Creating a carwash business plan
A business plan is a document to identify an opportunity, research why this opportunity is profitable and outline the steps needed to capitalize on the opportunity. The business plan can be a formal document or it can be written on the back of a napkin, but the mere act of writing the idea down forces you to get the idea out of your head and on paper to carefully consider each phase of your business.
When writing your carwash business plan, you need to keep in mind who your intended audience is and why you are writing the plan. Your bank will be less interested in exit strategy and return on investment than equity investors, who will want this critical information. Additionally, a plan written for internal use will be different than a plan written to seek financing as a bank is not necessarily interested in detailed operations of the business.
A good business plan consists of six key components:
- Executive summary;
- Business description;
- Managers and employees;
- Operations and location; and
- Financial projections.
In addition to these sections, a business plan should also have a cover, title page and table of contents. Your business plan can be as long or as short as it needs to be, so long as it addresses the critical points. An average carwash business plan narrative should be 4-15 pages plus financials and appendix items.
The executive summary is the first section of the business plan, but it is the last to be written. It gives the reader a quick glance of what your business proposal is about and what you are asking for. This is critical as most readers will scan this section before deciding whether to read further.
The executive summary should be about one-half of a page in length and include what you would cover in an elevator pitch such as:
- A condensed version of the business concept;
- Your service proposition, emphasizing any unique features or benefits of your carwash;
- The demographics of your market;
- A list of the persons on your management team;
- When the anticipated start date is;
- Your equity position; and
- The amount of money needed to start the project.
It is important that your executive summary is concise and to the point. You will go into more detail later in the business plan.
The purpose of the business description is to objectively describe the carwash business and its future potential. You are trying to paint a picture of the potential of your business along with the facts to support it. Try to inject energy and excitement to get the reader enthusiastic about the idea, without going overboard of course.
Be sure to include:
- Your mission;
- What the business does;
- Description of the carwash services;
- Carwash industry information;
- How your business will be organized;
- Status of the business (start-up, expansion or purchasing); and
- Current and future goals.
Any facts or figures should be noted and sources included in the business plan. This information is important should you need to defend your data and assumptions.
After describing the business, it is time to describe any additional products or services your carwash is selling. Keep in mind that it is important to show how your services are better than the competition. If you don't have a good answer then you should rethink your strategy. What is it about your carwash that is going to get the customer to change doing business with the competition?
The first step in identifying your marketing strategy is to determine who your customers will be. Consider characteristics of your market, such as age, income, interests and/or geographic locations. Carwash customers come in all types; decide who you want your average customer to be and explain what you will do to make them your customers.
Next, you must consider your competition. Attempting to run a portion of your carwash business better than the competition may be difficult, so it is a good idea to focus on being different instead. Can you serve a particular market niche such as the elderly that isn't being looked at? Can you identify a unique marketing strategy or profit center combination that hasn't yet been introduced?
Even if your market area does not already have a carwash, you still have competition. The home washer is our industry's biggest threat. Make sure to include this in your business plan if there are no carwashes to research in your area.
Optimally you will want information on at least three but no more than five competitors. List information about what type of carwash the business is, how long it has been operational, its location, services, pricing, quality, etc. and compare your advantages and disadvantages.
With the above steps researched, the promotional strategy follows. The promotional strategy is where most entrepreneurs fail. Do not use a blanket statement like, "I am going to advertise in the newspaper, radio and/or television" without thinking through the process or the customer. The promotional strategy provides you a map of how you are going to reach your market in the most efficient manner possible. Advertising is expensive, use it wisely.
One of the more difficult areas of the business plan is coming up with sales projections. This number is probably going to be wrong and that's okay. What you want is a figure backed up with justifiable data. Just grabbing a number out of the air won't work. There are many sources to help come up with this number including:
- Industry journals (PC&D publishes an annual benchmark survey for every segment of the industry);
- Trade groups;
- Carwashes in similar demographic areas;
- Industry experts; and
- Census data.
The effects of pricing play a large role on how your product is perceived in the marketplace. Price too low and your carwash may be perceived as cheap and unreliable. Price too high and you may discourage customers
Here are a few things to keep in mind:
- Make sure you can make a profit at whatever price you are selling at;
- If you want to have lower costs and "get your foot in the door" it may be better to offer discounts or coupons initially until your business is better known;
- Don't be afraid to charge more for your product or service than the competition if you have something of more value to offer.
Management and employees
In this section, you describe who is going to manage the business on a daily basis as well as provide strategic direction (if these positions are separate). Each of these people needs to have a brief biography included as well as a resume in the appendix. Try to show how the experience and education of these people will be able to successfully execute the strategy in the business plan and succeed.
