Published on 18/08/2018 by Any Business.Com.Au

The wash up: is the car wash industry still profitable?

Today, there are thousands of commercial carwashes throughout Australia according to the Australian Car Wash Association (ACWA) and buying an existing car wash business can be a shrewd and safe way to enter what continues to be a profitable industry.

According to IBISWorld figures, Car Wash industry revenue is expected to grow at an annualised 0.5% over the five years through 2019-20, to $585 million.

Car washes typically sell for a multiple of 1-3 times their yearly profit - irrespective of the amount of capital sunk into a business. Other factors that determine the sale price of a car wash are the state of the equipment and the length and nature of the lease, typically you can expect to pay a minimum of $80,000 per bay, according to industry experts.

Feasibility study

Before you even begin to look for a location to buy, think about the feasibility of owning a car wash. Consider the upfront costs to purchase a car wash, then figure the costs to run and manage the car wash, as well as operation and maintenance costs.

Buying an existing car wash may be appealing, because everything is already there, but consider why the existing owners are selling and whether or not you will be left with problems, such as equipment that needs replacing or a declining customer base.

When it comes to considering the money needed, look at your resources, which includes personal assets, access to capital and creditworthiness. If you haven't planned for the initial costs, operating expenses and upgrades, you could fall short in negotiations or you could fail in the first years of business.

Site selection

Start shopping for a location. Since you are buying an existing car wash, you may not have a lot of options available and it is possible that you had a specific opportunity in mind when you started your feasibility study.

Even if you did, see if there are any other sites for sale in your area. There could be a better opportunity just a few kilometres away. Researching options help you make a better decision.

Business plan

No one should consider starting any business without writing a business plan. Your basic industry feasibility data will be incorporated into this plan. Additionally, consider the type of car wash you want to own.

While another type may come available on the market, it might not meet your business goals. Be clear about the mission and vision of your company. Evaluate your strengths and weaknesses and examine the competition. Know what other car washes in the area are doing and how busy they are before you invest your money.

Define a marketing strategy and establish baseline car wash prices to determine your break-even points based on average expenses in your area.

Finance options

If you don't have enough money to cover the purchase, upgrades and at least one year's worth of expenses, you will need to get an investor or lender to fund the purchase.

Most businesses fail because they are under-capitalised. Make sure you have enough to properly market your new business, while also meeting all monthly obligations.

Update the business plan with details specific to your selected site location. This plan is the foundation of what is required to show investors, and even lenders, along with an application process.

Think about any initial financing needs, long-term lines of credit or land purchase requirements, if applicable, as well as any leasing of machines.

The wash up

There's no doubt figures indicate that owning a car wash can be profitable, as long as you have done your homework.

AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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