There were around 280.8M cars registered in the US in 2022. Can you guess how many carwashes there are to service all those vehicles? Just over 60,000.
60k locations to service nearly 3M cars…
Do you smell that? Kind of smells like opportunity to us (and maybe a little soap).
It’s slippery, though – macro opportunity doesn’t always mean a smart acquisition.
But in this case? It might just be the biz for you. Let’s see.
In 5 minutes or less:
- What’s the dirt on carwashes?
- The top 4 reasons we love them
- Caution: Potential pitfalls
- 5 steps to buy your own carwash
- Look up, study up, lawyer up, shape up, & rollup
What’s the dirt on carwashes?
According to Advanton, it costs between $40,000 and $300,000 on average to buy a carwash franchise, whereas a mobile carwash business will typically sell for $30,000 to $100,000.
Huge potential here for growth and expansion, but a few downsides, too. You can get a cash-flowing carwash for cheap, but there are several factors at play, like:
- location
- number of washing bays
- quality of the equipment.
But ultimately, we think a carwash is a great idea to add to your portfolio – or even be your very first biz.
Here are the top 4 reasons we love them:
1. Carwashes will exist as long as cars exist
The demand for carwashes will always be around, as long as we are driving cars (or until Elon comes up with a self-cleaning car… anything’s possible).
And the beauty of carwashes is that, for the most part, they just need to exist.
Do you go out of your way for the best carwash in town? Probably not.
You probably have a go-to spot by the grocery store, near your house, and across the street from your gym.
Most of the time, carwash customers are looking for one thing: convenience.
Get location locked, and the cash flows.
2. Profit day 1
You can’t beat the stellar profit margin opportunities of a carwash.
According to Profitable Venture, self-service and smaller-scale carwashes can yield as much as $40,000 in profit each year while larger, luxury carwashes can earn upwards of $500,000 in annual profit.
There are also endless ways to upsell your customers and easily add to your margin, even if you’re only adding $1 to the cost of your wash. Here’s a quick breakdown…
- Let’s say, all in, the cost to operate your carwash once is $2.75. You want a low cost point to get people in the door, so you go with $3 per wash? That’s a 25-cent profit margin.
- But what happens if you decide to raise the cost of your base carwash to $4? Sounds pretty good, and your customers probably won’t notice the difference in cost. But you get $1.25 profit per wash. That’s a 500% increase in profit margin.
- You’ve seen how creative carwashes get with upcharges. We’re talking: vacuum, foam, undercarriage rinse, windshield repellant, deluxe wash, ultimate wash, extreme deluxe ultimate wash with cherry sprinkles. The options are limitless. Higher price points can have a huge impact on your margins, without adding a lot of complexity to your operations.
3. Smaller marketing budget
Let’s be real… your customers aren’t searching far and wide to find a carwash they love. Most likely, they’re looking for a place that does a good job, fits within their budget, and is close to where they live. That means your marketing and advertising budget likely doesn’t need to be as huge as it would be for other industries.
But this also means your location is 10x as important as the money you pump into your marketing budget.
While you might be saving dollars on things like mailers, ads, and other promotional materials, it might be worth spending a bit more upfront on a deal if the carwash is in a better location than the competition. Bad location? You’re sunk in the suds.
Franchise opportunity
This one is for my boring business moguls who are looking to streamline the assets in their portfolios. Once you solve the overall operational model at one location, you’re better equipped for opportunities to franchise at other wash locations.
Acquiring a few different carwashes might be something to explore if you live near or are looking for business opportunities in a larger suburban area.
There are also plenty of opportunities within this industry to build on additional features, products, and services (think detailing, tire service, or even windshield repair) at a low operational cost to you
Caution: Potential pitfalls
Not to completely pop your bubble, but there’s no such thing as a risk-free business. Here are a few cons you’ll need to think about, too…
1. Weather. One bad month or a particularly rainy season can have a major (and unpredictable!) impact on your quarterly and annual revenue. You could build an unlimited subscription model to ensure recurring revenue and act as weather insurance. Still – some risk remains.
