Despite what its name implies, earning profits from an automatic car wash is not so automatic. In fact, you can make costly missteps. As Pam Newman explains at entrepreneur.com, “If you don’t know your break-even point, you’re running your business blindly.”
So how do you know whether or not your automatic car wash is earning enough money? Let’s explore how to determine your break-even point and what you can do to make sure that you get there.
What Is the Break-Even Point?
Calculating the break-even point is not as simple as subtracting expenses from sales. This is because it is a more specific figure that allows you to realistically assess how much business you need to do in order to make money. To that end, instead of being a monetary amount, it shows you how many units (in your case, car washes) that you have to sell at a given price to break even.
As business expert Rosemary Peavlr said in a recent article, in order to “price your product, you first have to know how to calculate the break-even point,” because there is only so much you can do to realistically increase your sale volume.
Determining your break-even point
The break-even point (B) is calculated by dividing fixed costs (F) by the difference between your sale price (S) and the variable cost created by a sale (V). The formula looks like this:
F/(S-V) = B
For car washes:
- fixed costs would be things like rent and equipment cost/depreciation;
- the sale price is the price of a car wash;
- and the variable cost includes things like water and chemicals used during a wash.
How to Meet Your Automatic Car Wash Business’ Break-Even Point
Follow the important steps below to make more money at your car wash business.
1. Increase the value of your washes
When customers see more value in your washes, they will pay more; an increased sale price creates a much easier break-even point. To this end, increase the quality of your wash with better a car wash system, parts, chemicals, etc.
2. Minimize your expenses
When trying to lower your car wash expenses, it is important that you aren’t skimping on quality, because this inevitably diminishes your ability to increase the value of your washes. For example, instead of trying to cut costs by getting cheap car wash equipment, invest in quality equipment that both enhances your washes and uses less water and chemicals so as to reduce the variable costs they create.
Is Your Automatic Car Wash a Cash Cow or a Money Pit?
Figure out whether or not your automatic car wash is poised to make you a profit before it is too late. Anything hurting your ability to do business should be immediately dealt with, so that you can maximize your business’ earning potential for the both the short term and the long term.
For more about how to get the most out of your car wash business, contact MacNeil Wash Systems, and let us help you set up a profitable car wash system, like we’ve done for countless car wash entrepreneurs across North America.