New to the Industry.....Investor Question

[Dalefc4]

I am hoping to get some really good leads on how to go about getting investors. Let me give a little background about where we are at in the process. My brother and I have spent well over 2 years planning, preparing, researching, and putting together our business plan to open a car wash. We have done all the research (demographics, land and site plans/drawings, traffic studies, supplier research, equipment and options....basically everything). We put together our business plan and presented it to our bank which we have been doing business with for years. They really liked it.

Our proposed location is a heavily traveled state route ~12,000 cars per day in front of the location and within a half mile are two major state highways with ~65,000 cars per day each and around ~22,000 cars per day at the exit to our location. Market is poorly served currently with only 2 gas station car washes, Sheetz and Rutters, both of which are poorly maintained. The location sits in front of a residential community with 370+ homes, and is right between 2 red lights so easy entry/exit. There is shopping center next door and a proposed 84 guest room hotel on the other side. A college is just down the road also a military establishment is very close. The road has a 40mph speed limit but is usually traffic logged so average speed is 20-40mph so it wouldn't be out of people's way to stop in for a wash.

The bank is ready to move forward in the process of getting the loan once we can show that we have $106k of equity (10%) available to invest. I have looked into venture capital and for $100k most are not interested as they are looking to get into $1m plus of investment. Does anyone know any investors that are interested in investing in the car wash industry? Is anyone on here an investor? The bank said getting a current car wash owner to sign on would be very good as they have experience in the industry. The equipment is an Autec EV-1 Combination wash system.

Thanks!!

 

[Whale of a Wash]

I looked up the autec ev1 and it looks like a touchfree brush combo-you should be able to put up a wash for half the money if thats all you want. Not sure if people would stop at a single IBA, you might need more of a draw.
Next be careful of investors- I know 100K is alot of money for you to come up with, but people who have washes may take your idea and run with it, without you. Be careful -relatives and money and other investors don't always mix well, and someone may take all the money and clean you out. There are more ways for you you to get screwed by extra investors than to make money.
Then it's also the time commitment--If you are working alot at your current jobs- can you or will you each commit to an extra 20hrs a week for each of you to make it successful, like giving up days off, or holidays and weekends to work at the wash. A business is not like having a job- it's more like having a baby -- 24/7 commitment.

 

[robert roman]

If you have convinced a bank to lend you the money for a start-up and you have no relevant carwash experience, consider this a victory.

As for bootstrapping the cash/equity to support external funding, you will need to demonstrate to the bank the cash does not come from, say, credit card debt.

You are right. Venture capitalists would not be interested in this project. So, your best shot is angel investors.

Angels are individuals with enough cash to take the risk of providing smaller amounts of funds for business expansion or start-up.

Angels can include friends, family members, relatives, small business owners and other people you may know that are affluent.

An astute angel will expect you to have your act together. This requires a convincing argument in a concise manner.

This means distilling your 25 or 50 page business plan down into a one or two page long presentation.

Such proposals emphasize the investment opportunity, business model, funding and use of proceeds, schedule of returns and exit strategy.

Plus, you will need to demonstrate to angels that you have the necessary experience and skills to deliver on the business plan.

Hope this helps.

 

[Dalefc4]

Thanks to both of you for the quick responses. I will look into the angel investors and see what I come up with. We already have a 2 page concise investor letter prepared. In terms of someone stealing our idea, I have given lots of thought to that. I didn't post out exact location on here for that reason. We are also not going to share location details with anyone not willing to sign a non compete agreement which my Lawyer cousin recommended. We are both willing to out in the extra hours so that isn't a problem. The best part is we live in the community behind the car wash so easy access is a plus. I am very busy during tax season but only work 40-45 the rest of the year. My brother is limited to 40 by federal regulation so he has time. We are both willing to use our paid vacation time, 3 weeks each, to be at the wash in addition to evenings. We have family near by that would are also willing to assist if the need would arise. As far as the equipment goes, the traffic would not support a dual in bay so a single is more appropriate. Most of the cost of this project is the land at over $600k cause it is golden and the owner knows it. The rest of the project will only be $550k. Most of the washes near us are single in bays and the ones that have hand bays just don't see the business at the hand bays. Handbags are also fairly useless from November to March in this region so almost half the year. Thanks again for all the advice.

 

[Washmee]

A single IBA on a $600k property makes no sense.

 

[Dalefc4]

The lot is definitely suitable for a dual bay set up but we want to make sure that we don't build more than traffic flow will make use of. Maybe a single in bay and 2 handbays even though I don't find them to have great ROI. Thoughts?

 

[Washmee]

What is the total population in the immediate area?

