robert roman
Bob Roman
Although some folks believe carwash benchmarks are not representative of what is happening in the field, I find they can be useful.
For example, I find many self-service operators simply price at the going rate or some arbitrary method like it feels right.
However, this approach makes it difficult for the owner to prove to customers that value received is relative to the price paid. Unless this is achieved, adequate volume to sustain the business may not be maintained.
For example, cash-on-cash return for 5 + 1 has slid from typical 35 percent or more to under 20 percent.
To get back to 35 percent, average price, net site, would need to increase by 28 percent ($4.15 per car to $5.31). That’s like increasing wand price from $0.50 a minute to $0.63 and this is based on data from 2004.
Today, a profitable price for a 5 + 1 would be around $0.75 a minute.
By profitable price, I mean one that can sustain the business and relate to exit strategy – a way to get the money back out of the business that was originally put into building or buying it.
To establish a profitable price, the operator must identify material cost, labor and allowance for overhead per unit of service and desired profit.
For example, if average total cost per car is $3.08 and the operator anticipates net operating profit of 25 percent on sales, final price would be $4.12.
Price = total cost X (1.0 / 1.0 – net profit as % of sales)
Arguably, one of the reasons many self-service washes are not sustainable is operator’s unwillingness or inability to establish a profitable price.
For example, I find many self-service operators simply price at the going rate or some arbitrary method like it feels right.
However, this approach makes it difficult for the owner to prove to customers that value received is relative to the price paid. Unless this is achieved, adequate volume to sustain the business may not be maintained.
For example, cash-on-cash return for 5 + 1 has slid from typical 35 percent or more to under 20 percent.
To get back to 35 percent, average price, net site, would need to increase by 28 percent ($4.15 per car to $5.31). That’s like increasing wand price from $0.50 a minute to $0.63 and this is based on data from 2004.
Today, a profitable price for a 5 + 1 would be around $0.75 a minute.
By profitable price, I mean one that can sustain the business and relate to exit strategy – a way to get the money back out of the business that was originally put into building or buying it.
To establish a profitable price, the operator must identify material cost, labor and allowance for overhead per unit of service and desired profit.
For example, if average total cost per car is $3.08 and the operator anticipates net operating profit of 25 percent on sales, final price would be $4.12.
Price = total cost X (1.0 / 1.0 – net profit as % of sales)
Arguably, one of the reasons many self-service washes are not sustainable is operator’s unwillingness or inability to establish a profitable price.
