We talk a lot about the nitty-gritty details of how to run a car wash business, but what about starting a business from scratch?
As a car wash equipment manufacturer which has been helping investors start their new car wash businesses for over 40 years, we know what a daunting and potentially confusing process it can be. Should you start with financing, or begin by assessing your market? How soon should you begin marketing? How do you pick the best location for your car wash?
While we certainly can’t cover everything you need to know in a single post, we’d like to take a moment to address what we feel are the 10 most important steps in starting your own car wash business.
1) Find a location.
The ideal location for a new car wash business is in the middle of a high traffic area, 25,000 cars per day or more, with little or no nearby competition. (Preferably nothing within at least 1 mile) Of course, you will need to do some demographic research on the surrounding area to determine if the population is large enough to support your business; which we can assist you with. We typically look for 10,000 people in a 1 mile radius for a Totally Tommy, and at least 5,000 people in a 1 mile radius for a Mini. Review the competition and think about what their actions will be when you open. Will they be able to do a multi-million dollar renovation? Are they debt free and they will simply wash cars for free for a year while you pay heavily in interest? Remember: car washes are an impulse purchase, so your wash needs to be placed in a highly visible, high traffic area that has a lot of rooftops nearby.
2) Do the paperwork.
Find out what local city or county department handles business licenses and request an application. While you can do this online, it’s best to go visit this office in person to find out if there are any other requirements for opening a business, what kind of insurance you will need, and what local building and utility usage codes are.
3) Planning and Approval process.
You will need to get with the local township and setup a meeting with the city planner. You can start by showing them a rendering of your concept and get a verbal, “yup, that will probably fly” or “not going to work.” Once you get past the verbal they will setup a formal meeting where you will need to present your plans and have it voted on at a city council meeting. Presenting a facility like a Totally Tommy, tailored to the look of the area will get their attention and blow them away. Cities want to see that your doing things top notch and unique. They hate the traditional car wash dark and dirty so coming in with a Totally Tommy will get their mouth watering.
4) Research car washes.
Tour as many successful car wash businesses as possible to see what makes them tick. At least 30 sites would be the right number. Find out how fully automatic car washes, partially automatic, tunnel and express washes differ from one another. Understand what kind of revenue stream different washes require to turn a profit, and compare that information to your chosen location’s population demographics.
5) Choose whether your car wash business will operate independently or as a franchise, LLC, or S-corp.
Franchises offer attractive options, but of course you have to pay the residual. Going on your own can be just as costly because you don’t have the premonition that the experienced veteran operators have. If you do plan to start in the car wash business on your own, decide who will run your business. If you plan on hiring an operator, make sure he/she is well invested in the business. Plan your exit strategy upfront! Know your plan on how and when you will exit the business.
6) Make a business plan!
Your car wash business plan should focus on both long term and short term aspects of running your business, from costs and planning for building to long-term revenue management and marketing strategies. The more detailed, thorough and researched your plan is, the better it will look to investors or the bank. Get them to say “wow” you are thorough. If you need advice on this step (it’s always good to have input from experienced business owners or consultants), our team here at Tommy would be happy to offer free car wash business consulting. Another great tool to take advantage of before going to the bank is a 3rd party professional proforma. There are expert organizations that do nothing but estimate your numbers. You can have them do a proforma for you which will be looked at strongly by the bank.
7) Get financing.
This is likely the most challenging step, and your success will largely depend on how well you’ve researched and prepared your business plan. A solid revenue model will go a long way in persuading investors to put up the capital for your new car wash business venture. When you ask for financing, make sure you give yourself enough room to invest in a high quality car wash facility and equipment, as well as enough room to market your new business properly. Be sure you have solid experience on your resume even if it was just working at a car wash. Today banks will rarely loan to anyone that hasn’t already owned one so having some experience as a car wash manager is very helpful.
8 ) Build your new car wash right, the first time.
As we said before, car washes are an impulse buy, and your car wash’s building is its biggest asset. Scrimping on building costs by building an ordinary ho-hum car wash with standard services won’t bring a flood of customers the way a glossy state-of-the-art wash with full a la carte services will. Consider the investment in the Tommy Tower you see on the Totally Tommy building. The tower itself for the contractor to build cost somewhere in the range of $80,000 – $90,000. How much do you think putting that tall red tower up there will increase your sales? Let’s say it draws in just .001% more traffic (which it typically will). That’s roughly $55,000 PER YEAR in additional Gross Profits if you had 30,000 cars per day out front and a profit of $5 / car. Understand those investments and where to put investment, and where not to put investment. The cool part is in the Totally Tommy, we’ve already figured it out for you. You MUST get a copy of our construction secrets manual. It will save you thousands in potential mistakes, or lost revenues if you don’t.
9) Market your new business.
The importance of a well-planned marketing strategy can’t be underestimated. You can’t sit back and expect customers to know about you; you need to make the community aware of your presence by getting the word out in print, radio and possibly TV. Consider using guerrilla marketing strategies through social media campaigns, and plan promotions at key times throughout the year. If you build it AND market it, they will come. Figure a $15,000 budget for opening marketing. Billboards, mailings to 5 mile radius, promotional washes, and radio commercials. For the first you could spend as much as $1 / car in additional marketing, then throttle back to $.10 / car in the future.
10) Pray for Sunshine!