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Buying a car wash can be a smart investment since there’s always a demand for them. But, like any business endeavor, you’ll need to be prepared to research and approach the buying process strategically. In our guide, we’ll go step-by-step through how to buy a car wash and offer useful tips and insights to help you navigate the process.
- Buying a car wash business requires conducting a feasibility study, creating a business plan, creating a budget, researching your available options, vetting contenders, and negotiating the sale.
- There are many different types of car washes including self-serve, automatic, full-service, and even mobile options.
- Car washes require a variety of licenses and permits to operate legally.
- Make sure you spend time researching the industry and visiting your competition.
Step One: Conduct a Feasibility Study
A feasibility study helps you determine whether the business is a viable investment and whether it aligns with your own financial goals and personal preferences. When conducting a feasibility study, keep the following considerations in mind:
- Location: Is the car wash in a high-traffic area that has good visibility and is easily accessible?
- Competition: Who are the competitors in the area? Do their prices, services, and other features compare to the car wash you're looking to start?
- Market demand: Is there a demand for a car wash in the area? What are the needs and preferences of the community?
- Financial information: What is the current and projected financial performance of the car wash? How much revenue does it or will it generate? What are the expenses involved? What is the potential return on investment?
- Operations: What are the current processes and procedures (if any)? How many employees are needed?
How Much Revenue Can a Car Wash Generate?
The revenue your car wash can generate will vary depending on several different factors like the location, type of car wash, your marketing strategies, and the competition in the area. The average revenue per bay for a self-service car wash is around $1,500 per month, while a full-service car wash can generate up to $500,000 to $900,000 annually.
What Type of Car Wash Model Is Most Profitable?
According to industry data, express exterior car washes and flex-serve car washes are the most popular models. Express exterior car washes focus on speed and efficiency, with customers typically spending less than five minutes at the wash. They usually offer a few wash packages and are designed to handle high volumes.
On the other hand, flex-serve car washes offer more options and services, such as full-service detailing, express washes, and self-serve options, catering to a wider range of customers. That said, this model also requires more space and money upfront, which can impact profitability.
What Are the Pros and Cons of Buying a Car Wash?
- When you buy an existing car wash, you're purchasing a business that is already up and running and comes with an established customer base, staff, and infrastructure.
- A successful car wash business can generate substantial profits, making it an attractive investment opportunity for an eager entrepreneur.
- Car wash businesses typically have low overhead costs, especially if you choose a self-serve or automatic car wash model.
- There’s great potential for growth with car washers. By offering additional services such as detailing or oil changes, you can increase revenue and expand your customer base.
- The initial investment required to purchase a car wash business can be substantial, especially if you're buying one that’s already up and running in a prime location.
- Depending on where the car wash is, it may experience fluctuations in demand throughout the year, with peak seasons during warmer months.
- If you choose a full-service car wash model, labor costs can be significant, especially if you plan to offer specialized services.
What Are the Operating Expenses for a Car Wash?
Operating expenses vary widely depending on the type of car wash you have. Here are some common operating expenses to consider when running a car wash business:
- A significant portion of the operating expenses for a car wash is the cost of water and sewer usage. This can be a significant expense, especially in areas where water rates are high.
- Chemicals and cleaning supplies are essential for running a car wash business, and the cost of these supplies can add up quickly. You'll need to purchase soap, wax, tire cleaner, and other cleaning agents.
- The cost of maintaining and repairing car wash equipment can also be a significant expense for the business. Regular maintenance helps avoid costly repairs and keeps the equipment running efficiently for longer.
- If you have employees, payroll expenses will be another significant operating cost. This includes wages, taxes, and benefits such as health insurance and paid time off, if you offer these.
- Car wash owners need to have insurance to cover potential accidents, property damage, and other liabilities.
- To attract and retain customers, car wash owners need to invest in marketing and advertising. This can include creating flyers, running ads in local newspapers, and running promotions.
