In this article we’ll explain you how to create powerful and accurate financial projections for a car wash business.
1. Forecast customers
The first thing you’ll need to do is to forecast the number of customers (or cars) you service per month. Before thinking about months, it’s easier to think in terms of days: how many cars do you think you can realistically service per day the first month, the second, and a year from now?
Then, simply multiply the number by the number of openings days (30 if you open 7/7) to calculate the number of customers.
For example, this is how could look like your customers over the next five years. The number of cars serviced per day increase from ~50 to ~120 and stay flat thereafter (maximum capacity)
2. Forecast revenue
Now that we have the number of customers, we can calculate revenue.
Yet, before we do so, we must break down the number of customers into the different services you may offer. Indeed, you might offer self-service and full service car wash services. Both have very different unit economics (prices and profit margins) you need to forecast accurately. Let’s see now how.
First, break down the services into a percentage of your total customers. For example, 40% choose self-service, another 30% automated, 20% touchless and the remaining a full service car wash.
That way, you can now multiply the number of customers for each service by their respective price.
Now you can obtain your revenue projections broken down by car wash type.
3. Forecast expenses
In addition to the one-off startup costs discussed here, you must also consider the total recurring cost of running a car wash. Those expenses include:
Before you start to do business, you will need to pay for the equipment as well as the car wash bay.
Whilst a decent carwash bay can cost up to $42,000 in average, the average cost of carwash equipment depends on the carwash services you intend to offer. Typically, the cost for a self-service carwash bay is between $8,000 and $10,000. For an automatic carwash bay, equipment costs range between $31,000 and $100,000.
In addition to these one-off expenses, you must also budget for expenses like the ones below.
Salaries & commissions
You can offer carwash attendants a monthly salary or a commission depending on the number of vehicles they clean. As per Indeed.com the average salary for a car wash attendant in the United States was $15.38 per hour.
Water and electricity account for one of the most important expense for car wash businesses. Water especially, which depends on the type of car wash you are operating. For example:
- A high-volume car wash with 100 cars a day would consume approximately 105,000 gallons a month which would cost approximately $1,000 a month (assuming $10 per 1,000 gallons)
- An automatic touchless car wash with 100 cars a day would use in comparison 210,000 gallons a month, costing approximately $2,000 a month in water expenses
As you can see, the monthly expenses on water can vary significantly depending on the volume, the type of car wash and the price per gallon you are paying.
Make sure to budget accordingly when you set up the prices customers will pay.
The typical car wash lots are at least 5,000 to 10,000 square feet. Depending on the location and size, renting the carwash lot ranges between $10,000 to $50,000 per month.
You will need to spend some money in marketing and advertising. Car wash are local businesses, so it will mostly be offline marketing expenses (vs. online marketing) which can include billboards, posters, partnerships with companies, radio ads, etc.
Finally, you will need a monthly budget to finance soaps, sponges, dryers, brushes and other car wash supplies. The typical expense on the car wash supplies ranges between $1,000 to $5,000 per month, depending on the number of vehicles you will be cleaning.
In addition to an accountant for the quarterly and annual reports, you can opt for an accounting software like Quickbooks which can cost anywhere between $12.50 a month to $90 a month depending on the plan you are selecting.
For example, this is what the breakdown of expenses could look like:
4. Build your P&L And Cash flow
Once we have forecasted revenues and expenses, we can easily build the profit-and-loss (P&L) from revenues down to net profit. This will help you to visualise key financial metrics such as Gross Profit or EBITDA margin as shown below:
The cash flow statement, in comparison, needs to include all cash items from the P&L and other cash movements such as capital investments (also referred as “Capex”), fundraising, debt, etc.
Cash flow is vital as it will help you understand how much funding you should get, either from investors or the bank (SBA loan for example) to start and run your own car wash.
In this chart below, we're showing you an example of a typical cost structure a car wash business would incur. Unsurprisingly, rent, salaries and initial capex represent ~90% of total expenses.
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