Business proposition for you: make money by being more like Shaq.
No mad basketball skills required, and you don’t need to be over 6 feet tall, either. While Shaq dominated the court, he did something different than most of his peers. He put his money to work for him.
Most NBA stars and pro athletes go broke a few years after losing those huge paychecks.
Unless they follow Shaq’s genius.
He created a financial flywheel using his existing income to fund the purchase of other businesses.
Investing in a series of boring businesses like car washes gave him cashflow exceeding his NBA income for years after he left the big leagues.
You can do the same thing with your current income. Just ask Codie: she owns a car wash, too!
One great way to start your boring business portfolio is by buying a car wash.
The average American washes their car every two weeks. Buying a car wash is an excellent way to get your hands on a low-overhead, high-cashflow business. Here’s what it takes to get started.
Why Buy a Car Wash Business?
With as much as people use their cars, it’s impossible to keep the interior and exterior clean without regular washing and vacuuming.
The convenience of a local car wash takes that chore and makes it accessible and affordable.
Here’s the great thing about running a car wash business: repeat customers.
If you buy an existing car wash, you could start earning profits immediately with very little overhead. Or add on some services like a loyalty program or an onsite car detailing expert and grow your bottom line quickly.
Three models exist today:
- Automatic car washes: no staff needed, as these run entirely by machines and timers
- Self-service car washes: no staff needed, you supply the materials, and customers wash their own cars
- Full-service car washes: tunnel-style washes that cost the most to build and need staff to manage the flow but also create the most income opportunity
Convinced this might be the next acquisition in your business portfolio?
Keep operational requirements in mind as you shop for an existing location. For example, different models may require more or less in terms of staffing, maintenance needs, and potential operations hours.
Car washes, like laundromats, are a recession-proof business. They perform well in all kinds of locations and through shifting economic climates.
Owning a car wash does come with some risks, however. Those include:
- The initial investment to start a car wash may be significant (especially for new equipment)
- It is difficult to budget effectively for maintenance costs, and only specific vendors can fix things
- Too much competition in a local area will deflate an owner’s profits
- You need a plan for security to prevent damage from vandalism or theft (cameras are your best friend)
Knowing how to identify and address these challenges could make or break your sudsy business.
To Build or Buy? Financial Considerations When Investing in a Car Wash
Your first big decision is whether to custom-build a car wash or to buy and improve an existing one.
Both can make money, but one offers a hell of an easier path. Finding an existing car wash and plugging up cash leaks may be the quickest way to start generating returns.
Building a new car wash opens up many questions like:
- What permits will you need?
- How difficult will it be to run water and electricity to the location?
- What drainage requirements will impact the kind of wash you build?
- What construction budget applies, and for how long of a timetable?
The type of wash you choose to build will influence four key factors:
- Your initial investment cost
- Ongoing operational costs
- Potential revenue
- Profit margins
The best long-term investment is the full-service tunnel wash. Full-service washes can attract more money and more customers overall.
But it’s not cheap. Plan to spend over $1 million to get it up and running.
If you can draw in over 75,000 cars a year and charge no less than $15 a wash, you could make your investment back in less than a year.
Here’s why buying an existing car wash has way more appeal than building a new one from scratch:
- It comes with a substantially lower initial investment
- You can keep the same staff for a simple transition and reduced training time
- A current car wash has an existing customer base
- You can structure the deal to keep the owner in place for at least a few years
Need some inspiration that anyone with some business savvy can do this? Here’s how 22-year-old Hannah took her first car wash to a $7,400/month cash machine:
How to Buy a Car Wash in 5 Steps
Raking in those car wash coins starts with a 5-step process:
- Learning the market
- Finding car washes for sale
- Conducting due diligence
- Getting financing
- Negotiating the deal
Research and Learn the Market
First, scope the market. You cannot create a successful car wash without a good location to start with.
More cars, more $$$.
Seek dense demographics. At least 100,000 residents in the nearby area is a good sign. Match that with solid population growth in the region (8-10%+), and you’re golden.
