Car washes are big business! According to the International Car Wash Association, there are more than 60,000 car wash locations in the U.S. and more than two billion cars are washed each year — a $15 billion market.
As consumers hang on to their vehicles longer and new car prices continue to rise, this is good news for car wash businesses that can help vehicle owners maintain their investment.
If you’re interested in starting or owning a car wash business, here are some things to consider.
Review the different types of car washes
Car wash businesses come in many forms, including self-service, automatic, full-service, and franchises. Let’s take a look at each:
- Self-service: In this model, vehicle owners pay a small price to clean their cars themselves. The business simply provides access to cleaning equipment, such as high-pressure water hoses, cleaning fluid, sponges, and even towels.
- Automated: Vehicles are pulled by a conveyor belt or drive into a bay, and automatic equipment does the work. The type of clean can vary and may include soft-touch washes or touchless.
- Full-service car wash: These locations provide both exterior and interior cleaning services. The service may be automated or a combination of automated exterior cleaning and self-service interior cleaning. Add-ons such as mat cleaning, vacuum, and detailing, may also be provided.
- Franchise: Buying into a franchise is a great way to get started and provides the benefit of name-brand recognition, marketing, and operational support.
Each model has its pros and cons in terms of price, labor costs, and efficiency. For instance, a self-service car wash is a lower-cost option for you as a business owner, but the margins may be lower and the time to clean is longer. Automatic car washes, however, mean more volume, but higher labor and equipment costs.
Write your car wash business plan
To ensure your car wash business is a success, you need a business plan. A well-thought-out plan can guide your strategy, identify risks, and help you secure funding to expand and grow your enterprise.
A business plan can also help you better understand your market, the costs of getting started, how you’ll differentiate your car wash from others. It is also a critical tool to help secure funding, but it’s important to consider your audience. Since banks and equity investors will be more interested in your finances (budget, forecasts, repayment plan) than your operational plans, you may need to tweak your plan or create a separate one for this audience.
To help you get started, here’s a suggested outline for your car wash business plan:
- Executive summary: A brief overview of your business and why it will be successful
- Company description: Provides detailed information about your business and explains your competitive advantages.
- Organization and management: How your company will be structured and who will run it. For example, will it be a partnership, LLC, S-Corporation? Who will be responsible for day-to-day management?
- Market analysis: What is the industry outlook? Who are your target customers? What competition are you up against?
- Financial plan: A description of your funding requirements, your detailed financial statements, and a financial statement analysis.
- Marketing strategy: How will you reach and retain customers and increase sales?
Identify car wash startup costs
Depending on the type and size of car wash you wish to operate, getting started can require significant upfront investment. Purchasing or leasing a lot and building a car wash from scratch can cost anywhere from $50,000 to millions of dollars.
Understand ongoing expenses
Car washes are a high-volume business that consumes significant amounts of power, water, etc. Be sure to factor in the following ongoing expenses (which will vary by car wash model):
- Equipment maintenance
- Employee wages
- Advertising and marketing
How profitable is a car wash?
Many factors impact how profitable a car wash can be, including the type of car wash, how much you charge per vehicle, location, and recurring expenses. For example, California has more car washes than any other state and the highest number of sales. Yet, Washington, D.C. (which has fewer car washes per capita), ranks first in the average sales per car wash.
Determine what to charge
When pricing your services, there are many variables to consider. If your business is located in a high-income area, you can set your base price higher. But do your research. What do neighboring car washes charge?
To determine cost-per-car, run your budget and calculate the precise costs involved in washing each vehicle. Be sure to revisit this number as labor, supply, and utility costs rise.
Pick a business structure
Your choice of business structure — whether it’s a limited liability company (LLC), corporation, or partnership — will impact your daily operations, taxes, and the amount of risk you’re willing to take with your personal assets. Choose a business structure that balances legal protections and benefits.
The four most common are:
- Sole proprietorship: This means that the business is owned and run by one person with no legal distinction between the owner and the business.
- General partnership: A general partnership is the simplest type of partnership and is created automatically when two or more persons engage in a business enterprise for profit. No state filing is required.
- Limited liability company (LLC): This is one of the most popular forms of business entity for small businesses. An LLC offers limited liability protection (shielding your personal assets by protecting them from debts and liabilities associated with the company) and pass-through taxation.
- Corporation: A corporation is a separate legal entity owned by its shareholders, thereby protecting owners from personal liability for corporate debts and obligations.
For more information on business entity structures, read Comparing company types.
Choose a business name
Naming your business may not be as simple as it seems. When selecting a name, try to make the name short, easy to remember, descriptive of the business, and capable of drawing attention. Depending on the business form you choose, you may have to register and/or receive approval from the local or state government where your business is formed.
For more information on naming rules for different entity types, read Naming your startup business.
