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How to Buy a Car Wash

If your entrepreneurial ambition is running a car wash business – aka ‘cleaning up the city, one car at a time’ - then here is our guide to the key stages of buying a car wash.

The car wash industry is highly fragmented industry. However, for an individual owner, that’s not necessarily a bad thing. A smart, well-planned operation still has every chance of doing well.

Sector overview

The car wash industry undertakes the cleaning, washing, and waxing of automotive vehicles. And in addition to removing road dirt from cars, commercial trucks, vans and trailers, the sector also includes car wash establishments which offer self-service facilities.

According to IBISWorld, the Canadian car wash sector employs 8,593 people nationwide across 3,218 businesses, and earns a current revenue of $465m. Experience has shown that car-wash trends are closely linked to new car sales. So, with automobile investment strong enough to support motor vehicle registrations growing at an annual rate of 2.1% (2011-2016), the business outlook appears promising.

In terms of the spread and diversity of services available, around 25-30% of car washes in Canada are self-service, and approximately 50% are run as conventional roll-over washes with in-bay automatic facilities.

Research

Though some sector entrants may be seeking a franchise deal, or looking to start a brand-new business in a fresh location, the majority of aspiring business owners will be looking to buy an already established business. The advantage here is that the business metrics will be based on real performance figures rather than projections. This means that instead of gambling on a start-up you will have a clearer idea of what revenue you will produce as a return on your investment.

Whilst taking over the reins of an up-and-running business can be reassuring, it is essential to employ an industry-savvy professional team to perform due diligence on your behalf. This will not only verify the seller’s trading figures and financial statements on which your own plans may rely, but also help you to form an opinion about whether the business valuation and list price is realistic.

Choosing your location / premises

A highly visible site which also creates a good first impression is a distinct advantage in regards to attracting business. This also implies a well-equipped installation which is in good repair, and which has been thoughtfully designed to allow customers to conveniently access the site and negotiate the wash facilities with ease.

Even the most ultra-modern car wash won’t do much business unless it is sited in a neighbourhood with sufficient population and traffic density to generate a steady demand for your services. And remember too that even heavy passing traffic may not be much good for business if it is always travelling at high speed.

As with any business venture, it is also vital to know where your rivals are located, what they offer, and at what price. This is, of course, mostly a matter of doing your homework, but the exercise may also open your eyes to some opportunities you may not have considered.

Licences and permissions

Your car wash venture will require a range of licences and permissions. For instance, you are likely to need permission for the large volumes of water you will need, and will certainly have to comply with regulations governing the disposal of waste liquids and chemicals.

You must also register your business with the appropriate authority and comply with tax legislation. If you plan to hire employees, there will also be further employment regulations governing your activities and insurance requirements to fulfil.

Some legal compliances, such as signage and parking rights, as well as permissions for any premise alterations you envisage, may be subject to local and/or zonal restrictions.

Financing your purchase

Funding your business may take the form of a bank loan, a merchant cash advance, or in certain circumstances the seller may even offer funding as part of the deal. Whichever funding route you follow you will need professional advice, a thoroughly researched business plan to support your projections, and a substantial cash deposit from your own resources.

Is it right for you?

The car wash industry tends to be fairly seasonal with heavy wash volumes in the first quarter of each year. In addition, there is always more to do than just collecting money from customers. You may have to train staff, maintain and repair equipment, and even placate an angry driver or two. And that’s before you think about advertising and promotion, ordering supplies, working out whether moving into valeting is a good move, and much more besides.



Sophie Mitchell

About the author

Sophie writes for all titles in the Dynamis stable including BusinessesForSale.com, FranchiseSales.com and PropertySales.com as well as other industry publications.

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