Are my memberships profitable

[Car Wash Brothers]

How do I know my memberships are profitable. I am using the Hamilton HTK and DAN. Currently this month we have collect about $5k in revenue from our memberships but shows that we washed $13k worth of memberships. How do I know this is profitable or not?

Thanks in advance!

 

[Keno]

You have to know the cost of your washes to see if you're profitable

 

[Car Wash Brothers]

You have to know the cost of your washes to see if you're profitable

What are my factors to evaluate? obvious is chemical. But what about electric, gas and water utilities?

 

[Keno]

All of that plus maintenance costs and cost to run your memberships

 

[Car Wash Brothers]

All of that plus maintenance costs and cost to run your memberships

I know how much revenue I need to bring in monthly to break even. It includes all of that plus my mortgage and payroll. I have 5 people on payroll. Once I get these numbers what number do I divide my overhead by to calculate my cost per vehicle?

 

[Car_Wash_Guy]

All of that plus maintenance costs and cost to run your memberships

Yes and no. He’ll have fixed and variable costs on all of it

 

[Earl Weiss]

What are my factors to evaluate? obvious is chemical. But what about electric, gas and water utilities?

You have a certain Base cost for Utilities like Electric and Gas. If you have a bill from when you were closed for an extended period you can use that. Also- you may use little gas in summer months so that could be a base cost. You also need to factor Maintenance / repairs . You could check a few months where you washed X# cars and others where you washed X+and see the difference for the "+" Somethings like maintenance / repairs and cleaning solutions don't track on a monthly basis so you may need to see what you spend on this annually and divide by # of washes to get a better idea. Fixed costs like, mortgage . real estate taxes, Scavenger, legal, insurance don't factor in to it.

 

[Axxlrod]

Memberships aren't profitable for smaller/low volume washes as only your best customers will become members and wash very frequently. Those are the customers who would have come anyway and spent more money at your business.

IMO, memberships aren't profitable unless you get to about 1000+ members minimum.

 

[JLanman]

Sorry late to the party here. The numbers to watch to determine your membership performance vs. full price customer is your average washes per month /member vs. your price multiple. So if you are prices at 2.5X your full price wash and your are running at 2.5 washes per month per member then you are sitting very nice as you are basically getting full price for all your washes. Not sure I agree with Axxlrod that you have to have 1k members to be successful. Obviously the higher the members, the more likely you are to have more of the low users vs the heavy users. More low users = lower washes/month/member and draws you closer to your price multiple.

Let's assume your single wash avg price is $10. Then $13k would be 1300 washes. If you are priced at 2.5x ($25/month/member), then the $5k collected would put your member count at roughly 200 members. This would put you at a 6.5x. Rough number for a membership. The gap from 2.5x price point to the 6.5 actual is the lost revenue. If we assume your variable cost is 30% (just for the example). Then for every $10 wash you making $7. The math says for 1300 washes you should have made $9,100, yet you made $5k from the members. The gotcha is the idea that you would have washed 1300 washes at full price without the members....

Totally agree, you should be tracking your variable spend vs washes to get an estimated profit per wash. The other metric that is important is LTV/customer. LTV is Life Time Value. Won't give a class, but basically how do you make every customer more valuable to your business. If you can get a person to pay full price and get them to wash 4 x per month, then you have a winning situation and you should look to find as many of those customers as you can. The reality is that consumers are getting much more comfortable with options, which is directly impacting their loyalty to businesses. This is what is driving the membership boom. LOYALTY. What is loyalty worth?

More quick math. If a nonmember customer washes 13x per year, then at $10 per wash that customer is worth $130 to your business annually (IF they use your wash for all 13 washes).
However; if you look at it from the membership lense, then a member is worth $300 ($25/month x12) per year - that is 131% increase in annual revenue per customer. From a cost stand point, at $3/per wash variable cost (30% of wash from the example above), then a nonmember would cost you $39 so they are worth $91 profit each year. While a member washing 4x per month is costing $144 annually, putting them at $156 profit per year. In this scenario, members are more profitable. However; if your members are washing 6.5x per month, then they become less valuable than a nonmember. It's all about the multiple. As Axxlrod stated, the more members the better and will likely draw your usage per month per member closer to your price multiple.

Unless you have a CRM tracking your nonmembers, it would very difficult to know how often each of your nonmember customers are washing at your wash. This is one of the big advantages to the membership approach. When you get a customer on a membership then they are using your wash for all their washing needs. If you are relying on just your swipers or paystations and do not have some loyalty program or CRM to track usage or something drawing them back then you are leaving it to chance that they will 1. even use your wash and 2. use your wash for all their washes.

 

[Zal]

I would suggest you look at the whole year and not one busy month. The idea with membership is to keep them coming all year long. If you structure properly, then your profit will rise just like it rises with any investment. I will invest $10,000 if my profit rises $30,000. So a little less dollars per wash during busy months for the security of a lot more at year end. We all have a point where it makes sense. That may be different for each of us.

