Building/Buying Formulas

[WishyWashy85]

Hey guys,

New to the site and the car wash business! I’ve been doing my research and am curious about a formula I have found regarding wash valuation (net profit). It goes something like this:

(AADT x Cap Rate) x Avg cost per wash x days open per year x average profit margin

There are a lot of averages in there I understand, and a lot of factors that can play into them.

Any thoughts on this formula? Anything to be taken into considering? Trying to use it in general terms at evaluating a purchase or potential build.

Thanks in advance for any input!

-WW

 

[jrauth]

Yes, I think you are going down the right path. We normally use daily traffic count times a capture rate of 1% times 300 days a year you can wash a car, to figure out the annual number of cars you should wash.

If you are in a dryer area then you might be able to use 310 or 320 days a year.

Also if there is a lot of competition or if the access to the site is difficult, like having to do a u turn to make a left hand turn into the site then you should probably reduce the capture rate.

As far as cash flow we normally see a margin of about 40% before debt service.

Jeff

 

[WishyWashy85]

@jrauth, thanks for responding to my post. I'm late with my apology but I appreciate your response. Back into the research phase after some time away!

 

[CashFlow]

@jrauth Thank you for sharing the formula for the annual annual numbers of cars one can expect to wash was; daily traffic count times a capture rate of 1% times 300 days a year.

Question: Is that 1% of traffic flowing in both directions of the road or 1% of traffic flowing directly past the wash?

 

[CashFlow]

@jrauth Also curious 40% margin for debt service for what type of car wash? I ask because I'm interested in self serve with possible in-bay automatics. Thank you.

 

[Waxman]

When I did my cash flow projections I used 3/10 of one percent of the daily traffic count. That proved to be fairly accurate for me.