many other car wash businesses nearby offering similar services at lower prices, it may be challenging to maintain your average price and number of monthly transactions. However, if you are the only car wash in the area or offer unique services, you may be able to charge higher prices and attract more customers, increasing your average price and transactions.
- The demographic of your target market can also affect your car wash's sales forecast. For example, if your car wash is located in an area with a high percentage of environmentally conscious consumers, offering eco-friendly car wash services may attract more customers and allow you to charge higher prices. On the other hand, if your target market is primarily price-sensitive, you may need to offer competitive prices to maintain your average price and number of transactions.
Once you have an idea of what your future sales will look like, it will be time to work on your overhead budget. Let’s see what this entails.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The operating expenses for a car wash
Once you know what level of sales you can expect, you can start budgeting the expenses required to operate your car wash on a daily basis.
Expenses normally vary based on how much revenue you anticipate (which is why, from experience, it is always better to start your forecast with the topline projection), and where your business is based.
Operating expenses for a car wash will include some of the following items:
- Staff costs: This includes wages, salaries, and benefits for your car wash employees.
- Accountancy fees: You may need to hire an accountant to help you manage your finances and file taxes.
- Insurance costs: You will need insurance to protect your business from potential risks and liabilities.
- Software licenses: If you use any software to manage your bookings, payments, or inventory, you will need to pay for licenses.
- Banking fees: You may incur fees for using banking services, such as processing credit card payments or depositing cash.
- Cleaning supplies: This includes soap, wax, towels, and other materials needed for washing and detailing cars.
- Water and electricity: Running a car wash requires a lot of water and electricity, so these utility costs should be factored into your expenses.
- Maintenance and repairs: You will need to regularly maintain and repair your car wash equipment to keep it in good working condition.
- Marketing and advertising: Getting the word out about your car wash and attracting customers will require investment in marketing and advertising efforts.
- Rent or mortgage: If you do not own the property where your car wash is located, you will need to pay rent. If you own the property, you may have a mortgage to pay.
- Taxes and permits: You will need to pay taxes on your business income and obtain necessary permits to operate your car wash.
- Uniforms and supplies: If you provide uniforms for your employees or offer additional services like detailing or vacuuming, you will need to purchase supplies for these purposes.
- Credit card processing fees: If you accept credit card payments, you will need to pay processing fees for each transaction.
- Training and development: Keeping your staff trained and up-to-date on the latest car washing techniques and equipment may require investment in training and development programs.
- Waste disposal: You will need to properly dispose of any waste generated by your car wash, which may incur fees.
This list will need to be tailored to the specificities of your car wash, but should offer a good starting point for your budget.
What investments are needed to start or grow a car wash?
Your car wash financial forecast will also need to include the capital expenditures (aka investments in plain English) and initial working capital items required for the creation or development of your business.
For a car wash, these could include:
- Car Wash Equipment: This includes items such as car wash brushes, vacuum cleaners, water pumps, and pressure washers. These are essential for the operation of a car wash and must be regularly maintained and replaced as needed.
- Payment Systems: In order to accept payments from customers, a car wash must have a payment system in place. This can include a credit card reader, coin-operated machines, or a mobile payment system.
- Building and Property: The physical structure of the car wash, including the building and surrounding property, is a major capital expenditure. This can include construction costs, renovations, and landscaping.
- Water Treatment System: A water treatment system is necessary for a car wash to filter and recycle water. This can include sediment filters, reverse osmosis systems, and water softeners.
- Security Systems: To protect the car wash from theft and damage, security systems such as cameras, alarms, and access control systems may be necessary. These can be a significant capital expenditure, but are crucial for the safety of the business.
Again, this list will need to be adjusted according to the size and ambitions of your car wash.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
The financing plan of your car wash
The next step in the creation of your financial forecast for your car wash is to think about how you might finance your business.
You will have to assess how much capital will come from shareholders (equity) and how much can be secured through banks.
Bank loans will have to be modelled so that you can separate the interest expenses from the repayments of principal, and include all this data in your forecast.
Issuing share capital and obtaining a bank loan are two of the most common ways that entrepreneurs finance their businesses.
What tables compose the financial plan for a car wash?
Now let's have a look at the main output tables of your car wash's financial forecast.
The forecasted profit & loss statement
The profit & loss forecast gives you a clear picture of your business’ expected growth over the first three to five years, and whether it’s likely to be profitable or not.
A healthy car wash's P&L statement should show:
- Sales growing at (minimum) or above (better) inflation
- Stable (minimum) or expanding (better) profit margins
- A healthy level of net profitability
This will of course depend on the stage of your business: numbers for an established car wash will look different than for a startup.
