Over the past year, the need for ancillary items has intensified. Consider for a moment that interest rates are up, gasoline is greater than $3, a cup of Starbucks is close to $4, and overall passenger miles are down. Hybrid vehicles are becoming commonplace, the first wave of baby boomers is retiring, and there is a lot of general anxiety in the marketplace.
So, is this an opportunity or a disaster? Years ago, an old sage commented, “In every seed of adversity there exists an equal or greater seed of opportunity.” With that in mind, let’s explore what is happening in your market. Likely, you are experiencing rising costs, reduced margins, lack of traffic, and angst about tomorrow.
You may be aware of a great planning tool that uses SWOT analysis: “Strength, Weaknesses, Opportunities and Threats.” It’s an exercise where you list on a “T” chart items that you and your competitors have in each category. As you list them, you’ll start to see areas you can improve, and where to capitalize on your competitor’s soft spots to gain market share.
Your analysis will reveal many items to use as initiatives or strategies. A word of caution: Unless you have endless resources and ocean-deep pockets you will never execute more than eight to 10 annually. But assume you have boiled it down to eight goals and objectives for the year, given responsibility to those who will carry out the program, established measures of accountability and are moving forward.
Reality vs. Silver Bullet
Some opportunities you identify will be clean-up, others will provide a clear competitive advantage. The reality is that until your business is running as a well-oiled machine, the last thing you should think about is diversifying. Your goal and objective is simple: Be profitable, put financial controls in place, and understand margins. Manage the balance sheet, create wealth, have an exit plan and, above all, focus. But, what about adding profit centers to your property?
If you keep your eyes on the balance sheet, your largest investment and asset is probably your ground. Most business owners don’t think about its value until time to sell. I am going to suggest your ground is not a stationary asset; hopefully, like your business, it’s growing in value. Therefore, you need to continually evaluate the worth to see if you’re growing the capitalized net income to support your site’s appreciated value. In many cases, the revenue of the intended business doesn’t keep track and owners look to other revenue sources.
The addition of a car wash to an existing business is definitely ancillary, not your core business. So what do you do when your SWOT analysis puts car washing at the top? How do you evaluate? Which kind of wash do you choose, and why?
Site Evaluation for Car Washing
A couple of rules of thumb will help evaluate your site. If your traffic count is in the 13,000 cars per-day range, consider a self-serve or in-bay car wash. If your daily traffic count runs up to 25,000, then an exterior tunnel will work; depending on other factors, if your traffic count is 38,000 cars or greater, you might want to consider a full-service tunnel.
These numbers are reported from a number of washes around the country and shouldn’t be construed as a guarantee of performance. But they do give you an idea of how your site might match up.
Looking at gross revenues, the typical, self-serve (depending on region) does about $1,500 per month per bay; an in-bay equals approximately four bays of self-serve, or $6,000; and the granddaddies of car washing—the full-service and or exterior-tunnel wash—process approximately 60,000 cars per year at an estimated average price of $18 and $8 respectively.
Choosing the right car wash for your current or future needs requires thorough research. I suggest contacting and interviewing a number of car wash suppliers. You also might want to view an article in the ISS online archives, “25 Questions to Ask Your Car Wash Supplier,” to use as a base in qualifying potential providers.
Fred Grauer is president of Grauer Associates and vice president, investor services, for Mark VII Equipment LLC, a car-wash equipment manufacturer in Arvada, Colo. He has made a lifelong career of designing, selling, building and operating car washes. He can be reached at email@example.com.