Carwash owners — both newbies and veterans — all have one primary priority: their finances. When cash doesn’t flow, it becomes difficult to pay your own expenses, and of course you want to keep those expenses low so that you maximize profit margin.
You do not have to be a financial wizard to be a better financial manager for your carwash. This article offers tips designed to help professional carwash owners get the most out of their finances.
Consider your business structure
You may not even realize that the way your business is set up can impact your assets.
Operating as a sole proprietorship or partnership puts your assets at risk because there is essentially no layer of protection between you and your business. Should the business ever be sued, it would be your personal assets that would be seized to pay the legal fees and expenses.
On the other hand, if you select the business structure for your carwash as an S corporation or LLC, your personal assets will be untouchable when it comes to covering business debt. Not only that, but you will also realize some great tax savings with these structures.
Have a separate business checking account
When you use your personal checking account for business expenses, it creates a financial nightmare that you will have to sort out sooner or later. Filing your taxes can be difficult (for either you or an accountant) when your personal and business expenses are intermingled.
It is not difficult to set up a business checking account. If you have your fictitious business name statement, along with your business license and business structure paperwork, you can set up a checking account in just minutes at your local branch. Then, you can link your accounting software to your checking account so that your expenses are automatically downloaded and categorized. This will help greatly with your taxes.
Keep a rainy day reserve
Certainly, you should be taking a salary and maybe a draw from your business account after all expenses are paid, but it is also wise to save some. You never know when your carwash equipment might break, leaving you with a large unforeseen expense you will have to figure out how to cover.
Setting aside even 10 percent of your profits each month can give you a cushion to reinvest in the company, whether it is for unexpected expenses or something you want to invest in to grow the business.
Use debt wisely
Even if right now you cannot see needing to take out a loan or line of credit, the day might come where you want to open a second carwash location or otherwise expand your business. The key to using debt is to get it when you are not strapped for cash. If you cannot make ends meet, no bank will want to lend you money.
On the other hand, when business is booming, this is the ideal time to get financing, because you are low-risk for the bank (meaning you are likely to be able to pay back the loan). Always keep an eye to the future to consider how you might be able to use investments to make more money.
Shop around for the best vendors
Whether you are looking for cleaning chemicals or towels (if you offer handwashing services), these are ongoing expenses that eat into your bottom line. It is a wise idea to comparison shop to see if you are getting the best deal on these materials.
Also, see if buying in bulk can save you money. If you order new towels each month, for example, you may save by ordering enough for three months at a time. Do not be shy about asking for discounts from your vendors. They want to keep your business and may have some wiggle room in what they are currently charging you.
Buy used equipment (when it makes sense)
It is not all that often that used (and quality) carwash equipment pops up, but if you are actively looking for used equipment — through auctions or on Craigslist — then when the opportunity arises, you can get great deals.
Also, look for used office furniture, computers, phones, etc. There is no reason you need completely new equipment or furniture, and buying used can help you save significant money.
Look into other streams of revenue
While your business may consist of a standalone carwash, there may be other ways you can take your money-making to the street … literally. A mobile detailing business could be a great way to add revenue (you already have the equipment) with little overhead.
Additionally, you could give customers add-on options for their carwashes — like special scents or extra layers of protection — or sell snacks in the waiting room as a way to boost your bottom line.
Safeguard your carwash
While you may be required by law to carry certain types of business insurance policies (like general liability or workers’ comp), it is a smart idea to go above those basic requirements to protect your carwash.
Look into a key person policy if you are the face of your business. This ensures that, should you be injured or even die, the carwash has the funds to keep operating under the new owner.
Business interruption insurance can be helpful in that it protects you against lost income in the event that you have to shut your carwash down for repairs. And, property insurance protects your carwash against theft, vandalism and fire.
Of course, you hope you never need to use any of these business insurance policies, but having them can be … well, like having insurance against costly and stressful situations.
These tips are not very difficult to implement, but they all add up to cash flowing freely in and out of your business. When you have a handle on your finances, you can put your attention on growing your professional carwash or detailing business.
Just remember: Your financial needs will change over time, so stay tuned into what your business needs in this moment, and then adapt as necessary.
Susan Guillory is the president of Egg Marketing, a content marketing firm based in San Diego, California. She has written several business books and frequently blogs about small business and marketing on such sites as Forbes, AllBusiness and Cision. Follow her on Twitter @eggmarketing.