The projected balance sheet
Your car wash's projected balance sheet provides a snapshot of your business’s financial position at year-end.
It is composed of three types of elements: assets, liabilities and equity:
- Assets: represent what the business possesses including cash, equipment, and accounts receivable (money owed by clients).
- Liabilities: represent funds advanced to the business by lenders and other creditors. They include accounts payable (money owed to suppliers), taxes payable and loans from banks and financial institutions.
- Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.
The projected cash flow statement
A projected cash flow statement for a car wash is used to show how much cash the business is generating or consuming.
The cash flow forecast is usually organised by nature to show three key metrics:
- The operating cash flow: do the core business activities generate or consume cash?
- The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
- The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?
Cash is king and keeping an eye on future cash flows is imperative for running a successful business. Therefore, you should pay close attention to your car wash's cash flow forecast.
If you are trying to secure financing, note that it is customary to provide both yearly and monthly cash flow forecasts in a financial plan - so that the reader can analyze seasonal variation and ensure the car wash is appropriately capitalised.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Which tool should you use to create your car wash's financial forecast?
Using the right tool or solution will make the creation of your car wash's financial forecast much easier than it sounds. Let’s explore the main options.
Using online financial forecasting software to build your car wash's projections
The modern and easiest way is to use an online financial forecasting tool such as the one we offer at The Business Plan Shop.
There are several advantages to using specialised software:
- You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
- You have access to complete financial forecast templates
- You get a complete financial forecast ready to be sent to your bank or investors
- You can easily track your actual financial performance against your financial forecast, and recalibrate your forecast as the year goes by
- You can create scenarios to stress test your forecast's main assumptions
- You can easily update your forecast as time goes by to maintain visibility on future cash flows
- You have a friendly support team on standby to assist you when you are stuck
- It’s cost-efficient and much cheaper than using an accountant or consultant (see below)
If you are interested in this type of solution, you can try our projection software for free by signing up here.
Hiring a financial consultant or chartered accountant
Hiring a consultant or chartered accountant is also an efficient way to get a professional car wash financial projection.
As you can imagine, this solution is much more expensive than using software. From experience, the creation of a simple financial forecast over three years (including a balance sheet, income statement, and cash flow statement) is likely to start around £700 or $1,000 excluding taxes.
The indicative estimate above, is for a small business, and a forecast done as a one-off. Using a financial consultant or accountant to track your actuals vs. forecast and to keep your financial forecast up to date on a monthly or quarterly basis will naturally cost a lot more.
If you choose this solution, make sure your service provider has first-hand experience in your industry, so that they may challenge your assumptions and offer insights (as opposed to just taking your figures at face value to create the forecast’s financial statements).
Why not use a spreadsheet such as Excel or Google Sheets to build your car wash's financial forecast?
Creating an accurate and error-free car wash financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
Most entrepreneurs lack the expertise required to create an accurate financial forecast using spreadsheet software like Excel or Google Sheets. As a result, it is unlikely anyone will trust your numbers.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
This is why professional forecasters all use software. With the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.
Finally, like everything with spreadsheets, tracking actuals vs. forecasts and updating your forecast as the year progresses is manual, tedious, error-prone, and time-consuming. Whereas financial forecasting software like The Business Plan Shop is built for this.
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Use our financial projection templates for inspiration
The Business Plan Shop has dozens of financial forecast templates available.
Our examples contain a complete business plan with a financial forecast and a written presentation of the company, the team, the strategy, and the medium-term objectives.
Whether you are just starting out or already have your own car wash, looking at our financial forecast template is a good way to:
- Understand what a complete business plan should look like
- Understand how you should model financial items for your car wash
Takeaways
- A financial forecast shows expected growth, profitability, and cash generation metrics for your car wash.
- Tracking actuals vs. forecast and having an up-to-date financial forecast is key to maintaining visibility on your future cash flows.
- Using financial forecasting software is the modern way of creating and maintaining financial projections.
We hope that this guide helped you gain a clearer perspective on the steps needed to create the financial forecast for a car wash. Don't hesitate to contact us if you have any questions!
Need a convincing business plan?
The Business Plan Shop makes it easy to create a financial forecast to assess the potential profitability of your projects, and write a business plan that’ll wow investors.
Also on The Business Plan Shop
- Financial forecast example
- How to create a sales forecast for a business?
- Example of financial forecast for business idea
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Founder & CEO at The Business Plan Shop Ltd
