By Brandon Fredericks, CPA| Principal | Industry Specialty AGP Advisory, Audit & Assurance
The rapid growth of the carwash industry has made it a promising investment for those interested in owning a business. The opportunities will continue to grow as the industry expands — the global car wash services market is anticipated to grow when you consider that more than 72% of drivers in the United States regularly use professional car wash services.
As the industry continues to grow, many ask themselves if getting into the industry is the right choice for them. To answer that question, we’re diving into six key areas to consider before purchasing a car wash.
1. Do your homework
Before taking the steps towards car wash ownership, it’s important to do your homework and immerse yourself in the industry. Owning a car wash involves a lot to learn and many costs.
The first thing to consider is the type of car wash that you’d like to own. There are various types of car washes, and understanding the options and what would serve your customers the best is important. If you’re interested in diving into the details, Apple Growth Partners can host a Car Wash Workshop for you and your stakeholders, but we’re going to touch on the key takeaways here:
- Car Wash Types: There are various types of car washes. Are you seeking a self-service model, where the car wash provides the hoses and wands needed and the customer washes their own car? Or are you seeking a more automated operation? Or do you envision a luxury, high-touch option? All options offer benefits and a unique customer experience. Understanding your client base and the business opportunity is imperative for selecting the right option.
- Car Wash Structure: As you dive deeper into your decision-making, it is important to know the structure of the car wash is further divided into in-bay and tunnel models.
- An in-bay model allows the customer to drive their vehicle into a stationary unit in which the machinery or washer moves around the vehicle. In this model, only one vehicle can be washed with the equipment at a time.
- In a tunnel car wash, a conveyor belt takes the customer’s car through a tunnel, where the wash is conducted.
- Each region/locality will seek different elements. Understanding the benefits of both is critical to long-term success.
- Delivery Method: Finally, the delivery method—touchless or friction—plays a critical component in your strategy. Each offers strong pros and cons that must be evaluated. Given the capital outlay needed to be successful, fully committing to a delivery method that mirrors your vision is critical for being true to yourself and a solution that resonates with your customers.
The Local Market
Your community is essential for your business to succeed and grow. Before making a purchase, it will be necessary to understand your market, especially within a 5-10 mile radius of your potential business. Some things to consider:
- What are the needs of your customers?
- Who is the competition?
- What are the needs of your environment?
In addition to the direct market interactions, you should keep in mind that your car wash is a business that belongs to a greater community, and understanding what’s important to them will keep your business in the good graces of the people that you serve.
Of course, there are many other things to consider, but these are a great first start for comprehending your local market.
Beyond the car wash itself and the market, there are other considerations that an owner should firmly understand for greater success. These vary by region and locality. Some of the current trends we see wash owners having to spearhead include:
- Interest rates and securing financing
- Water conservation needs and efforts
- Soap usage and disposal
- Local zoning laws and regulation
- Community involvement and interaction
2. Making it work
Equipment is an essential piece of your car wash business, so before making a purchase take the time to understand it.
If you are purchasing an existing business, spend time understanding the equipment’s state, whether it aligns with your business needs, and whether you’ll need to replace or maintain it anytime soon. You will also need to take time to understand what equipment your competition is using. You may be in trouble if your capabilities need to catch up compared to other local car washes.
Consider the cost of new equipment, potential repairs, and upgrades you might need to make when considering finances.
3. Honing in on operations
Equipment is one thing, but making the business run smoothly operationally is also a considerable part of any business. Of course, every savvy business owner knows that it’s essential to have a solid business plan, pricing and marketing strategies to reach your local market, and a strong understanding of the financials beyond the upfront cost of doing business.
In addition, every business relies on people to make it run, whether it’s the people who work for them or purchase from them. Let’s dive into the people you need to get to know when purchasing a car wash:
Your team is essential to making your business run smoothly. If you are acquiring an existing workforce, getting to know the team you will be working with will be necessary.
These individuals will be key to our success and a great client experience. As you think about increasing monthly revenue, referrals through word of mouth, and building a great culture—it all starts with the individuals that are delivering a great client experience.
Prior to any purchase, spending time to understand potential and current customers will be critical in moving forward with your purchase of a wash. The insights provided by customers are just as much part of the due diligence process as reviewing the financials.
Understanding who your customers are, the intrinsic value they place on their vehicles, their perceived value of the car wash, their loyalty to the brand, and similar considerations are valuable pieces of information that should be prioritized.
Being an interactive contributor to the local community can go a long way in your car wash’s success. A key first step is understanding what role the current owner-operator plays in the community (existing site location only). From there, assess how you will maintain that level of community commitment and enhance it. Though it’s always hard to put a monetary value on such commitments, being connected to the community and its success can go a long way toward brand awareness and brand loyalty.
In this process, do not forget about the strong partnerships that you will need to develop to deliver an outstanding customer experience. Everything from soap distributors, maintenance needs, and outsourced services to get your message and services out to the masses. Investing in these partnerships will create continuity, goodwill, and reliability through all stages of your carwash business.
4. Location, location, location…
As you master the critical components of your car wash business, don’t lose sight of one of the most vital elements for this industry: location. You can ace every part of the business, including your operations, team, and business plan, but, without a great location, it could all fall apart.
When scouting location opportunities, keep these questions in mind:
- Is the location busy and well-traveled?
- Is the location a hot spot for shopping?
- Is it on a well-traveled commute route to/from work?
- Does the location have a decent mix of residential/commercial activity?
- How easy is the location to access?
- Can your clients easily and safely enter and exit the wash without issue?
- Do traffic signals or the flow of traffic allow customers the opportunity to get in/out?
- Does the location have sufficient space?
- Will the location offer enough room for cars during peak hours?
5. Have an exit plan
This is not a misprint — yes, we are encouraging potential buyers of car washes to think through an exit plan before entering the market. Plans will change, and course corrections will happen. Running a successful car wash requires a lot of time and energy, and the more you can plan for tomorrow, the better positioned you will be. Community needs, economic situations, or competition can change at any moment.
Being proactive and assessing how you will exit the business will make you a stronger car wash owner today. This is not a call to action to exit immediately or be short-sighted. Rather, we believe in a holistic business approach here at Apple Growth Partners. To do so requires discipline and intentionality at every step along the way.
6. Ask for help along the way
There is much to consider when making a huge decision, like a business purchase. While it’s a difficult and often complex decision, it’s not one you need to make alone. There are many experts and partners that you can partner with to help you make the right decisions for your financial future. In fact, the one thing we coach is to fill a “board of advisors” with trusted consultants to help you think about all the business needs you may need as a car wash owner.
At Apple Growth Partners, we are here to help you with all your accounting and financial deal-related matters. Contact us today, and let us guide you toward making the best decision you can for your business.
For further information, or support related to business transactions in the car wash industry, please contact Brandon Fredericks at email@example.com.