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I know two entrepreneurs who started car washes, both of them ultimately lost around $300-$400k each and they were not inexperienced business people. Car wash businesses are tempting as many people perceive them to be easy “can’t fail” type of businesses, which is not true.
That said, we know that some car washes do make money, so let’s explore 6 reasons why you may not want to start a car wash and the common mistakes buyers make.
You still need to clean up after people, and people do stupid things that will cost you money. Repairs cost a fortune as it is specialized equipment, most general plumbers or electricians won’t work on car washes. If you are prepared to learn how to maintain your equipment yourself you will be further ahead.
You can hire someone to do this, but it cuts into margins. Profits vary widely. If you are in a low-traffic area you won’t make much, but industry earnings for a decent self serve car wash location are around $1500 a month gross revenue per bay, that drops a bit if you have a lot of bays. You’ll need your location, and land in cities isn’t cheap, equipment like a pumping unit, in bay equipment, signage and more. Start up can be around 8k-12k per bay plus real estate, property and business taxes etc.
It can be easier and cheaper to find a resale wash for less than land value if the business has been neglected. You can update the location, add credit card payments, a support line, website, renew the equipment, and signage, all will help to build back business. Accepted industry asking prices are generally around 3-5X gross revenue for a resale. Remember, these businesses all take more time than you think – did you consider counting coins? This alone can take a couple of hours per week.
4. You want to be an absentee owner.
As noted in #1, a self serve was is a bit better option for passive, but tunnel washes that do best will invariably have some type of owner involvement. A tunnel wash isn’t just an on and off switch. There is fine-tuning needed that changes seasonally, even during different weather. If you don’t understand the equipment you’ll get dirty cars, wet cars, unhappy customers and lose business. Experienced decisions based on spikes and business ebbs and flows will make or break your business.
Finding a manager that will dedicate as much effort and knowledge as an owner can be very difficult. If you are looking for an absentee business, other industries can be easier, such as laundromats. You can buy a laundromat franchise for around $800k, 75% can be financed, you don’t need special skills, equipment is basic, 3-4 employees, and you are looking at a net profit of around $200k for a single unit, $600k a year for 3 units, which is about the same as a high end car wash for less money. Again your market demand and operator preferences will dictate what makes the most sense.
5. You think any type of wash will work in your area.
Here’s the problem. If you are in an area with a struggling economy, even if people do wash their cars, they are looking for the cheapest option possible. If you open a high tech touchless wash, or a high end mobile detailing business for a premium price in this type of area, chances are you will fail. If you are in an economically vibrant area and open a standard tunnel wash, most owners of Tesla’s and Lambos don’t want the micro scratches created by the brushes. So you need to make sure to align your demographic with the type of car wash you open.
6. You think hiring & retaining employees is easy, and consider it an afterthought.
It’s not impossible for a full service car wash to go through 200-300 employees in a year. Recruiting, hiring and training just one person takes time, multiply that by 100. This is another reason car washes are not the best idea for passive owners. Right now our current economy is making it even more difficult to hire and retain a labor force in any business, so minimizing labor can be advantageous.
If you are considering starting a mobile car wash you can make extra money by servicing vehicle fleets and dealerships, not just focusing on private owners. Those are typically a contract and has a more predictable revenue stream. Some pressure wash companies will wash pretty much anything, like exteriors of homes, and this can expand your customer base. There are franchises in this space whose top 10% have revenues over 1.8m a year. The investment is $50k down around $80k all-in, contact us to take a look at franchise businesses.