2. Location. This is the one factor when buying that can’t be changed. It’s also arguably the most important predictor of a carwash’s success. Look for:
- A high-traffic area
- Easy access from a major road
- With few nearby competitors.
- Convenience. Wins.
3. Maintenance. While this business is relatively simple to get started (especially if you’re buying a turnkey operational carwash), expect many hidden costs – particularly in the maintenance category.If you buy a machine-operated carwash, these pieces of massive equipment can break. This is expensive in two ways: 1) paying for specialized repairs, and 2) your entire business shuts down until those repairs happen.
Carwashes require quite a bit of available cash-on-hand to mitigate maintenance risk.
Ready to proceed with caution?
Let’s check out the steps you need to take to buy a carwash of your very own.
5 steps to buy your own carwash
Carwashes are a great business, whether you’re a biz-buying first-timer or this is the tenth company in your portfolio.
Everyone from Shaq to 22-year-old Hannah Ingram can be successful at buying and maintaining a profiting carwash (or carwash empire).
Taking some hints from Ingram’s success, here’s how you can buy your own carwash.
1. Look up: Know where to search
“If carwashes are such great cash cows, why would anyone want to sell them?”
Well, the same reasons as always:
- Behind on taxes.
- Business fatigue.
- Relocating to another state.
The list goes on and on. But as long as you choose not to look, you’ll never find these deals ripe for the taking.
You can try BizBuySell, Loopnet, or any other biz marketplaces. But honestly, the best deals will be right under your nose.
Search up carwashes near you. Note any with a lacking online presence, sad look, and great location. Take a drive by. See if the owner is around or if you can get their direct contact info.
Sometimes the owners of neglected businesses just need permission to get out. You can be their opportunity as much as they are yours.
Potential pros of an off-market search:
- Price may be lower
- Little to no buying competition
- Seller financing may be an option
- More growth opportunities (the biz had no buyers to impress, so likely hasn’t reached its full potential)
- Get a wider off-market search with the powerhouse micro-tool Bizscout
2. Study up: Learn seller financing
Especially if you’re looking at a carwash as your first acquisition, seller financing could be your #1 way in:
- It’s cheaper. You’re looking at as little as 0-10% cash down on the purchase.
- The seller keeps a little skin in the game, so you’ve got them on your team after closing.
- You can avoid the loan process, which means you don’t have to involve your credit, and you don’t have to navigate a maze of paperwork.
All it takes is a little background knowledge of your seller, a coating of confidence, and killer negotiator skills.
3. Lawyer up: Get a SBA attorney
Not in a scary way. Like with every other property acquisition, seller financing can get technical.
It’s critical to hire a legal expert to hash out the finer details of your contract. (Even when you have the basics down.)
It’ll cost a bit upfront to draw up the right papers, but a good lawyer is almost always worth the cost.
4. Shape up: Improve the biz
Find where the last owner was falling short, and fill in the gaps. Flex your marketing muscles. Throw on a new coat of paint. Differentiate your carwash with amenities.
In Ingram’s case, she attributes a good portion of her weekly turnover to her vending machines that stock only five car care products:
- Glass cleaner
- Air fresheners
- Tire shine
- Interior sponges
- Absorbent towels
Air fresheners, which she buys for $0.20 apiece and resells for $1.25, are by far her bestsellers. That’s a 500% markup.
5. Rollup: Build your M&A empire
The carwash industry has a rare quality: there are very few big players. Even the largest chains don’t have a market share greater than 5%.
Translation?
Disaggregation means opportunity.
A horizontal merger is one way to expand while safeguarding your cash flow against seasonal fluctuations. By acquiring carwashes up north where there’s higher customer volume during winter and more down south where the boom typically comes in summer, you could keep your annual revenue more even.
Of course, you could also decide to branch out vertically. At $160 per detail and $12B+ in revenue, car detailing is one related (and high-value) boring business to add on.
You probably didn’t think you’d be a carwash mogul when you grew up, but hey – you did want to make money, right?
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