If you start your car wash from scratch, spend time looking at land costs in your region since that investment may be the most expensive in your budget.
You can spot profitable car washes in rural and urban areas. It all depends on competition in the region and any unique differentiators for the business.
Identifying Potential Car Washes for Sale
Connecting with an existing commercial real estate agent may help you find current car washes in your region already for sale.
You can also look at sites like LoopNet and BizBuySell to find car washes that are on the market if you don’t want to involve a real estate agent right away.
Even if a location’s not on the market, consider stopping by and asking to speak to the owner. Planting those seeds could lead to a purchase now or in the future, so it doesn’t hurt!
And, if you’re interested in more off-market deals, check out BizScout.
BizScout is a platform that we built and own to help people find business deals on everything from car washes to storage faciliites to RV parks.
If you buy a current car wash, you’ll need to know whether the operator owns or leases the land since both heavily impact your deal terms.
Evaluating Potential Purchases and Doing Your Due Diligence
The rubber meets the road in the due diligence phase for buying an existing car wash.
You can go wrong in many ways here, so it pays to take the time and pay attention to the details.
Give some thought to each of the following while you look at locations:
- What’s the overall physical condition of the car wash facility?
- How old is the equipment? Is it reliable? How many washes per day can the current equipment handle?
- What is the existing customer base? Can you find ways to grow it?
- Is the company legally compliant with state or federal issues, such as disposal of the wastewater? (Pro tip: most states publish rules about approved ways to drain wastewater from car washes.)
- What do profit and loss statements tell you about the company’s financials?
Don’t take the owner’s word for it.
Get equipment independently inspected and valued. Check the company’s financials by looking at its tax records. Make sure that they are compliant with all regulations.
Missed issues in the due diligence phase can cost thousands.
Poorly maintained car wash equipment will lead to constant downtime for repairs, which eats into your profits.
Securing Financing
You could score a new car wash business with cash, but that presents three problems:
- Most people don’t have the cash outright
- Not everyone can take out a personal loan for enough money to buy/upgrade a car wash
- For those who do have it, it’s risky to tie it up all in one new venture
You can always turn to SBA loans and equipment loans to get startup cash in place or to upgrade.
But the pros use seller financing.
Seller financing lets you get your hands on the business with limited cash (or none at all). You pay back the owner over time with terms you establish as part of the deal. It’s a much more flexible way to get some skin in the game.
Negotiation and Closing the Deal
Even if you go with seller financing, you need to make your case for a reduced valuation.
With a car wash, you must know everything you can about the existing operation to make a good offer. Go in asking for what you want, but be ready to share your reasoning if the seller pushes back.
Armed with the data, you can explain how you arrived at your numbers and deal terms. This approach guards you against risks.
For example, if you can show that the current tunnel washes are in need of major upgrades or maintenance, you could be in for a reduced purchase price.
Tips for Running a Successful Car Wash
Half the battle of running a thriving car wash? A good location with top-of-the-line equipment and convenience.
But it doesn’t stop there.
To continue counting those coins:
- Provide outstanding customer service and train your employees on what that takes
- Keep up with regular maintenance and cleaning of equipment
- Invest revenue dollars into marketing
- Hire an operator to manage the business for you
- Invest in vending machines or other upgrades that boost profits (like interior sponges, tire shine, air fresheners, absorbent towels, or glass cleaners)
You may already have the perfect operator on your hands from day one. The best person to run the business is the former owner or a trusted, longtime employee. See if you can get the previous owner to stay on during the transition period.
And if all of these ideas aren’t enough for you. Check out this video where Brandon from Investment Joy breaks down his 10 tips for running a car wash:
Rinse, Repeat, and Rev Up Your Earnings
Owning a car wash gives you plenty of opportunities to scale an existing company.
With low upfront investment and high cash flow potential, you avoid many of the challenges of starting your own car wash from the ground up.
To succeed with soap, find a desirable location, investigate their numbers, and make an offer that gives you a chance to grow quickly.