Step Two: Create a Business Plan
Creating a business plan helps you define your business goals, strategies, and the financial projections of your business. This plan can offer a roadmap for how you'll operate and grow the business. Here are a few key elements to include in your car wash business plan:
- Executive summary: This section provides a general overview of your business plan and highlights the key points you'll discuss later on.
- Business description: Describe the car wash business you're purchasing or building, including its history, location, services, and target market.
- Market analysis: Explain who your competition is, what the market demand is, and any relevant industry trends. Identify your unique selling points and explain how you plan to differentiate yourself from other car washes in town.
- Marketing and sales strategies: This section should outline how you'll attract and retain customers, how you’ll advertise your services, and how you’ll build your brand.
- Operational plan: Detail the day-to-day operations of your car wash, including staffing needs, equipment, and supplies. Explain how you'll manage the business, how you’ll measure performance, and deal with any customer issues.
- Financial projections: This is one of the most important parts of your business plan. Create a comprehensive financial plan that includes your revenue expectations and expense projections, your profit and loss (P&L) statement, balance sheet, and cash flow statement. Also, include any startup costs and financing needs.
Step Three: Determine Your Budget
Before you can even start looking for a used car wash or a new lot to build one on, you’ll need to think carefully about your budget. The cost of buying or building a car wash business varies greatly, but it’s not an insignificant cost. Here's how to determine what your budget should be:
- Take a close look at your personal and business finances, including your savings, credit score, and debt-to-income ratio, all of which will have an effect on any financing you can get. Determine how much you can afford to invest without jeopardizing your financial stability.
- The location of the car wash is a significant factor that impacts its cost. An already-built and profitable car wash in a high-traffic area with good visibility and accessibility will likely cost more than a smaller car wash in a more rural location.
- Determine the size of the car wash, as this also affects its cost. A larger car wash with more bays and equipment will cost more than a smaller, self-serve one.
- Evaluate the equipment necessary for your car wash. High-end equipment will cost more upfront but may provide better long-term ROI, while used equipment is cheaper upfront but will need to be replaced more frequently.
- Factor in additional costs. In addition to the purchase price of the car wash, there may be other costs to consider, such as legal fees, licensing, insurance, and ongoing operational expenses.
How Much Will It Cost to Buy a Car Wash?
Opening a car wash can be expensive. In rural areas, entrepreneurs have options available for just over $100,000, but cities often require over a million dollars in funding.
Step Four: Research Available Options
Once you’ve determined your budget and created a business plan, the next step is to research the available options for purchasing a car wash business. There are a variety of places you can look to find already-built businesses or lots for sale, including:
- Online listings: Many websites list car wash businesses for sale, including sites such as CarWashSale.com, BizBuySell.com, and LoopNet.com. These sites let you browse by location, size, and price.
- Business brokers: Business brokers specialize in buying and selling businesses, so they’re the experts when it comes to finding a car wash business for sale. They help you locate businesses that meet your criteria and assist with the negotiation and purchase process.
- Local classifieds: Yes, local classifieds still exist. Look in your local newspapers and online classifieds from sites like Facebook Marketplace or Craigslist.
- Industry associations: Industry associations, such as the International Carwash Association (ICA), are valuable resources for finding car wash businesses for sale. Some of these associations have lists of businesses available for sale or, at the very least, provide networking opportunities with other car wash owners looking to sell.
Step Five: Vet Any Contenders
Alright, you’ve landed on a few final contestants for purchase. Before finalizing the purchase, you’ll need to vet any contenders thoroughly. Here are the steps to take during the due diligence process:
- Check all zoning regulations and permits: Car wash businesses are subject to zoning regulations and license requirements that vary by state and even city in some cases. Ensure that the car wash business you're considering complies with any and all local zoning laws and has all necessary permits and licenses.
- Conduct due diligence on the seller: Before signing any contracts, research the seller's background and reputation. Check online reviews, talk to other business owners in the area, and ask for professional references from the seller.
