How to Start a Car Wash
Unlike many retail businesses that require inventory management and supervision during operational hours, coin-operated car washes function a little bit differently, making them an appealing business venture for many entrepreneurs. Because customers do most of the washing in a coin-operated car wash, these facilities don’t require the staff that retail businesses need. If you’re talented in working with machinery and fixing things, opening a car wash might be a profitable business venture that you’ll enjoy.
Car washes provide drivers with vehicle washing services that are both necessary and convenient. Regularly washing vehicles help protect their paint and reduce the harmful effects of road salt during the winters. For drivers who live in apartments or other settings without the ability to wash their cars at home themselves, car washes are a must. Drivers who live in settings where they have access to a hose and can wash their vehicles in their driveway may still use car washes because of their convenience and efficiency.
There are several car washes types to choose from. To start with there is the touchless car wash, where a conveyor system pulls a vehicle through the automated car wash or tunnel system. Next is the self service car wash that requires the driver to use a coin-operated pressure washer to clean the vehicle. Some full-service car washes exist where attendants are present to hand wash the vehicles. Last, some businesses have a mobile car wash operation to bring the car wash to the owner.
For the purpose of this guide, we’ll focus on self-serve coin-operated car washes.
The car wash industry has been enjoying increased profits and success lately. According to IBIS World, the industry experienced 3.9 percent annual growth from 2013 through 2018, and during that time, the number of car washes increased to 67,382 businesses. Industry employment also grew to total 219,894, and in 2018 the car wash industry’s revenue totaled $12 billion.
This industry growth correlates with the reduced unemployment rate in the country and the increase in disposable income. Drops in oil prices also caused more vehicle owners to use their vehicles more often, and with that increased use came an increased demand for car wash services.
Because washing a car is seen as a discretionary service, the demand for car wash services is closely linked to the economy, employment rate, and disposable income. Rising gas prices also tend to reduce the amount of driving that people do, so even though the economy may be thriving, if gas prices increase, they can drive down the use of car washes.
Car washes use a significant amount of water, and 38 gallons of water are used to wash a single car, on average. Each day, 304,000,000 gallons of water are used to wash about 8 million vehicles all over the world. This high degree of water consumption, paired with the increased awareness of the importance of eco-friendly practices, means that there’s a demand for eco-friendly and water-saving car washes throughout the country.
Most car washes target drivers and vehicle owners. In many cases, a car wash’s target market is local drivers who will return to the car wash repeatedly. Loyalty programs and discounts for repeat customers can help to encourage this kind of loyalty.
Checklist for Starting a Car Wash
If you’re thinking about starting your own car wash, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a car wash, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Name the Business
Finding the perfect name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Related: Tips and ideas for naming a car wash
Step 4: Select your Location
Finding a high-traffic location is important to the success of a car wash business. It can be a time-consuming process to get city approval for a car wash in many areas, so work with a local commercial real estate agent to discuss any challenges before contacting the city planner. A good location will be one that is easily accessible, in a safe neighborhood, and visible from a high-traffic street.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A car wash owner must obtain specific licenses and permits before opening the business. These licenses and permits can vary from state to state and even from county to county.
For instance, California requires all businesses that offer car washing and polishing in the state to register with the California Department of Industrial Relations.
Your local government may have additional requirements regarding wastewater and facility specifications and locations, so look into all of these details ahead of time before you start building.
Also, there are some common local, state, and federal registrations such as a sales tax permit, Employer Identification Number, and Occupancy Permit, among others.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a car wash is another. Funding to start a car wash business can be difficult due to the high initial investment of real estate and equipment. The borrower(s) will need to have good credit and invest 15-25% of their money towards the total start-up costs to get a loan. A loan guarantee from the Small Business Administration (SBA) will be needed to secure a loan in some cases.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
Marketing is essential for a car wash, especially in the startup phase. Common marketing activities include print advertising, flyers, direct mail, online advertising through social media platforms like Facebook, and more. Establishing a loyalty program can encourage return customers, and partnerships with local businesses in the community may also be an effective way of encouraging new customers to visit.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a car wash business. A few of these include:
– Commercial liability insurance covers expenses if a customer is ever injured while at the car wash or if a customer’s car is damaged.
