Is the Car Wash Business for Me?
The economic reality of investing in any business requires some careful consideration before deciding on the best venue to enter. It would be impossible to cover all the details involved in entering the car wash industry by investing in a wash in a short article. Hopefully I can provide enough “food for thought” to assist you in making an intelligent, well-informed decision whether an investment in the car wash business is for you or not and information on the process.
A Little Car Wash History
Professional car washing has been on the scene for a long time and has gone through many changes – especially in the last 10 to 15 years. Previous to that period, most car wash investors were hands-on types of entrepreneurs that did not mind long hours, hard physical work and had the dream of owning their own successful business. They found the best location they could afford, put up the biggest sign that was allowed and worked hard to keep the wash in good operating condition. With minimal competition, a little bit of luck and a lot of hard physical labor they succeeded.
Over the past several years things have changed drastically. While hard work and long hours are still a requirement the successful operator must also have marketing skills, understand more than basic business principles and have good management skills as well as business acumen. To prove that point one only has to look at several large consolidation efforts in the industry that have met with marginal success or failure with the exception of a few. Most were attempts by companies or individuals that had been successful in other business endeavors yet failed to be successful with professional car washing. Basically, the car wash industry still draws the attention of individuals looking for a business that offers long term success with acceptable risks. However, to own and operate a successful wash has become much more difficult. Stiff competition, an uncertain economy and long stretches of bad weather tests even the best businessman.
Making the Commitment
Assuming you have already decided to take the plunge into the world of professional car washing some of the initial activities that you undertake may make or break your venture before it even begins. Professional car washing seems to be a fairly simplistic business from the casual observer. You build a wash, operate it as well as possible and collect the money. If it were really that simple many more would choose it as an investment and there would not be so many wash failures. The first consideration would be to take a personal inventory of what your strengths and weaknesses are and how they match up to the challenge of building and operating a successful car wash. As an individual investor expect to be a hands-on operator ready to spend long hours at a challenging business. This is not a business for the faint of heart or one who expects little personal involvement in it. Depending on the type of wash you decide to build, you can expect to deal with and depend on support personnel, suppliers and related businesses on a regular basis. There may be employee issues, accounting details, dealing with customers and the constant threat of competition moving in. In addition, you will find yourself at the will of some things you have no control over like of the weather and subject to economic trends both up and down. If you have considered all the pros and cons and decide to invest the fun begins.
Next you must decide on the type of wash that best suits your investment capabilities, the time and effort you are willing to commit to the operation and your personal skills. Self service washes with or without an automatic wash tend to be the least expensive to build and easier to operate while requiring a minimum number of employees. In most cases they will require more involvement with maintenance issues as well as daily visits and cleanups. Conveyor washes require a larger site and generally cost quite a bit more than self service washes. In addition to the higher cost there will be more employee and management issues in operating a conveyor wash depending on what type of format you choose to operate. These are very simplistic descriptions. Be sure to research each type thoroughly before making a decision on what's best for you. If possible talk to owners of each type. Most operators will be very open to discuss their washes as long as you will not be in competition with them. Another option would be to look at working through a franchise program. There are several out there that may or may not meet your needs. This would eliminate much of the work with selecting a site, building the wash and operating the wash and would add to the project cost and require paying a monthly royalty fee.
Can You Afford It?
Like any investing in any other business the most important hurdle is financing. Before going too far into it, you need to have a very good idea of how much it will cost and how you will be able to finance the project. In today's world, expect to be required to put down at least 20 to 30% down or more, with good personal financial resources, a clean credit record and preferably successful experience in running a free standing business. Lending institutions willing to finance a wash have very strict guidelines for financing with very little if any leeway for the potential investor, especially if you have no previous industry or business experience. In addition to the money you put down you will need a financing package that should take into consideration cost of the land and building, equipment, contingencies and working capital. Make sure you have either a personal reserve to meet your personal obligations for a minimum of at least a year or more or plan for it in your financing arrangement. This is extremely important. I have seen seemingly successful washes lost over personal financial issues.
