Calculating Cash Flow for Your Car Wash Business

Here at Pit Crew, we don’t just clean your car wash sludge pits. Sure, we have the pit cleaning equipment (including an industrial vacuum truck) to come in and get your pits clean and then get out of your hair.

But our business goes beyond that to include car wash business tips and resources. We know that our role in making pit cleaning as hassle-free as possible only takes care of one of the many worries that keep you up at night as a current or soon-to-be car wash owner.

That’s why this article will cover how you can calculate the profit margin and cash flow for your car wash business to keep a tight lid on your revenue projections and financial inputs and outputs.

Why Calculate a Car Wash’s Profit Margin?

Calculating cash flow is important for both the established car wash and for founding a new car wash. Typically, calculating the cash flow to determine profitability is part of the process of securing a business loan to start a new car wash. However, if you are buying an already established car wash, it may still be valuable for you to calculate these figures to wrap your mind around the true value of your investment. Routinely calculating cash flow may also uncover insights into why a particular car wash might not be as profitable. It can also help with deciding what location your car wash empire should expand into next.

Building Blocks for Calculating Cash Flow

Before you can get to the calculations, there are some building block numbers that you will need to know. For this article we’ll discuss how to get these numbers. We’ll also suggest average car wash profit margin and revenue figures that you can use to stand in for unknowns.

Annual Traffic Count

Firstly, you need to know how many cars drive past your car wash site per day. Some car wash owners have had to research this figure before they ever broke ground. Banks typically want to know this data to determine the risk of loaning your car wash the necessary funds to begin operating. You can usually find this data by looking online for traffic volume from the Department of Transportation (you can find Virginia’s traffic data here). If you don’t know this figure quite yet, you can use an average annual traffic count of 30,000 as a baseline.

Days of the Year in Operation

Next, you need to write down how many days out of the year your car wash is open. Take into account closing for holidays, inclement weather, routine maintenance or occasional equipment failure. If you are unsure about these variables and how many days you are actually open a year, you should use a worst case, median, and best case scenario figures. We’ll use an average of 320 days of the year in operation for our calculations.

Capture Rate

This figure gives you an idea of how many cars out of the thousands that pass your car wash every single day actually stop in to get their cars clean. The capture rate for your car wash can depend on a number of factors. A road with a higher speed limit or a median may have a more difficult time capturing cars than one with a slower speed limit. If your car wash is difficult to notice because of trees, other businesses or a lack of signage, this will decrease your capture rate.

Estimating capture rate can be difficult if you don’t have the data to support what would be an accurate number. If you have the previous years data on the number of cars your car wash serviced, you can divide that by the estimated annual traffic volume on your street to determine a capture rate for calculating profitability for future years and future locations. If you are starting a new car wash, you can either ask other car wash owners in the area or use a moderate 0.75% figure.

Average Ticket Price

Your average ticket price is a number based on the average amount that your customers are spending each time they use your car wash. You can figure this by taking the total revenue for your car wash and dividing it by the total number of cars serviced. If you don’t know these numbers, an industry average in 2017 was $15 per ticket.

Profit Margin per Vehicle

The profit margin that your car wash will make per vehicle is last and most crucial number when you are calculating the cash flow and profitability of your car wash. Brandongaille reported that the average profit per car for in-bay automatics was $4.35 (or 29% of an average ticket price of $15).

Your car wash could easily be above or below this amount. It is important to determine your total revenue for a sufficient period of time (greater than a year of data if you have it), subtract your total expenses for that period and divide the resulting figure by the number of cars that you serviced in that time. This might be another figure that you should phone a friend for.

Pulling it All Together

Now that we have all of the raw materials for cash flow figured out, you can calculate your projected profitability for any given location. If you followed along with this article, you may have had to make some educated guesses for certain figures or had to rely on industry averages for others. If some of the numbers seem more certain than others (such as knowing the up-to-date research facts versus guessing based on national averages) try to use those figures first and fill in the gaps of uncertainty with either educated guesswork or a little high school algebra to calculate backwards.

For example, if you don’t know how many cars per year you are currently washing or will wash at a yet-to-be location, you will want to take the average traffic count for your location and multiply it by the number of days you are open in a year then multiply that result by the capture rate. If you don’t know what your annual gross revenue is but you do know how many cars you washed and what the average ticket price was, take those two figures and multiply them by each other.

Income Statement Excel Spreadsheet Breakdown

According to the above photo of a mock income statement based on average car wash revenue projections, we have:

• Daily traffic count of 30,000 in cell B2
• 320 days open per year in cell B3
• A capture rate of 0.75% in cell B4
• An industry average ticket price of $15 in cell B5
• Profit margin of 29% in cell B6

Calculating Cars Washed Per Year

By multiplying the daily traffic count in cell B2 by the days open per year in cell B3 multiplied by the capture rate in cell B4, we can get the annual traffic count. If you are using Microsoft Excel to calculate this, the formula would be “=B2*B3*B4”. For this mock car wash income statement, we get 72,000 cars washed per year.

Calculating Annual Gross Sales

Gross sales is the amount of money that your car wash business takes in before adjust for the cost of goods sold and overhead. It is the equivalent of counting the money in your cash register at the end of the day. It isn’t going to be the final profit that you walk away with but it is still an important figure to keep an eye on.

In the Excel spreadsheet above, take the average ticket price in cell B5 and multiply it by the cars washed per year in B7. In Excel, you would write “=B5*B7”. For this example, we get an annual gross sales of $1,080,000.

Calculating Annual Cash Flow

The final step for your car wash business’ profit margin is to calculate the annual cash flow. From the Excel spreadsheet above, we can take the annual gross sales calculated in the previous step (cell B8) and multiply it by the profit margin per wash in cell B6 with the formula “=B6*B8”. From our round figures and industry average statistics, this will give you an annual cash flow of $313,200. This is essentially how much an average car wash makes in a year. It does, however, come with a note of caution because we included lots of educated guesses all over the place for the sake of the example.

This final figure is known as your cash flow or EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). It is an important number for determining how much juice your car wash is generating and it can be used to determine if a location is a profitable investment or whether you should intervene in some way to improve profitability.

How Pit Crew Can Help With Your Cash Flow

Although we can not help with all of the factors at play that affect your car wash’s profitability, One factor that might be plaguing your business is the routine maintenance of pumping your sludge pits. If you are closing your locations for significant period of time to clean your car wash pits, it can affect the number of cars you wash per year and therefore your overall cash flow. Pit Crew gets in, gets your pits clean and gets out so your car wash can stay operational without interruption.

Additional Resources About Cash Flow

Is It Worth It? – The Rules of ROI Calculation Nobody Told You by Auto Laundry News

HOW TO START A CARWASH: CREATE A STRONG CASH FLOW by Professional Carwashing & Detailing

WASH WISDOM: CALCULATING POTENTIAL CASH FLOW by Professional Carwashing & Detailing

10 Mistakes People Make When They Start a Car Wash Business by Anthony Analetto from Sonny’s The CarWash Factory