 

[Dalefc4]

Traffic flow: 12,000 in front of location
22,000 with in half mile
65,000 on the highways 1 mile away

Population: 2011: 28,500 within 3 miles
46,550 within 5 miles
123,671 within 10 miles

Households: 2011: 11,423 within 3 miles
18,865 within 5 miles
50,199 within 10 miles

Income per Household: 2011: 62,777 within 3 miles
72,168 within 5 miles
80,069 within 10 miles

 

[mjc3333]

600k for land for a car wash will never work for an in bay auto / autos etc.

Maybe an Express Exterior / Full service tunnel.

An In Bay auto can ONLY wash so many cars per hour (maybe 10 - 12 max per hour per in bay). You can only charge so much $ per car average. You may make enough $ during the "best" winter (salt all the time, sunny every weekend etc.) During the "off" season late summer and the entire fall season, you will choke let alone a "bad" winter season like last year in PA.

By the time you buy the land, prep the land, buy the equipment, install the equipment + + +, you are looking at well over $1 million + depending on how many In bay's you have the room to install.

Angel investors will not make a return on their investments. You will need a more diverse site to justify 600K for the land.

This is why most new developments in the retail area are big box stores and banks…..

 

[rph9168]

Without really seeing the site or taking a closer look at what is available in the area, this sounds like it might be better served with a mini tunnel. It might cost slightly more than you have planned but it would easily accommodate growth without an additional investment in the future. It would cut down on hours of operation but from what you describe you will have a hard time covering the wash full time anyway. It would also serve to differentiate yourself from the two existing automatics.

From what you said I am not totally convinced this is as no-brainer a situation as you paint it. Being close to an interstate means almost nothing. Very few people pull off a highway for a car wash. The same goes for the hotel. The military base could be a plus but a college close by isn't that big a help as you might think. People living in apartments or condos tend to be better potential customers than homeowners. The bigger assets for a good site are residential traffic, good visibility and easy entrance and exit.

The fact that their are two poorly maintained washes could be a telling factor. Both those companies you mentioned are successful and profitable car wash companies in most areas where they operate. In some cases their standards slip because the wash is a loser. This may or may not be the case but it bears consideration.

I am not trying to rain on your parade but I think you really need to examine this situation even more carefully and maybe even hire an independent consultant to further review your plans. The fact that you have a consultant might also help attract investors.

 

[Waxman]

Idea won't work

Land is far too expensive for this type wash.

#'s won't pencil out. You'll never wash enough cars to make the note and expenses.

You haven't any experience.

I investors of ANY sort are a BAD idea (trust me because I know).

This project is a no-go.

Sometimes the best answer for a newly proposed project is a 'no'.

 

[tobaccofarmer]

What Bank is only requiring 10% down? Also a single automatic, and I dont care what kind it is, dont care friction or touchfree is never going to work at a million plus dollar total project cost. As a previous post mentioned you can only wash 10-12 cars an hour tops which limits the max potential for site. I can't imagine how many No wash days you would have with weather like PA? you can never catch up from the bad days with such a low production on the good days. Bottom line with weather like PA, with a price tag that high, with no experience, and even more importantly having to borrow the 10% down, which In my opinion is unheard of. Here 20 down normally, are all huge red flags which seriously could save you a huge nightmare from ever thinking of going any further with this project. Just curious though what did you plug into proforma as far as cars washed per day and cost per car? how much is water/electric in PA?

 

[Buzzie8]

It sounds like you have done all your homework, but just as many have mentioned here, $600k for land is a absolute deal killer because a car wash is probably not it's best use. 12,000 cars a day is on the low side of traffic too (most food franchises would find 12,000 cars a day only marginal, if that). My wash has 14,000 a day, is directly across from a McDonald's and I didn't pay anywhere near $600k.

 

[Dalefc4]

The bank is going through an SBA 504 program and it requires 10% equity from the owner. We are looking into several other sites. We may end up with a dual bay set up or single with hand bays. I agree the land cost is ridiculous so we will continue to shop. They have had terrible luck selling the other plots so they are likely way over priced.

 

[robert roman]

This has to be a joke.

You first said you had a business plan but needed help finding investors.

I suggested a venture proposal and you said you have one.

Someone suggested your numbers don’t make sense and you said a dual in-bay that could, can’t.

On this basis, I wouldn’t lend you a dime.

 

[mjc3333]

Most of the washes near us are single in bays and the ones that have hand bays just don't see the business at the hand bays. Handbags are also fairly useless from November to March in this region so almost half the year. Thanks again for all the advice.