Register your car wash business
Depending on the location and business structure of your gym, you may need to register your new business with your state and/or local government.
To do this, LLCs, corporations, and general partnerships must register (online or through the mail) with the Secretary of State or business agency where they conduct business.
Importantly, if you choose to operate your business under a name other than your personal name (even if you are a sole proprietor), you will need to register that business name with state and/or local governments a process known as filing a “doing business as” (DBA) name.
Get federal and state tax IDs
Before you can pay business taxes, you may need to register your business with the IRS and obtain an employee identification number (EIN). An EIN is the equivalent of a social security number for your business and is required on your state and federal tax filings. (Note: If you’re a sole proprietor without employees, then you don’t need an EIN. Instead, you will file your taxes using your social security number.)
An EIN is also needed to open a business bank account and ensure the separation of your business and personal finances.
You may also require a state tax ID. Typically, you’ll need to get an EIN before you apply for your state tax ID. Check with your state or a business lawyer, as the process will vary by state.
Open a business bank account and credit card for your car wash
A business bank account and credit card keep your personal and business transactions separate and afford certain legal protections. For example, if you operate an LLC or corporation, maintaining a business bank account helps you maintain liability protection and the security of your personal assets in the event your business is sued or found liable.
A bank account and credit card also help build business credit – something that suppliers and vendors will verify before transacting business with you. For this reason, consider opening your business accounts as soon as you start incurring business expenses or accepting money.
Select a location for your car wash
Once you know the type of car wash you want to run, you’ll need to select a location that has the following characteristics:
- Ease of access: Make it easy for your customers to find you and access your facility. Consider street position, how congested traffic gets, and whether there is an intersection nearby that makes it hard for customers to enter your car wash.
- A highly traveled road: Look for locations that have a high volume of traffic, but at a steady speed of 40 mph so that drivers have time to see your business and decide to patronize it.
- Space: Find a location that has sufficient space for vehicles of all sizes to enter and navigate your services, including exterior wash and interior cleaning bays — without blocking the entrance or nearby roads.
Location is everything, so you may want to pay a premium to get your business noticed.
Note: Check zoning laws. Certain jurisdictions dictate that car washes are a single-use facility, meaning once the car wash is built, the land can’t be used for any other purpose.
Get licenses and permits for your car wash
Most small businesses need some form of business license or permit to operate. These vary by business type, location, and regulations. Be sure to check with your city, county, and state website to be sure you have everything you need. A failure to obtain the right licenses and permits could result in your business being shut down.
Operating a car wash also requires compliance with state and local government laws around waste containment and mitigation. These rules are designed to reduce environmental harm and regulate wastewater and grit-trap waste disposal, vehicle air emissions, and fuel tank storage.
Insurance for your car wash
Insurance policies that your car wash business will need to obtain include:
- Business liability insurance
- Workers’ compensation insurance
- Commercial umbrella insurance (optional)
Note: If you are leasing property, the lease agreement may require certain insurance limits.
Always consult a trusted insurance broker to ensure you get the right coverage.
Fund your car wash business
Starting a car wash business involves a degree of upfront investment and may require you to obtain financing. A business bank loan or SBA-backed loan are common sources of small business financing. These funds can be used to procure equipment and other capital expenses.
Your business will also need funds to accommodate ongoing and unexpected expenses, such as equipment maintenance and repair. A business line of credit is a potential option to cover these costs. This form of financing allows you to draw on funds only when you need them.
Use your business plan to help increase your chances of securing funding. Include your budget, projected profit and losses, and financial projections. With these tools, you’ll have a good sense of how much funding you need and your plan to repay the loan.
Promote your car wash business
Think about how you will get the word out about your car wash business. Here are some tips:
- Launch a website: Create a website that lists your services and is optimized for search engines. This will ensure your business ranks high when someone searches for a local car wash. Use key search words and phrases in your body copy, headers, and metadata. Finally, be sure your website is designed with desktop and mobile users in mind. For more information, read Top 3 tips for building a company website.
- Launch a social media and review site presence: Set up business pages and accounts on Facebook, Yelp, Google My Business, and Instagram. Regularly post updates, news, and specials.
- Get positive reviews: Online reviews and make or break a business. Think of ways to solicit reviews of your services from your customers. Monitor reviews on social media and diplomatically respond to any unfair negative reviews.
- Network: Introduce your business to local businesses such as auto repair shops and dealerships. Join your local chamber of commerce and other small business groups.
- Develop a loyalty program: Loyalty programs are a great way to keep customers coming back time and again. Create a reward program that offers customers a free car wash or add-on service after a certain number of visits.
Learn more from BizFilings
BizFilings is dedicated to making starting a business easier so you can focus on doing what you love. For more information, check out our state guides for LLCs and corporations.