Before embarking on writing a business plan for starting a
car wash, a definition of what a business plan is in order. A business
plan is a document to identify an opportunity, research why this
opportunity is profitable and the steps needed to capitalize on the
opportunity. The business plan can be a formal document or it can be
written on the back of a napkin but the mere act of writing the idea
down forces you to get the idea out of your head and on paper which
helps find hidden business flaws and makes you think carefully about
each phase of your business.
Creating a business plan is
something anyone can do, even if you don’t know anything about business
or finances. Even though the business plan is critical to getting the
idea off of the ground, many entrepreneurs procrastinate when it comes
to preparing a written plan. If you don’t know anything about business
or finances, this is the best time to begin learning as the chances of
your business being successful will be limited without this knowledge.
Just as a builder won't begin construction without a blueprint,
entrepreneurs shouldn't rush into new ventures without a plan. The old
saying that “those who fail to plan, plan to fail” is very relevant when
talking about starting a business. SBA’s statistics claim over half of
new businesses fail in the first three years and the common factor is
poor planning or under-capitalization (which is also poor planning).
Getting Started
The
first step in creating a business plan is just getting started. Writing
the business plan may seem overwhelming at first, but if you break the
plan down to bite sized pieces and work on one section at a time won’t
seem as daunting. Begin with what you know first and describe your
business and your product or services. Work towards the more difficult
subjects such as marketing, operations and financials. Don’t worry about
it being perfect now, just get the concepts on paper - expand and
refine later. If you get stuck on a section in the plan, skip it for now
and come back later when you have more details.
Who is your audience?
When
writing your car wash business plan, you need to keep in mind who your
intended audience is and why you are writing the plan. Why? A plan for
the bank will be less interested in the exit strategy and return on
investment than one for equity investors. Additionally, a plan for
written for internal use will be different than one looking for
financing as a bank is not necessarily interested in detailed operations
of the business.
Structure
Business plans tend to have a lot
of elements in common. While there is not a format that all business
plans follow, there are generally accepted guidelines that most follow
as the order in which the subjects flow are not random. The Business
Description of a business plan is aimed at painting a picture of your
business and why this business will be successful. The Marketing,
Management and Operations sections are researched and a strategy of how
your business will compete and operate is developed. Last financial
projections show in numbers what you explained in the business plan for
the sales and expenses.
Breaking these three major sections down even further, a business plan consists of six key components:
Executive Summary
Business Description
Marketing
Managers & Employees
Operations & Location
Financial Projections
In addition to these sections, a business plan should also have a cover, title page and table of contents.
How Long Should Your Business Plan Be?
The
answer that nobody liked in school applies to a business plan which is,
“as long as it needs to be”. The more complex a business or the more
sophisticated investors or funds requested will increase the length of a
plan. An average car wash business plan narrative should be 4-15 pages
plus financials and appendix items.
Business Plan Outline
Executive Summary
The
executive summary is the first part of the business plan but is the
last to be written. It gives the reader a quick glance of what your
business proposal is about and what you are asking for. This part is
critical as most readers will scan this section before deciding whether
to read further.
The executive summary should typically be about
one-half of a page in length and include what you would cover in an
elevator pitch such as:
Explain the condensed version of the business concept
Product description or service proposition
This
section should emphasize any unique features or benefits that what is
currently in the industry or area, aka why would someone buy your
product over the competition.
The demographics of your market
The Management team
When the anticipated start date is
Your equity position
How much are you asking for
Concise is the key in the executive summary. You will go into more detail later in the business plan.
Business Description
The purpose of the business description is to objectively describe the car wash business details and future potential include:
Mission
What the business does
Description of products and/or services
Industry information
Business Organization
Status of the business (start-up, expansion or purchasing)
Current and future goals
Any
facts or figures should be noted and sources included in the business
plan. This information is important should you need to defend your data
and assumptions. The business description is where you are trying to
paint a picture of the potential of your business along with the facts
to support it. Try to inject energy and excitement to get the reader
enthusiastic about the idea, without going overboard of course.
After
describing the business, it is time to describe and additional products
or services your car wash is selling. Keep in mind that it is important
to show how your products and services are better than the competition.
If you don’t have a good answer than you should rethink your strategy.
What is it about your car wash that is going to get the customer to
change doing business with the competition?
Marketing
A very
important part of your business plan is the marketing section.
Regardless of the quality of your products and your services, your
business will be lost in the clutter of advertising. If you don’t know
your customers, how will they ever find you? All of this begins with
doing some research.
Customers: Who Is Your Market
The first
step is to determine who you are going to sell to by identifying common
characteristics of your market such as age, income, race, religion,
education, interests and/or geographic locations. While everyone will
want to wash their car product how are you going to effectively
advertise to everyone and still make a profit? What you need to do
instead is determine the group or groups of people who are most likely
to use your car wash services and market to them. After all you are
trying to generate a positive return on your marketing dollars, so use
them wisely.
