Is a car wash profitable. From my experience, yes, definitely. But the way it is profitable is different from most small businesses, and if you do not understand that difference you will build the wrong thing in the wrong place.

The fixed cost problem is the whole business model

A car wash is heavy in fixed costs. That is the biggest cost you carry. Rent or mortgage, equipment, utilities, insurance. Those bills arrive whether you wash 40 cars or 400.

Now here is the part most people miss. Because you know the fixed costs are high, this is now a volume play. That single sentence should drive every decision you make about this business.

The industry data shows the same thing from a different angle. MMCG Invest reports that wages absorb roughly 29 percent of industry revenue overall, but at automated express exterior facilities that figure often runs in the low to mid teens. The formats that automate the labor out are the formats that make money, because they push more of the cost into fixed and less into variable.

The margin spread tells the story. MMCG Invest puts the average operating margin near 14.1 percent across a fragmented operator base, while premium express sites at maturity reach 35 to 50 percent four wall EBITDA margins. Same industry. Very different businesses.

Which means location is the profit decision

If the business is a volume play, then location is not a preference. It is the profit decision, and you make it once.

Selecting a good location with high traffic is an excellent strategy. Further, selecting a location that has subdivisions or apartment complexes near it is also excellent. You want cars driving past and you want cars parked nearby.

Just keep in mind, you definitely need the car wash to be easily accessible both coming in and going out. Nothing is worse than trying to leave with your clean car and having to run through a pothole that will ruin your day and upset the customer, to say the least.

Break even is a car count, not a dollar figure

Most owners think about break even in dollars. In this business it is easier to think in cars.

MMCG Invest reports that new leveraged builds require approximately 120 to 180 cars per day to break even. That is a number you can actually manage against. You can stand in your lot and count it.

And once you break even, then you have substantial profits from the numbers above. That is the whole shape of this business. A long flat climb, then a steep one. The same data puts mature express exterior locations at $1.5 million to $3.0 million in annual revenue.

Car wash financial projections template tutorial, with Dr. Paul Borosky, DBA, MBA

So how much does a car wash owner actually make?

Here is how I answer that question, and it is not the way most people expect.

When I build a financial model for a car wash, I always target a net profit of $100,000. That is the starting point, not the output. With that target in mind, we then build out the membership levels and the customer numbers required to hit it. From there we can find a location that is suitable to make sure the target can be met.

Most people work the other direction. They find a site, guess at the volume, and hope the profit shows up at the end. I would rather decide what the business has to earn to be worth owning, then find out what that demands of the site.

So when somebody asks what a car wash owner makes, the honest answer is that it depends entirely on what you designed the business to make. If the site cannot support $100,000 in net profit at a realistic car count and a realistic ticket, it is the wrong site. That is not pessimism. That is the test.

Why I will not give you a single average

You will find plenty of articles that hand you one number. I am not going to, because it would be a fiction.

Property costs are a huge part of the fixed cost in this business, and they are vastly different depending on where you are. Average ticket depends on competitor density and on the part of the country you are in. With higher property costs come higher membership levels. Heck, even the number of high schools in the area is worth a glance, because kids start detail shops and that is competition too.

Location, traffic, subdivisions, apartment complexes and office complexes all need to be considered almost equally. Anyone handing you one national average has skipped every one of those.

The weaknesses that quietly sink car washes

Every business has weak points. In this one, three come up again and again.

1. Skipping the location research

The prime location sits on a high traffic road with an easy entrance and an easy exit, with subdivisions and apartment complexes close by. Car wash businesses that target those areas tend to do better. If that type of location cannot be found, then there need to be serious extenuating circumstances before you build there anyway.

Most owners simply do not do the research they need to do. And no amount of good operating fixes a bad corner.

2. Opening without enough money in the bank

Some car wash owners do not keep enough working capital once they start. It is going to take time to build up your memberships and take the wash to the next level. Until then, you need money in the bank.

This is the one that catches owners who spent every last dollar on the build. The wash is beautiful and the account is empty, and the membership base that was supposed to carry them is still six months out.

3. Buying a wash and under budgeting the repairs

If you are buying rather than building, budget hard for repairs and renovations. All too often they cost more than the business owner budgeted. Without adequate funds, renovations get left half done.

A half finished wash is worse than the one you bought, because now you have spent the money and still cannot show the customer anything new.

What actually kills margin

Some of the operational challenges that impact margin and return are not about the market at all. They are about you.

The biggest one is not optimizing your car wash. Again, it is all about the numbers. Make sure you are continually reviewing and optimizing. Make sure you are training your employees on how to interact with the customers, the first step, the second step, the third step. Have it all as highly optimized as possible.

If your employees are doing the same steps over and over again the same way, in an optimized manner, then your service inevitably becomes top notch and faster and faster. Speed and consistency are the same thing here. Both of them come from repetition.

The counterintuitive one: do not skimp on soap

Here is advice that sounds wrong until you look at the cost structure.

Do not skimp on raw materials like soaps and towels. A car wash has so little variable cost that splurging a little bit on high quality soap and towels is an excellent investment. It buys customer satisfaction and repeat customers, and it barely moves your P&L.

Think about what you are actually trading. Cheaper soap saves you cents per car. A customer who does not come back costs you every wash they would have bought for the next three years. That is not a close call.

Same logic applies to the membership customer, where lifetime value is the whole point. Recurring memberships can push customer lifetime value above $440, which means one soured wash is not a small loss.

Marketing is not optional in a volume business

On return on investment, this is again just a numbers game. You have to make sure the car wash is highly accessible and you have to make sure that you are consistently marketing it. It is all about volume.

Owners underestimate this because the building looks like the marketing. It is not. A high traffic corner tells people you exist. It does not tell them why they should pick you over the wash two miles down the road, and it does not convert a one time customer into a member.

How to know your own numbers

Everything above is a benchmark. None of it is your business. The only way to know whether your site, your build cost and your expected car count actually produce a profit is to model it.

That means an assumptions sheet you can defend, a daily revenue build, labor, startup costs, a 12 month profit and loss, and a break even analysis that tells you your car count. Not a spreadsheet somebody handed you. Yours.

Frequently asked questions