Car wash businesses, like any other, require owners to track specific key performance indicators (KPIs) to help them understand how the business is doing and if there are areas they can improve.
KPIs are also an integral part of your financial projections when you prepare a business plan so make sure to understand what they are and how they impact your car wash business.
From revenue per car, employee turnover, downtime, etc. here are the 9 most important KPIs you should track for your car wash business. Let’s dive in!
1. Dollar per car
This is probably the most important KPIs car wash owners should track. Also simply referred to as “revenue per car”, it’s the average amount of revenue collected per car cleaned.
Calculating this KPI enables you to monitor business trends and determine how much the business should upsell to clients to compensate for lost revenue. For instance, this might involve offering club membership and premium services.
More importantly, dollar per car goes a long way in understanding what business model your car wash have: whilst self-service car wash typically costs $7 to $15, fully automated car wash can easily go up to $30.
You can calculate this metric by dividing the total revenue generated over a given period (like a month) by the number of car washes in that month.
Dollar per car = Total revenue / # car washes
For instance, if in a month you generate a $15,000 revenue for washing 1,000 vehicles, dollar per car is:
Dollar per car = $15,000 / 1,000 = $15
This KPI shows the average number of cars your car wash cleans over a period of time.
Because throughput represent your volume (the amount of cars you clean), it is with dollar per car (price) the 2nd most important KPI for car wash businesses.
Throughput can be calculated as:
Throughput = # car washes / time
For instance, if your car wash business cleans 50 cars in 10 hours, then throughput is:
Throughput = 50 / 10 hours = 5 cars per hour
3. Client retention rate
Client retention rate is another of the most important KPIs car wash businesses should track.
Indeed, repeat customers (customers who came at least once before to your car wash) are more likely to spend more, and will increase your revenue predictability (as they are more likely to come again in the future).
Also, this KPI reflects customer experience and satisfaction (see NPS at the bottom of this article), which will ultimately affect your bottom line. A car wash business has to work hard to retain customers. You can do that by running loyalty programs where you give customers discounts or membership cards offering certain benefits.
Customer retention rate = # repeat customers / # total customers
# repeat customers = # customers who came at least once in the past
For instance, if your car wash had 1,000 clients in a month of which 400 are repeat customers, CRR is:
Customer retention rate = 400 / 1,000 = 40%
4. Average downtime
Downtime represents the percentage of the total available (opening) hours in a period when your car wash is operational. Indeed, unfortunately there might be times when your car wash bay or some piece of equipment is not functional. This is an opportunity cost as you’re not making money whilst you could have.
Downtime is an important KPI to monitor as it can explain swings in revenue and profits. For example, the revenue loss can reach thousands of dollars if you close for a few days period.
Average downtime = # downtime hours / # available hours
# available hours = number of opening hours x number of car wash bays
For instance, if you are open 5 days a week, 12 hours a day, and you have 4 car wash bays, that’s a total of 240 available hours a week. Therefore, assuming you close down a car wash bay for 2 days because of equipment failure, downtime for the week is:
Downtime = 12 hours x 2 days / 240 available hours = 10%
5. Capture rate
This KPI is a tough one. It’s only used by a fraction of car wash businesses and franchises.
Indeed, although it’s a very useful metric to gauge the success of your car wash strategy and business, it’s very difficult to measure accurately.
That’s because capture rate is an estimation: it represents the percentage of cars that pass by your car wash that stops for cleaning.
The capture rate depends on various factors, most importantly: where your car wash is located.
Capture rate can be estimated as follows:
Capture rate = # cars washed / estimated car traffic
For example, if you had 1,000 customers in a month, and the estimated daily traffic of the street where your car wash is located is 6,000, your capture rate is:
Capture rate = 1,000 cars washed / ( 6,000 x 30 days ) = 0.5%
6. Profit margin per car
This KPI measures the profit margin of the car wash makers for each vehicle cleaned. It is among the top KPIs car wash owners should measure when calculating profitability and cash flow.
The margin usually is EBITDA (Earnings Before Taxes, Interest, Depreciation and Amortization expenses) as it represents the true profitability of your business, before any exceptional expenses, non-cash costs and taxes.
Profit margin per car = EBITDA / # cars washed
EBITDA = Revenue – Total operating expenses
For instance, if your car wash generate a monthly revenue of $30,000, incurs $25,000 in operating costs, and services 1,200 cars, then:
Profit margin per car = $5,000 / 1,200 = $4.2
In this example, $4.2 is the amount of money that’s left per car wash after you’ve paid all operating expenses (including your own salary). After this, you’ll still have to pay for taxes (~21%) and any debt interest (if you have a business loan).
7. Employee turnover rate
High employee turnover is a big challenge for the car wash business. Therefore, this is among the KPIs car wash owners must track because, especially as given the current economic conditions (low unemployment rate), recruiting good staff isn’t easy.
Also, the higher your employee turnover rate, the more time you spend in hiring and training your staff, which has an impact on your car wash profits.
You can calculate employee turnover as follows:
Employee turnover rate (ETR) = Retained employees / Average employees
Retained employees = # starting employees – # employees at end of period
Average employees = (# starting employees + # employees at end of period ) / 2
For instance, if at the start of a year you had 20 employees and at the end of year you had 24 employees (of with 12 retained employees), your ETR will be:
ETR = 8 / 24 = 33%
Retained employees = 20 – 12 = 8
Average employees = (20 + 24) / 2
8. Employee efficiency
Although measuring this KPI may appear odd, finding ways to maximize every employee’s efficiency is critical for any car wash.
It is important to note that this metric also helps you create a benchmark to work from. For example, you can use the personnel cost to gross revenue ratio, which is the cost of employing staff versus the gross revenue the carwash makes.
Therefore employee efficiency is among the most important KPIs carwash owners should track to help them identify inefficiencies.
Employee efficiency = # car washes / # labor hours
# labor hours = total number of hours worked in a given period
For instance, if you have had 250 car washes in a week, and you have 5 employees working 40 hours a week each, employee efficiency is:
Employee efficiency = 250 / 200 = 1.25
In other words, your car wash cleans 1.25 cars per hour per employee. Let’s try it this way: each employee “cleans” 50 cars per week. It’s important to note that employees aren’t necessarily cleaning cars, they can also be your support staff as well (receptionists, HR/finance manager, etc.), thereby the quotes for “cleans”.
9. Net Promoter Score (NPS)
Net promoter score is an essential indicator of success in a business. You determine the KPI by asking customers how likely they would recommend your car wash to others.
You then core their responses on a scale of 1-10, with 10 being most likely and 1 unlikely. Customers who score 9-10 are promoters, 7-8 are passives, and any score under 6 is categorized as a detractor.
NPS = ( # promoters – # detractors )
For example, if you have:
- 100 responses
- 80 promoters
- 10 passives
- 8 detractors
NPS = 80 – 8 = 72