 

[SSadmiral]

G

 

[Southwest MI Carwash]

Hello all. I followed similar threads before I took the plunge and migrated from the Htk to Dencar for memberships. Couple lessons to share.

1.) Pricing is everything- not just pricing but presentation. I went from 4 washes 9, 12, 14, 16 to 3 wash options 10, 13, 16 and added $1 to all buyups so from 2-3.

2.) Talk to the experts- Jason at Car wash consultants was invaluable. Assured me we would be around 3.2 washes per month per member….1 year and 250 members later we are at 3.2 washes per member. Jason assured me we would see spike in bay business….we have seen a spike in bay business.

3.). Walk before you run- we let the Dencar do its thing for about 11 months. The only promo we did was a $10 first month promo top wash only. This does add to the churn but we are adding every month with mega wash options less than 5 miles away. We just added a marketing platform to push promos on social media, etc and now it’s taking off. My goal is to hit 300 cars, switch to marketing existing clients to add cars , wait until January add $5 to each membership and chill.

4.) Customer Communication- Shits gonna break and not work right; gotta have a plan to communicate to the members. We’ve found with the right heads up (break down, weather , etc ) they get it and are understanding. If they’re not , there’s plenty of options down the road they’re welcome to bitch to.

I did not want to go this route initially. I believe 100% this is the future and the longer you wait the greater disadvantage you’re gonna find yourself in. Price right, trust the experts and communicate with your customers and you won’t be disappointed.

 

[Southwest MI Carwash]

Sorry late to the party here. The numbers to watch to determine your membership performance vs. full price customer is your average washes per month /member vs. your price multiple. So if you are prices at 2.5X your full price wash and your are running at 2.5 washes per month per member then you are sitting very nice as you are basically getting full price for all your washes. Not sure I agree with Axxlrod that you have to have 1k members to be successful. Obviously the higher the members, the more likely you are to have more of the low users vs the heavy users. More low users = lower washes/month/member and draws you closer to your price multiple.

Let's assume your single wash avg price is $10. Then $13k would be 1300 washes. If you are priced at 2.5x ($25/month/member), then the $5k collected would put your member count at roughly 200 members. This would put you at a 6.5x. Rough number for a membership. The gap from 2.5x price point to the 6.5 actual is the lost revenue. If we assume your variable cost is 30% (just for the example). Then for every $10 wash you making $7. The math says for 1300 washes you should have made $9,100, yet you made $5k from the members. The gotcha is the idea that you would have washed 1300 washes at full price without the members....

Totally agree, you should be tracking your variable spend vs washes to get an estimated profit per wash. The other metric that is important is LTV/customer. LTV is Life Time Value. Won't give a class, but basically how do you make every customer more valuable to your business. If you can get a person to pay full price and get them to wash 4 x per month, then you have a winning situation and you should look to find as many of those customers as you can. The reality is that consumers are getting much more comfortable with options, which is directly impacting their loyalty to businesses. This is what is driving the membership boom. LOYALTY. What is loyalty worth?

More quick math. If a nonmember customer washes 13x per year, then at $10 per wash that customer is worth $130 to your business annually (IF they use your wash for all 13 washes).
However; if you look at it from the membership lense, then a member is worth $300 ($25/month x12) per year - that is 131% increase in annual revenue per customer. From a cost stand point, at $3/per wash variable cost (30% of wash from the example above), then a nonmember would cost you $39 so they are worth $91 profit each year. While a member washing 4x per month is costing $144 annually, putting them at $156 profit per year. In this scenario, members are more profitable. However; if your members are washing 6.5x per month, then they become less valuable than a nonmember. It's all about the multiple. As Axxlrod stated, the more members the better and will likely draw your usage per month per member closer to your price multiple.

Unless you have a CRM tracking your nonmembers, it would very difficult to know how often each of your nonmember customers are washing at your wash. This is one of the big advantages to the membership approach. When you get a customer on a membership then they are using your wash for all their washing needs. If you are relying on just your swipers or paystations and do not have some loyalty program or CRM to track usage or something drawing them back then you are leaving it to chance that they will 1. even use your wash and 2. use your wash for all their washes.

So prior to doing memberships we reached out to Hamilton and got a list of all customers using wash. Throw out your cash customers and focus on your credit cards…we were 80/20 so we had the law of large numbers on our wide.

Next, we exported into excel and sorted by last 4 of card number. Not perfect but assumption is people pay with the same card for daily expenditures like car washes, gas, groceries. Not perfect but workable.

The data extracted gave me the comfort to take the plunge. 250 members give ir take, the Dencar offers like 15 washes a month unless you change it and I may have 2 that come more than 6x a month, average is 3.2 over 12 months. In my opinion way better than offering bundles at a 25% discount because they’re buying one every month and using 3.2 washes for the price of 2.8.