Many times the owner may not have the specific experience for this business, so it is very important to use the team's other professional experiences and explain how it will make for a successful operation.
Next, a brief explanation of the staff, including:
- What positions need to be filled;
- When they need to be filled (this is important in developing financial projections as you may have some employees come on after you start); and
- How much they get paid (be sure to calculate payroll taxes as well, estimate 15 percent if not sure).
It is also recommended to add the professional and advisors to your business. These people include:
- Board of directors;
- Bankers; and
Operations and location
The operations and location section of the plan illustrates how you are going to make or acquire your product and information about your business location.
Explain how and where your products or services are made. A few points to include in your plan:
- How does your carwash operate, what steps are in your service?
- Who are your suppliers?
- What are the terms and lead time for this product?
If you are in the classic "I can't get my location until I get a loan, so I can't finish my business plan" scenario, list what features you are looking at in a building along with average prices or rents and pad that number a little just in case.
A few things to add:
- Traffic count;
- Building description;
- Specific reasons for this property;
- Proximity to suppliers, roads;
- Average utilities. Be sure to get the last 12 months from the electric company if the building had been occupied. This could be an expensive lesson from a dishonest landlord. If you are opening a new location, try to talk with other carwash operators in a non-competitive area to get an estimate;
- Pictures of the proposed site;
- Floor plan;
- Purchase price or monthly rent/lease;
- Include sales/rent/lease agreement in appendix; and
- If building or renovating be sure to include quotes as this is an area frequently underestimated in costs.
Financial projections are placed at the end of your business plan, before the appendix. They are a very critical piece to the plan. The must-have financial statements are a cash flow statement, a profit and loss statement and a balance sheet. The information already provided in the narrative portion of the business plan must match the financial projections.
Most financial projections are three years in length. It is a good idea to include a notes and assumptions section to the financial projections page to help make sure all of your numbers come through and provide an itemized list to provide clarity for the reader.
Notes and assumptions to financial projections
- Break out each loan (building, equipment, inventory);
- Interest rate; and
- Any monthly costs not discussed in business plan narrative;
- Cost of goods/inventory;
- Employee wages;
- License and fees;
- Professional fees;
- Rent/property taxes;
- Repairs and maintenance;
- Telephone; and
- Anything else that needs to be explained in the financials that is not in the narrative.
Startup expenses: These are all expenses you will incur prior to opening your carwash. It is recommended to have quotes available or in the appendix for the larger items. It is also recommended that you pad your numbers some as there will always be unexpected expenses that were not accounted for.
Sources and uses of funds: This section details how the loan money will be used (inventory, carwash equipment, repairs and improvements, working capital, etc) and who is providing it (bank, investor or owner). You will likely need to be injecting 20 percent of your own money and maybe more depending on the risk assessment of the business and your personal finances.
Cash flows: The cash-flow statement is one of the most important pieces of your business plan. It shows a schedule of the money coming into the business and expenses that need to be paid and whether you have enough cash to sustain the business gained during the warm month to cover the costs during the winter months.
Every part of your business plan is important, but none of it means a thing if you run out of cash. Should this number be negative, you either need to raise sales, reduce expenses or have more cash.
Your cash flow statement will typically be three years in length with the first year analyzing the monthly figures and later years by quarter.
Profit and loss: This statement, while similar to the cash flow statement but illustrated annually looks at the effects of non-cash charges such as depreciation and amortization to get an accounting overview of the operations of your business.
Balance sheet: The balance sheet is a summary of the value of all assets, liabilities and equity for an organization at the end of each year. A balance sheet is often described as a "snapshot" of a company's financial condition and will show the value of the business over time.
Personal financial statement: If you are looking at bank financing, every person who will have a 20 percent or more ownership position will need to provide a personal financial statement to show how effective they are at managing your money.
Appendix items are various pieces of information that help make your case. Include details and studies used in your business plan; for example:
- Quotes for items over $500;
- Resumes of the management team;
- Industry research;
- Demographic data and trends;
- Maps, floorplans or blueprints of location;
- Leases and contracts; and
- Letters of support.
There is a lot to creating your business plan but will definitely make your business stronger. While it may seem easier to have someone else write your plan, there is no substitute to writing it yourself. This is your business and by writing it yourself you will have a better understanding of your business and strategies for success.
Spencer Gregory is a consultant advising business owners on business planning and financing in the carwash industry. More information on starting a carwash business can be found at www.StartingACarWash.com, and about business plans at www.TheBusinessPlanFactory.com.