- Review the business’s financials: Review financial statements, tax returns, and sales data to understand the revenue and profit margins of the business. Also, check the condition of the equipment and review any maintenance records or repair bills.
- Understand the customer base: Analyze any customer data and feedback the business has collected, and even consider conducting a customer survey to understand their preferences.
- Consider staffing: Review the employment contracts, job descriptions, and performance evaluations of employees and determine if any changes are necessary.
Step Six: Settle on a Location
Having your car wash in a good location is vital to success. When picking the right car wash, consider these factors before settling on a final location:
- A car wash business should be visible and easily accessible to all potential customers. So, choose a location with high traffic volume and good visibility from the road.
- The demographic characteristics of the area can impact the success of a car wash business. This means considering the population density and car ownership rates.
- Evaluate the competition in the area. Consider the types of car washes in the vicinity, their pricing structure, and the services they offer. You’ll want to choose a location where there is enough demand for car wash services, but not too much competition.
- Car wash businesses are subject to zoning regulations that vary by location. Is the area zoned for commercial use? Make sure that there are no restrictions on operating a car wash in that area.
- Consider any environmental factors that may impact the business, such as water supply, drainage, and waste disposal.
Questions to Ask Before Buying a Car Wash
Before purchasing a car wash business, make sure you’re asking the right questions to ensure that the business is a good fit for you (and any partners).
- What is the history and performance of the business?
- What is the condition of the equipment and facilities?
- Why are you selling the business?
- Are there any legal issues?
- What is the current customer base?
- Do you have a current marketing strategy?
- What is the staff and management structure?
Step Seven: Negotiate the Sale
It’s finally time to purchase your property! Before officially making an offer, you’ll want to prepare for the negotiation process. Here are some tips to help you negotiate the best deal possible:
- Understand the true value of the business: Use the information you gathered during the due diligence process to evaluate the value of the business. Think about the current market conditions, the condition of the equipment in the car wash, and the business's overall financial performance to determine a fair price. Also, do a SWOT analysis, which evaluates the strengths, weaknesses, opportunities, and threats facing the business.
- Determine your maximum and minimum offer: Go into the negotiation with a maximum and minimum offer in mind. This should take into account your budget and the potential return on investment.
- Consider non-financial factors: In addition to the purchase price of the car wash, you’ll want to consider non-financial factors such as the terms of the sale, any warranties left on the equipment, and seller financing options available.
- Make a formal, written offer: This should include the purchase price, terms of the sale, and any contingencies or conditions of the sale.
- Negotiate: Expect the seller to come back with a lower price than you offer. Explain why you’re asking for the price you are and, if you think it’s right, negotiate down slightly. Or, stay firm and consider the bare minimum offer you’re willing to accept. You need to not be afraid to walk away if the seller is too stingy.
- Finalize the sale: Once you and the seller have agreed on the terms of the sale, sign a purchase agreement, and then the owner will officially transfer ownership of the business to you.
Step Eight: Secure Your Funding
Since most people don’t have a few hundred thousand dollars lying around, car wash financing exists to help cover the cost.
- Small business loans: Car wash loans from banks, credit unions, and the SBA (Small Business Administration) are all viable options for those with good credit. When you want to purchase a car wash, reach out for a quote and get the process started.
- Seller financing: Some sellers will be willing to offer seller financing, which is similar to bank financing except you work with the seller to come up with an appropriate payment plan.
- Grants: There are a few grants available to small business owners, although the competition can be tough. Still, this provides funding you don’t need to pay back.
- Crowdfunding: Crowdfunding platforms like Kickstarter and GoFundMe can help you pitch your business idea to anyone using the platform, making it easy for you to get your ideas out there in front of investors.
- Angel investors: Angel investors provide funding to small businesses, but often in exchange for ownership.