You obviously do NOT know what you are talking about. Hand bays (Self Service Bays) are useless from November to March???? The winter months in PA are the BUSIEST the whole season! Trust me I know being in PA in the car wash business for the past 23 years.

The winter months of Jan Feb and Mar are the busiest for ALL types of washes SS, In Bay Autos, EE, Mini tunnel, Full Service, etc. etc. etc. !!

This has to be a joke.

You first said you had a business plan but needed help finding investors.

I suggested a venture proposal and you said you have one.

Someone suggested your numbers don’t make sense and you said a dual in-bay that could, can’t.

On this basis, I wouldn’t lend you a dime.

That's putting it lightly.

 

[Dalefc4]

This has to be a joke.

You first said you had a business plan but needed help finding investors.

I suggested a venture proposal and you said you have one.

Someone suggested your numbers don’t make sense and you said a dual in-bay that could, can’t.

On this basis, I wouldn’t lend you a dime.

How rude Mr. Roman! First if all we do have a business plan and we are in the preliminary stages. We are simply trying to ascertain what the best setup would be. We have gotten a lot of suggestions and based on what we have been told about the land I am not sure it is the best site for a car wash. The bank has given us the freedom to make necessary modifications to our business plan and we will. I will not waste my time entertaining or arguing with you. We want to take all advice into consideration. Our lot is big enough for a dual bay with hand bays but I really want to avoid hand bays. I would like a single in bay or at most a dual in bay. I do not want a tunnel because they are too labor intensive and I don't want to screw around with employees and Obama care.

 

[Dalefc4]

You obviously do NOT know what you are talking about. Hand bays (Self Service Bays) are useless from November to March???? The winter months in PA are the BUSIEST the whole season! Trust me I know being in PA in the car wash business for the past 23 years.

The winter months of Jan Feb and Mar are the busiest for ALL types of washes SS, In Bay Autos, EE, Mini tunnel, Full Service, etc. etc. etc. !!



That's putting it lightly.

So many nay Sayers. I don't want to mess with handbays. When Tom Hobby the CEO of Autec who is way more successful than both of the nay Sayers is telling me hand bays don't return as much as automatics, I listen. We have two car washes about 5 miles away with handbays and they sit empty even during the winter. If you are a nay sayer I am not in need of your negativity.

 

[Buzzie8]

So many nay Sayers. I don't want to mess with handbays. When Tom Hobby the CEO of Autec who is way more successful than both of the nay Sayers is telling me hand bays don't return as much as automatics, I listen. We have two car washes about 5 miles away with handbays and they sit empty even during the winter. If you are a nay sayer I am not in need of your negativity.

The negativity will save you a bunch of money and time. You better listen to some of what you hear from of the guys who have been in the business for a while or you will regret it for a long time.

Tom, from Autec is correct auto bay returns are much higher than hand wash bays, but hand wash bays are the busiest from November to May. I have two washes in PA also and I can tell you I hate the summer months when it comes to making money at the washes. The main reason for you to consider putting hand bays in at all is because it makes the wash more of a destination point than an impulse buy. The winter months are key to this business in PA in all the bays. My self serve bays are three deep waiting after the salt flies and there is a warm up.

 

[Dalefc4]

The negativity will save you a bunch of money and time. You better listen to some of what you hear from of the guys who have been in the business for a while or you will regret it for a long time.

Tom, from Autec is correct auto bay returns are much higher than hand wash bays, but hand wash bays are the busiest from November to May. I have two washes in PA also and I can tell you I hate the summer months when it comes to making money at the washes. The main reason for you to consider putting hand bays in at all is because it makes the wash more of a destination point than an impulse buy. The winter months are key to this business in PA in all the bays. My self serve bays are three deep waiting after the salt flies and there is a warm up.

Thank you Buzzie8!

Finally someone that posts positive advice. I am heeding the advice from even the ney sayers and considering other land sites. The seller is asking nearly $637k for 1.367 acres and based on what I have heard, that is not worth it. We are open to considering hand bays but in an ever changing world, how many people really care enough to get out and spend 15 minutes hand washing there cars? I do, but I consider myself to be the exception rather than the normal. I love cars and I really love clean cars! What Tom told us is this:

"Get a single in bay or dual in bay automatic and nothing else. Get them in and out before they break something." I tend to think that is pretty good advice. A single Autec EV1 similar to the one in front of the Autec factory can wash 300 to 315 cars per day if you keep standalone options over on board options. The one at Autec averaged over 200 cars per day every day this last week with the exception of Wednesday when it rained. Perhaps we will redo our business plan to figure on a single in bay, two handbays, and two or four vacuums? What do you think Buzzie8?