Make It A Team Effort
If you make it through the money matters you need to turn your attention to building a team to help you through from start to finish. An investment in a wash is not something you should undertake on your own. Put together a team of individuals whose judgment you trust including an architect/general contractor, accountant, banker, lawyer and an industry specialist. Look for an independent consultant or a distributor you can trust to help you through the process. While the independent consultant may seem to cost more in the beginning, in the long run they may save to money and headaches by being on your side from the beginning with no other personal gain to be made other than the fees they charge. On the other hand, a well qualified, experienced distributor usually has no upfront fee and will work for the profits they will make on selling the equipment and other wash supplies to you. Make sure that either individual or company has already been involved the process of building and operating a wash in the past. In either case be sure to check out their qualifications and references thoroughly before choosing one to work with. This is one of the most critical decisions you will make in the entire process.
After assembling your team you are now ready to put your plans into action. At this time, if you have not already done so, it is important to have a firm business plan in place with a detailed strategy with basic criteria to be met and written goals you intend to achieve with your investment. Before building a wash you might be able to save yourself a great deal of aggravation, time and money by checking out washes in the area you have chosen to operate in. Like many other industries, most existing washes can be bought for the right price. If you find one that meets your criteria and budget you will be able to avoid a great deal of work like site selection and development, feasibility studies, contracting services, dealing with local and state regulations and boards and the general headaches of the building process. Once again you must be able to rely on your team to assist you in making the decision to buy an existing wash or building one from the ground up.
If the decision to build has been made the first thing you must do is take a deep breath and muster up as much patience as possible. One thing for sure is that it will be a miracle if everything goes as planned – on budget and on time. In all my years in the industry I can only remember a very few washes that were built on time or within budget. Stay on top of the entire process and in contact with the appropriate team member for the various challenges you will face. You will have to make some decisions very quickly which should not be a real problem if you have assembled a good team and done your homework. Expect this portion of the process to be a learning experience that you will not soon forget. If I have painted a difficult picture it was intentional.
Actually building or purchasing an existing wash is certainly a key element of your investment but now the real work begins – you have to operate the wash. This is where your consultant or distributor could be invaluable. They should be able to help you develop manuals and training programs for operating the wash and assist you in the start up. Setting up a good infrastructure will be key in your success both short and long term. Constantly evaluate your wash's performance and do not become complacent if you experience immediate success or depressed if things do not go well in the beginning. Operating a wash is a process that really never ends. You must constantly evaluate your operation capitalizing on your successes and correcting failures.
The decision to invest in a car wash is one that should be done after careful research on the industry and an evaluation of how much you are willing to invest in terms of both time and money. On the positive side even if it does not go as well as planned you will still have the concrete assets of the land and building. If you succeed in addition to those assets you will have positive cash flow and a valuable business. Like any investment there are risks involved that need to be examined carefully. Professional car washing is not an easy business. Many have failed. The primary reasons for failure usually revolve around poor management skills, insufficient funding and flawed planning and research.
There are two basic types of investment opportunities. With one you invest with hopes of making a quick profit. That is a lot like hunting. You go out, shoot something, bring it home and eat it. The other is looking for long term gain and stability. That is like farming. With farming you buy the land. You decide what crops are best for your land. You plant the seeds. You nurture the crop. You harvest and plan for next year's crop. Investing in a car wash is a lot like farming. You select a site. Choose the operating format. Build the wash. Operate as best you can. Show a profit and plan for future success in the coming years. Operating a successful car wash is truly hard work but it can be personally rewarding as well as an investment you can be proud of that may turn out to be the best decision you have ever made.
Ron Holub has been involved in the car wash industry for 30 years working for several national carwash chemical companies, owning a car wash and detail supply company, and serving as a general manager for a national car wash chain. He is currently National Sales Manager for Private Label Products for Transchem and can be reached at [email protected].