Operating Expenses for EE

[steve569]

I know this has probably been discussed but what percentage of gross sales of an express exterior would a person expect to pay in operating expense? I know it would vary from one area to another but I am just interested in an average.

 

[Earl Weiss]

Right, tough one because things like utilities vary from area to area both due to utility providers and climate. Then there is the issue of solutions which can be double or triple depending on supplier.
Finaly, I would NEVER (unlike some) look at solutions as a % of TOTAL gross due to huge variations in extra service sales. For instance your base $3.00 wash may use 25 cents (8.35)in solutions. Your mid level $8.00 wash may use $1.25 (15.6%) and your $13.00 wash may use $2.75. (21%)
Your higher prices use a higher % but generate a lot more per car, so who cares.

 

[robert roman]

If the project is being benchmarked as in concept planning, then applying an operating expense ratio of between 45 percent and 50 percent against gross sales would be appropriate.

If pro forma financial projections are being prepared, then operating expenses need broken down into its component parts.

As Earl mentioned, variable unit cost (VUC) can vary greatly.

For example, benchmark VUC is $1.85 whereas I just finished a project where the client’s VUC was $1.86.

This operator is adding hot wax product. The product has cost of goods of $1.00. So, VUC would be $2.86 for each service sold.

Conversely, if unlimited washing is planned, then sales volumes need broken down into its component parts.

For example unlimited subscribers typically wash between 4 and 5 times a month whereas the average customer might visit once a month.

Hope this helps.

 

[steve569]

Thanks for your replies

 

[jtownathan]

If the project is being benchmarked as in concept planning, then applying an operating expense ratio of between 45 percent and 50 percent against gross sales would be appropriate.

I hope you're still on this site. I have been following your responses and have found you to be one of the most numbers based individuals out there.

Does the 45-50 percent estimate cover fixed and variable expenses? I realize a proforma would give a more accurate picture with real numbers, but I received a proforma that listed $34,623.65 per month in fixed costs alone. I may be completely naive, but that seems astronomically high.

 

[MEP001]

I hope you're still on this site.

He was banned years ago.

 

[MC3033]

Does the 45-50 percent estimate cover fixed and variable expenses? I realize a proforma would give a more accurate picture with real numbers, but I received a proforma that listed $34,623.65 per month in fixed costs alone. I may be completely naive, but that seems astronomically high.

it really depends what is considered fixed vs variable. In car washes almost anything can be variable. It also depends if this is EBITDA or cash flow. Lastly, what is the volume for the month of $34k fixed expenses? My guess utilities are counted as a fixed expense in the $34k which would make sense of the number

40-50% is good but you can be successful at a much lower number. It just depends what your goals are (ie volume approach vs ticket average approach) and what kind of business you are (ie. Do the minimum or wow all your customers).

 

[jtownathan]

it really depends what is considered fixed vs variable. In car washes almost anything can be variable. It also depends if this is EBITDA or cash flow. Lastly, what is the volume for the month of $34k fixed expenses? My guess utilities are counted as a fixed expense in the $34k which would make sense of the number

40-50% is good but you can be successful at a much lower number. It just depends what your goals are (ie volume approach vs ticket average approach) and what kind of business you are (ie. Do the minimum or wow all your customers).

54,241 was the annual volume given, but they have included some unlimited wash members in there.

They actually list utilities, damages, and credit card processing fees set as variable expenses. I don't love the proforma, honestly. Especially as it shows I'll lose 30k in my first yearI don't need a rocket scientist to tell me my site is not the traditional home run type site. I just need some realistic numbers I can count on.

I understand that even a fixed expense could be considered variable when you look at it as a percentage of your revenue, but what I'm attempting to do is work backwards and trying to determine what the typical fixed costs of an express exterior wash tunnel are to determine how many cars I'd have to wash to cover those expenses. I'm fairly confident in cost of utilities and cogs just based off what I've read. But the list of fixed costs seem to vary wildly depending on the area and the type of operation you are running.