Step Nine: Address Legal Issues
Business sales are costly endeavors that shouldn’t be entered into lightly. During the buying and selling process, both the buyer and seller should consider any potential legal issues that may arise. To protect yourself, consider doing the following:
- Hire a lawyer: Work with a lawyer who is familiar with business transactions and can review all legal documents, including the purchase agreement. A lawyer helps you identify any potential legal issues in the contract.
- Hire an accountant: An accountant can review the financial statements and tax returns of the car wash business to ensure that they’re all accurate. An accountant can also tell you the overall financial health of the business.
- Include important clauses in the purchase agreement: These may include a non-compete clause, an indemnification clause, and a representations and warranties clause. These clauses can protect the buyer from potential legal issues that may arise after the sale has already gone through.
- Make sure you’ve got the right insurance and licenses: Car wash business insurance can protect you in the event that a legal issue occurs. Plus, having invalid licenses can lead to the biggest kind of legal issues, so make sure both these licenses and insurance are in place before you open.
Step Ten: Close the Deal and Take Possession
Whew, you’re at the end of the sale process! Before you celebrate, review this checklist of items to complete before you officially take possession:
- Ensure that all parties have signed the purchase agreement, and that all terms and conditions have been met
- Transfer ownership of the car wash business and any licenses or permits associated with it, if allowed.
- Obtain insurance coverage for the car wash business, including liability, property, and workers' compensation insurance.
- Notify employees of the change in ownership and any changes in their employment status or benefits. Plus, set up further training with employees as necessary.
- Conduct a final walkthrough of the car wash business to ensure that everything is in good condition and working order.
- Get keys and access codes to the car wash business and any equipment associated with it.
- Review the financial records of the car wash business to ensure that all accounts are in order.
- Notify customers and suppliers of the change in ownership and any changes to contact information or payment methods.
Additional Tips for Buying a Car Wash
Buying a car wash certainly isn’t a simple process, but it can be a rewarding one. Here are a few more tips to help you face the buying process head-on.
Understand the Car Wash Industry
When you think about starting a business, one of your first steps should be to research the industry you’re thinking about getting into. It’s easy to make assumptions about how an industry works, but you won’t know completely until you immerse yourself in it.
Look around at other car washes and spend some time online exploring how other business owners have fared.
Survey Any Potential Sites in Person
Never purchase a property without seeing it in person. This can have devastating consequences if you end up with a rundown business or an improperly zoned lot. Visit multiple locations before making your decision so you can see the true availability in your area.
Learn About the Local Competition
Checking out the competition can help you see how you can offer unique services. For example, if there are five full-service car washes in town, a more inexpensive, self-serve option may actually be the right move for you.
Be Realistic About the Business’s Potential
You don’t want to be overly confident in your business’s success. Make sure you have an emergency fund in place for unexpected expenses and overestimate your expenses so you can leave your budget some breathing room.
Have an Exit Strategy in Place
With any business, it’s good to have a backup plan in the event that you have to close your doors. To ensure that doing so isn’t financially devastating, have a plan in place in the event that you have to sell your business.
Beyond Traditional Ownership: Exploring Alternatives
If the sticker price of a traditional car wash is a bit too shocking to handle, there are other alternatives that still allow you to reap the rewards of car wash ownership. A few include:
- Franchising: Franchises provide an established business model, brand recognition, and typically provide ongoing support from the franchisor. Franchise agreements typically include initial training and access to technology and products. For those who prefer to have a proven model to follow rather than starting from scratch, this can be a good option.
- Starting a mobile car wash: A mobile car wash can be a cost-effective way to enter the car wash business. With a mobile car wash, you can offer your services to customers in various locations, eliminating the need for a physical location altogether. This type of business typically requires minimal overhead and can be an excellent option for entrepreneurs who are just starting.
- Partnering with existing brands: Consider partnering with an existing brand or business to offer car wash services to their customers. For example, gas stations, car dealerships, or parking garages all tend to offer car wash services to their customers.