New Wash

[guitarandy]

I'm new to the industry and considering building a new 1 IBA & 4 SS. the location is on a heavily traveled road 23,000 cars per day at 35 MPH near Wal-Mart. The competition is light.
It looks like I can build the entire project for under $700,000 including the land. Any Ideas? The guys selling equipment say it is a good deal. But of course they are trying to sell equipment.

 

[washnvac]

I don't think you can do it for $700k, unless maybe the land cost is 10 bucks.

 

[Mitch]

Never underestimate that run down wash down the road. He may give up and sell it to a motivated operator or he could see you raking it in and decide he wants some of the pie and rehab his wash. If there is not another auto in the area, then you might consider a two bay automatic or a tunnel.

 

[I.B. Washincars]

I don't think you can do it for $700k, unless maybe the land cost is 10 bucks.

That was my first thought. I really don't think it can be done for 700K with free land.

 

[guitarandy]

I think that it will come in pretty close to that number. My main concern is can it produce enough return to service a 60% debt and provide some income.

 

[Waxman]

I did exactly whay you are asking about just a few years ago.

PM me and we can talk more in-depth about your budget location and concept.

 

[guitarandy]

Thanks for taking interest in my project Waxman. Like I said IF the numbers that the equipment people are giving me are correct I should be fine with the project. What do you think the ROI will be on this project? I am in a town of 14,000 the traffic count is 23,000, There are 2 small old self serves washes and 2 with 5 ss , 1 IBA. Niether of the automatics do a very good job.

I tried to PM you but the site wouldn't let me.

 

[Waxman]

sent you a PM. see if u get it.

 

[Greg Pack]

Is this a small town, or part of a metro area?

You need to look at all competition within a 15 minute drive, maybe even more.

Be careful comparing market/income data from other regions. Cold regions get snow/salt removal as big business in the winter.

 

[Greg Pack]

One other thing-

You may want to consider publicly posting the name of the distributor for possible feedback. Some of are questionable ethics in the best of times. But right now, there are some hungry, hungry sharks circling in the water.

 

[robert roman]

Here?s my take.

Small-town market of 14,000 and you are planning to build exactly the same type of carwash as the competition has. Other than ?newness? how are you going to differentiate your business?

Who are the major employers in the market?

Is the Wal-Mart a superstore that serves a large region or one of their smaller-sized stores that is designed to serve small communities? How close is ?close??

The typical cost to build a 5 + 1 is about $1.0 to $1.3 million including land

Figure gross net of about 55% to 60%

If you can?t gross over $200,000 with this site, I probably would consider another type of wash or another type of investment

 

[guitarandy]

Our difference is that we will clean the place up more than once per week as the competitors do, We will actually use hot water in the wash cycle (our closest competitor has had the gas meter pulled)

Major employers are refineries and chemical plants

There is a supermarket between Wal Mart and my site, and it is a small supercenter. With the traffic count at just over 23,000 in a town of 14,000 I would say that something is bringing in people from the country.

I don't know what it costs to build in other areas but the quotes with the equipment anc construction cost that I have and the 1 acre bought for 150,000 I will be at or under 700,000

What is Gross Net?

I am figuring around 180,000 Gross, 110,000 Net,

Within 10 miles there are 15 poorly operated self serve bays and 2 IBA's that are old and do a terrible job .

 

[Kevin James]

There is a very good reason that there are so many run down, poorly maintained car washes in your area. It?s called LOW PROFIT!!! If there was a decent return on there investment they wouldn?t be run down. What ever the distributors are telling you cut it in half, they are one business and that?s to sell equipment. If they tell you that your going to do 180K gross then figure on doing about 90K and anything above that a bonus. How much do you think you?ll be able to charge for your service? What do the other car washes in the area charge? You might be able to build it for 700K but I?d figure on more like 900K, cost over runs. How much are the sewer and water tap fees? Is the city asking for any road improvements in front of the car wash?

 

[guitarandy]

I don't know how to interpret the run down car washes, maybe you are right and they are all just barely getting by but then again if they can stay in business operating with very little input imagine what a properly managed car wash could do.

The numbers that I am getting are coming from others in the business as well as from the equipment vendors and they all say the same thing "if you just open it up and don't pay attention to the business it will perform poorly but with proper upkeep and marketing it will greatly increase the likelihood of success"
The other IBA car washes charge 6,7,8, I will probably be looking at 6,7,8,10.
I don't have the numbers from the water district on the connection fees yet.

 

[Red Baron]

I don't have a problem with your estimate to build; it's pretty close to what I was going to build a 4/1 for, and my land was higher than yours.

