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April 28, 2022

Why You Should Be Buying Car Washes

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Ever wanted to make your millions in the boring, but weren’t sure what kind of business would be right for you? This week, we’re talking car washes and why we love them so.
 

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According to Avanton, the average cost to buy a car wash franchise can be anywhere from $40,000 to $3,000,000, whereas mobile car wash businesses will typically sell for $30,000 to $100,000.

Huge potential here for growth and expansion, but a few downsides, too. There are a lot of factors that play into the cost of a car wash and if you’ll be able to cash flow quickly, including things like the location of the car wash, the number of washing bays available at the facility, and the quality of the equipment that is used on site. 

If you’re new to what we do here at Unconventional Acquisitions, we’re on a mission to create 100,000 small business owners by buying boring businesses. 

Our philosophy? We help you acquire profitable businesses by buying then building, so you can see cash flow on day one. And one of the business types we love sharing about is car washes. 

Here’s why we think they’re a good idea to consider adding to your portfolio:

1. Car washes will be needed for as long as there are cars on the road. 

The demand for car washes will always be around, as long as we are driving cars (or until Elon comes up with a self-cleaning car…anything’s possible). One thing that makes car washes such an interesting business model is because of how the business actually operates out and in the market. 

Just think about…if you want to go and get your car washed, you probably have a couple of go-to’s spots in your area. One for when you’re on the same side of town as your grocery store. Another near the gas station by your house, and one more that’s across the street from your gym. 

Most of the time, people in need of car washes are looking for one thing: convenience. And if you’ve got the location locked, the cash flows.
 

2. They’re profitable on day one.

There are a lot of reasons to buy a car wash, but one that we thing we love in particular is the stellar profit margins. According to Profitable Venture, self-service and smaller-scale car washes can yield as much as $40,000 in profit each year while larger, luxury car washes can earn upwards of $500,000 in profit annually. 

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 the breakdown…

Let’s say, all in, the cost to operate your car wash is $2.75 in operating expenses. Maybe you originally want the base price for your lowest wash option to be $3 a wash. Seems like a great idea and low-cost point just to get people in the door, but 25 cents of profit per wash isn’t great.


Bummer…but watch this:

What happens if you decide to raise the cost of your base car wash by $1. $4 a wash? Sounds pretty good, and your customers probably won’t notice the difference in cost. They just want their car washed.

But simply raising the price of your wash, even though it was a really small change—only a dollar—gives you a $1.25 profit margin (and 500% increase).

Now imagine if you had a wash option that had all the bells and whistles that went for $10. You wouldn’t necessarily need to sell theSE all the time, every time, but the option is there. But even capturing a few washes at a higher price point has a huge impact on your margins, without adding in a lot of complexity to your operations. 

3. Your marketing budget is smaller than other ventures. 

Let’s be real…your customers aren’t searching far and wide to find a car wash they love. Most likely, they’re looking for a place that does a top-notch job, fits within their budget, and is close to where they live.

That means that your marketing and advertising budget likely doesn’t need to be very large like it would be for other industries. But what this does mean, is that 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 car wash is in a better location compared to the competition. Bad location? You’re sunk in the suds.

4. There are opportunities to franchise. 

This one is for my boring business moguls who are looking to streamline the assets in their portfolios. Another benefit of getting into the car wash game is that once you solve the overall operational model at one location, you’re better equipped for opportunities to franchise at other wash locations.

If you live near or are looking for business opportunities in a larger suburban area, this might be something to explore if you’re looking to acquire a few different car washes over time.

There are also plenty of opportunities within this business type to build on additional features, products, and services (think detailing, tire service, or even windshield repair) at a low operational cost to you.


But for all these pros, there are few cons to think about…

Weather is a big one. One bad month or a particularly rainy season could be the bitter end for your car wash which can have a major (and unpredictable!) impact on your quarterly and annual revenue if you’re not careful. 

One thing we’d recommend to help lower the risk associated with weather is to build in an unlimited subscription model for washes to create monthly recurring revenue in the business and act as weather insurance if you have a particularly wet season. 

Location is another big thing to think about if you’re interested in getting into car washes. This is the one factor you’ll have to weigh in on when buying that can’t be changed, so be smart here! 

You’ll want to look for a car wash location that is in a high-traffic area, ideally with easy access from a major road. If you can, you should also scope out the area for competitors and how close they are to your location.
 

Complex maintenance upkeep is also another thing to keep in mind if you’re seeing dollar signs while you’re driving by your local car wash. While this business is relatively simple to get started (especially if you’re buying a fully operational car wash that’s turnkey), there are many hidden costs, particularly in the maintenance category, to watch out for. 

If you’re operating a machine-operated car wash, these pieces of massive equipment can break, which sucks for two reasons. First, if your car wash needs to be repaired, it means your entire business will be shut down until it gets fixed. Yikes.  

And second, the costs to repair these machines can be extremely high and require special mechanics to get the job done. If you don’t have a savings fund or a lot of available cash-on-hand for the inevitable, yet occasional, maintenance issue, buying a car wash may not be for you.


Yours Unconventionally,

Codie Sanchez & Ryan Snow
Co-founders Unconventional Acquisitions


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