– Commercial property insurance covers the cost of car wash equipment damaged by a careless driver, storm, fire, or other events.
– Workers’ comp insurance is necessary if a car wash employs any staff and covers lost wages or medical bills if an employee is ever injured while on the job.
The cost to insure a car wash will vary according to deductibles, policy limits, and even the car wash facility’s location and value. To get a more accurate idea of insurance costs, contact several different companies, and compare the policies closely to determine the best option for a car wash.
Step 10: Hire Employees
While customers do the actual washing at a coin-operated car wash, the car wash will still need staff to monitor the machines, make repairs or troubleshoot issues, and keep the facility itself clean. According to PayScale, car wash attendants make an average of $10.01 per hour.
In addition to salaries, other expenses that come with employing staff include paid time off, workers comp insurance, and unemployment contributions.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your car wash is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a car wash?
Unlike many other businesses, where you can rent or lease an existing property, car washes require you to purchase land and build the unique facility that they require. Because of this, the costs of starting a car wash can be high. Expect to spend about $80,000 on the cost of land and constructing the car wash. Each bay of a self-serve car wash can cost between $8,000 and $10,000.
Some common startup costs for a car wash include:
– Car wash bays and washing equipment
– Vacuum units
– Car wash soap
– Utility Bills
A large part of owning a car wash is identifying and fixing malfunctioning equipment. By investing money in quality equipment initially, you’ll be more likely to be able to use that equipment for years and years to come. It’s also important to get to know the equipment so that you can quickly identify issues. If you’re familiar with “trouble areas” that are likely to break, you can provide appropriate maintenance and monitoring to avoid costly repairs.
The startup costs of operating a car wash can be significant, but this type of business also offers many benefits. Car wash use is fairly stable throughout the year, and once a business develops a base of returning customers, profits and wash numbers can increase. The business is relatively low-maintenance compared with the scheduling commitment required of a retail store, and car washes have only minimal inventory to track and manage. By strategically identifying a location in a community that needs a car wash, and by getting creative with marketing efforts, you can increase the chances of your car wash being a success.
How much can a car wash owner make?
According to Focused Car Wash, wand- or coin-operated car washes average $1,489 in monthly revenue for each bay. An average two-bay operation brings in approximately $41,000 in annual revenue, and each bay is in use for about 10 percent of the time. With effective marketing and a great location, these profits could be higher.
In addition to the startup costs, be prepared for significant electrical and water bills. Plan to budget 38 gallons of water per car washed and electric costs of between $0.50 and $1.00 per car. Car washes that use natural gas to heat the water spend about $0.12 per car. Implementing a water reclamation system can help to minimize water usage and keep bills down. However, the exact utility expenses will depend on utility costs in your area, as well as your specific usage amounts.
What skills are needed to run a car wash?
Starting a car wash doesn’t require a business degree, but certain skills and experience can make the process easier and increase your chances of success.
Attention to detail. Monitoring the performance of equipment is a large aspect of owning a coin-operated car wash. When a car wash owner has excellent attention to detail, they are more likely to spot issues with equipment early on, which can help avoid poor quality washes and potentially catch equipment issues early on before they become expensive repairs.
Machine repair and maintenance skills. A car wash owner who can do at least some maintenance and repair of machinery can help to keep the car wash operational while cutting down on the cost of hiring a professional technician every time a machine malfunctions.
Customer service skills. While a coin-operated car wash is mostly operated by the customers themselves, responding to customer questions or complaints appropriately is an important trait for any car wash owner.
Marketing skills. Marketing a car wash takes some skill, but a small business owner who can manage at least some marketing efforts, such as establishing a loyalty program and managing social media pages, can help reduce the overall marketing costs, making a budget go further.
Are there grants to start a car wash?
It’s extremely rare to find a grant to start a car wash. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a car wash?
The NAICS code for a car wash is 811192.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?