Do you want to know how profitable a car wash business is and how much they make? If YES, here is an analysis of the profit margin and ROI for a car wash.
A car wash or auto wash is a facility that cleans the exterior and, in some cases, the interior of motor vehicles for a fee. The business makes money by attending to a steady stream of cars and by providing added services. Owning car wash business is a great way to make a living and start your entrepreneurial career.
Owning a car wash business comes with a lot of advantages and one of them is the amount of profit the business is able to generate in a short time. Located in viable community or neighborhood, the business is able to recoup its startup investment. Again, depending on the kind of car wash you want to start, it is possible that you can do so with just minimum capital.
Profit Margin of a Car Wash Business
Like have already been said, a car wash business is a profitable small business venture. If you want to delve into this industry and are looking for what you business can start to earn when operational, here are statistics to guide you. Small-scale, self-service car washes have been noted to average just over $40,000 per year in profit.
Larger luxury car washes on their part are known to net their owners more than $500,000 per year. According to the US Census Bureau, it reports that consumers spend an estimated $5.8 billion at car wash businesses annually.
On the average, nearly 20,000 cars get washed at any given car wash annually. Auto Laundry News on the other hand reports that conveyor car washes will see an average gross revenue of $9.56 per car, which on its own is a high profit margin.
How Profitable is the Car Wash Business?
A lot of variables come into play when it comes to calculating how profitable a car wash business is. You must have to take into account the fixed and variable cost of the business. Let us take for example that the variable and fixed costs of a certain car wash business is $4.13 for one car washed.
If you take this number and multiply it by the average number of 20,000 cars that get washed at any given car wash annually, then the total number of costs you will incur is $82,600. Suppose that the 20,000 cars that come through your car wash each buy a basic car wash at $7 per car wash, then the total revenue made is $140,000 (if your business has just the one-bay automatic car wash).
To calculate the average car wash business profit you can make, take the total estimated revenue and subtract by the total average costs and the number you get is $57,400. Since this is just an average car wash business profit, there is potential to make much more profit by either opening up more automatic car wash bays, adding additional car wash services and having customer loyalty programs.
Factors That Influence the Profit Margin of a Car Wash Business
Like have been said before, a lot of factors influence the amount of money your car wash business can make at any given point. Some of these factors include;
- Operator expertise
An experienced operator runs a better business, this is a fact. With the requisite experience in place, the operator can help his business to reduce operational cost and deliver great services at the same time.
Demographics play a very important role in the profit your business stands to make. This is because it impacts labour costs, electricity rates, sewer rates, and water. It can also affect you business patronage. This is because if you are located in a less traffic area or a neighborhood that has fewer cars and where people prefer to wash their own cars, then you may find it difficult to break even with your business.
- Quality of the equipment
Another factor that can influence the amount of profit your car wash business can make at any given time is your equipment. The equipment will affect your gross margins as some types of equipment have higher depreciation costs, while some can be less efficient than others. So, learn the costs involved with the equipment before buying it.
- Water – the cost of water is very essential to this business, and it is unlike some costs where you might have alternatives such as using electricity instead of natural gas or utilizing environmentally-friendly soaps instead of chemicals that are dangerous to the car’s exterior. Normally, it takes about 150L of water to wash a car by a self-cleaning car wash and 200L by an automatic car wash. Of course you have to pay more if you use more.
- Detergents/chemicals – the detergents or chemicals used in cleaning a car plays a huge role in determining the overall cost. Some detergents are expensive while others are cheaper. Eco-friendly detergents are usually more costly than chemicals. If you want to offer your clients the best services, then you should opt for high-quality detergents that don’t corrode the exterior of the client’s vehicle.
- Electricity – operating a car wash business takes a lot of energy consumption in order to keep the premises working to maximum efficiency. The cost even rises when you own an automatic car wash as the blowers that dry the car use a lot of electricity to do so.
- Repairs/maintenance – this is another area that needs your attention when operating a car wash business. If you have built your car wash business from scratch, it will reach a time where you will have to repair or service equipment and renovate or repair the building. All of these costs should be factored in the cost of washing a car.
- Administrative Expenses – as you run the business, several expenses will come up such as management staff, business insurance, office supplies, marketing and advertising fees, landscaping, and much more. If you’re paying rent, the cost should be included in the administrative expenses.
- Site labour – this cost can be arrived at by the number of people required to be on the worksite every day. Actually, you should have the same number of staff regardless of whether you received only 15 cars or 900 vehicles. The minimum wage bill of a car wash worker in the US is from $8.59 to $11.86 per hour. Note that most car wash businesses charge between $6.34 to $15, and if it’s valeting, the price goes up to around $17. Most workers operate for 10 to 12 hours a day. All these costs are significant when put together.
- Rent/mortgage and Property Taxes – these charges depend on where you are located in the country as they vary from one region to another. This variable can also take your profit margin down or up.