What might make me a tad nervous is what those run down competitors would do to retain market share if you build. My 3/1 is coming up on 5 years old and has washed a lot of cars, and thus, the IBA is getting a little ragged. I have been biding my time though until/if I hear a rumor of a new competitor in the area or my only competitor upgrading his IBA. If/when that happens I intend to enclose my outside bay, add a second IBA and new equipment in my existing IBA. This in an attempt to remain better and retain my customers. Those run down wash owners in your area might do the same...probably not, but factor that in.

 

[MEP001]

I don't have the numbers from the water district on the connection fees yet.

That can be a big number, and that's why some are telling you that you won't get it in for $700,000. Figure in at least 10% on top of what all your expected costs will be as well.

Small towns are hard to figure out. I've seen small town washes do extremely well and some that can't gross $2,000 a month. The biggest problem with rural is the messes customers will make. If you aren't attended, bays will get muddy fast, and people who actually want to drive a clen car won't want to drive through the mud. Figure in an attendant to your expected operating costs, whether you intend to hire one or not.

 

[robert roman]

Cleanliness and things like warm water washing are "expected" by customers and should be considered average or normal performance and not a differentiating factor. After all, if you come into the market, it would be relatively easy for competitors to match your strategy; clean up their sites and add warm water.

I'm guessing that you are located in Texas or Louisiana? What type of refiners and chems?

The value of commercial property is usually closely related to the relative strength of the retail market; cheap dirt often implies a cheap or weak retail market which tends to create downward pressure on price.

Perhaps this explains the poor condition of the competition; not enough margin to maintain standards.

Gross net = EBITDA

Instead of 61%, I would consider using 50% or 55% for planning purposes.

Do you have actual construction bids from a GC or just general estimates that come from an equipment distributor checklist and pro forma? If it is the latter, I would not have too much confidence in the numbers.

Based on your description of the competition and the other information you provided, I believe you still have a lot of homework to do.

If you were a veteran carwash owner, you would be in a better position to evaluate the opportunity and risks.

Since you are "new to the industry," my suggestion is to put the horse in front of the cart. This means first solving the location problem.

Is this site superior to competing sites in terms of proximity, visibility and accessibility to traffic, businesses and consumers? Will the site produce adequate sales?

If the market can support another wash, the next level of decision making involves store and services design. This means procuring civil and architect and developing a preliminary site plan that complies with planning and zoning.

The next step would be to prepare a feasibility study to validate the commercial viability of the project so you could try to obtain financing.

 

[Waxman]

That is all super advice!

I did my own feasibility study and it was a long, hard road. In the end I worked it out, but I had alot of help. Paying to have a study done by a neutral 3d party sounds smart.

Whether the answer is build or do not build, the study pays for itself!

 

[bigleo48]

Guitarandy,

The single most important thing you can ever do for your wash is a proper and thorough due diligence.

I built a wash a little bigger than you are proposing and I agree with all the posts so far...but are you willing to listen? So here goes my 2 cents;

First, when I researched mine I looked at it five different ways. I counted cars are competitors, took the sales info from the vendors, etc and it took me 2 years to pull the trigger. I had a few 'what if's' in there for good measure. My numbers checked out and I was going to make a mint, then two other competitors build and blew my numbers away. Fortunately I have the best location. So don't wear rose colored glasses when looking at this.

Second, 2 small old self serves washes and 2 with 5 ss , 1 IBA is not light competition in a small town of 14K pop. Depending on where you are exactly, that amount of competition would scare me away completely. Here's a what if...what if Wal-Mart builds a car wash...what will that do to your $700K?

Lastly, do you truly understand the business. It's 24/7/365 going concern. Do you have the technical aptitude and business acumen to pull it off? Look in the mirror when you answer that one, because it's anything but show up and collect the money. I have over 30 years in the technical world and I pride myself on being able to fix anything...my wife is an accountant and her skills are very much required. So it works for us. Still, it ain't easy.

All the best...BigLeo

 

[guitarandy]

Two new washes plus yours went in and you are still making a profit? I have to respect your business skills for that. Just think, if you would have went into it recklessly two years earlier you would have probably kept the two new washes out and been making that mint. I'm not advocating going into things blindly, "I'm just sayin"

14k is the population of the city, the area has 26000 within a 5 mile radius of the site, the traffic count on the street is 23740.

Yes I realize that running the operation is a full time job and the technical aspect of maintaining and repairing the equipment is something that I am comfortable with as well.

Thanks Big Leo!