How to Calculate Your Car Wash Profit Margin
Having a passion for your car wash business is a boon but that alone does not guarantee your car wash profit. You may have the energy, the commitment and a solid business plan to begin with. However, that can easily come to naught if you do not conscientiously manage your business finances and crunch the numbers from the get go. Many businesses fold within the first two years of setting up because they just didn’t “see it coming”.
The Underlying Reason For Any Business Investment
The majority of people open up businesses with the hope of using their existing assets and resources to make even bigger gains. That is what an investment is all about. You sacrifice today in order to reap the benefits in the near or medium future. Yet oftentimes, owners face the demands of running the operations and become aware to what is the true state of their financials.
You may have done all the prep work with financial statements and forecasts at your business planning stage. Yet, all of that means very little if you do not stay on track with how your expenses and incomes pan out in reality. You should follow your car wash profit and cost very closely.
In fact, it is not all going around to wrap your mind around financials. Once you have it set up properly; all that you need is your special attention for an hour or so on a weekly basis. Let’s use a weekly spreadsheet as an example to track your car wash profits, income and costs.
Use A Spreadsheet And Create Sub-Sections For Revenue and Costs
Keep the top section of your spreadsheet for your weekly revenue entries. This should be quite straightforward and perhaps grouped by car wash and detailing income streams.
Costs will be more involved as they are made up of fixed and variable costs, which in turn consists of various sub-categories. Fixed costs are the overheads you have to incur no matter the volume of business transacted. These include rents, equipment and tools, licenses, insurance, marketing etc. On the other hand are variable costs, i.e. supplies and labor costs that vary with your business volume.
We recommend that you group them accordingly. The more specific the data you put in – item, category, sub-category, date, cost, and other remarks – the more useful the financial information you can derive from it. The analysis of this info allows you to accurately gauge your car wash profits and health.
Calculate Your Car Wash Profit
You can calculate your car wash profits from the percentage margins you etch on to the total costs you incur in offering the individual services. In your spreadsheet or income statement, you can find the profits at the very bottom. That is why we call them the bottom line, wherein all expenses are deducted from revenue and leaving you with the net income.
For the first year or so when you are establishing your brand, your car wash profit figure is likely to be negative or in the red. The average breakeven point (when no profit or loss is made) for many car wash businesses is usually eighteen months into the business. This is not to say you can take your eyes off of the ball during that period. You need to enter the figures, you need to scrutinize them on a weekly basis, at the very least, in order to know your business is going in the right direction.
After a few years operating successfully, your car wash profit should more closely reflect your average margins. If not, you will then be able to easily needle down into the figures to find out what is holding back your potential car wash profit.
Tedious and monotonous as it may seem, figures do not lie. Moreover, by knowing how to crunch the numbers gives you a clearer picture of how well or not, your business is doing. If it’s doing well, you will have more resources to reinvest with and if not, it is action time to review, contain and correct the issues.
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