Competition
In today's ultracompetitive
marketplace, there is going to be competition, no matter how creative
your business concept is. Attempting to run a portion of your car wash
business better than the competition may be a difficult challenge so it
is often better to focus on planning on being different and competing
with them less directly. Can you serve a particular market niche such as
the elderly that isn’t being looked at? Can you identify a unique
operations/marketing/distribution strategy with a mobile approach? Even
if you don’t have direct competition in your area meaning someone
selling the same or similar products/services, you will have indirect
competition for replacement products/services. If you indicate in your
plan there is no competition it will be viewed that there is either no
market for your product or you have not done your research.
Optimally
you will want information on at least three but no more than five
competitors. List information about who they are, how long they have
been in business, location, products or services offered, perception on
pricing, quality, etc. and compare your advantages and disadvantages. If
the information you are looking for is not available online, you may
need to pretend you are a customer to get some of this information.
Distribution
- How Will You Get the Product To The Customer: By looking at who your
market and competition is, you will have an idea of how to get your
product to them. Perhaps through your research you will find a strategic
advantage to serve the customer that the competition does not.
Promotional Strategy
With
the above steps researched, the promotional strategy follows. The
promotional strategy is where most entrepreneurs fail as they use the
blanket statement that they are going to advertise in the newspaper,
radio and/or television without thinking through the process or the
customer. The promotional strategy provides you a map of how you are
going to reach your market in the most efficient manner possible.
Advertising is expensive, use it wisely.
Sales Projections
On
of the more difficult areas of the business plan is coming up with
sales projections. This number is probably going to be wrong and that’s
ok. What you want is a figure backed up with justifiable data. Just
grabbing a number out of the air saying you will make $300,000 won’t
work. There are many sources to help come up with this number including:
Industry journals
Trade groups
Car washes in similar demographic areas
Industry experts
Census data
Pricing
The
effects of pricing play a large role on how your product is perceived
in the marketplace. Price too low compared to the competition and your
product could be perceived as cheap and unreliable. Price too high with
the features and benefits of your product and few customers come through
the door. While this is a complex issue, here are a few things to keep
in mind.
Make sure you can make a profit at whatever price you are selling at.
If
you want to have lower costs and “get your foot in the door” it may be
better to offer discounts or coupons initially until your business is
better known.
Don’t be afraid to charge more for your product or service than the competition if you have something of more value to offer.
Pricing
is the easiest of the marketing mix to change. You may find that a
large competitor will under price you to ensure you can’t make a profit
and your car wash goes out of business.
Management & Employees
In
this section you would describe who is going to manage the business on a
daily basis as well as provide strategic direction (if these positions
are separate). Each of these people need to have a brief biography
included as well as a resume in the appendix. Try to show how the
experience and education of these people will be able to successfully
execute the strategy in the business plan and succeed. Many times the
owner may not have the specific experience for this business, so it is
very important to pull their other professional experience in and
explain how it will make for a successful operation. Next, a brief
explanation of the employees is in order including:
What positions need to be filled
When
they need to be filled (This is important in developing financial
projections as you may have some employees come on after you start)
How much they get paid (Be sure to calculate payroll taxes as well, estimate 15% if not sure)
It is also recommended to add the professional and advisors to your business. These people include:
Board of directors
Consultants
Accountants
Attorneys
Bankers
Mentors
Operations & Location
The
operations and location section of the plan illustrates how you are
going to make or acquire your product and information about your
business location.
Operations – Explain how and where your products or services are made. A few points to include in your plan
How does your car wash operate, what steps are in your service?
Who are your suppliers?
What are the terms and lead time for this product?
Location
– Location is where you will be doing business out of. If you are in
the classic, I can’t get my location until I get a loan so I can’t
finish my business plan scenario, list what features you are looking at
in a building along with average prices or rents and pad that number a
little just in case. A few things to add:
Department of
Transportation traffic count – most states have this information online
to show how many vehicles pass your location each day.
Building description
What is the size
Where is it located
Specific reasons for this property
Proximity to suppliers, roads, airports, railroads, and shipping centers, etc.
Zoning
Average
utilities – Be sure to get the last 12 months from the electric company
if the building had been occupied. This could be an expensive lesson
from a dishonest landlord. If you are opening a new location, try to
talk with other car wash operators in a non-competitive area to get a
estimate
Add pictures to the appendix
Add a floor plan to the appendix
Purchase price or monthly rent/lease
Include sales/rent/lease agreement in appendix
If building or renovating be sure to include quotes as this is an area frequently underestimated in costs.
Financial Projections
Financial
projections are placed at the end of your business plan, before the
appendix but it a very critical piece to the plan. The three must-have
financial statements are a cash flow statement, a profit and loss
statement and a balance sheet. The information already provided in the
narrative portion of the business plan must match the financial
projections. Most financial projections are three years in length. It is
a good idea to include a Notes & Assumptions to Financial
Projections page to both help make sure all of your numbers come through
and provide an itemized list to provide clarity for the reader.
Notes & Assumptions to Financial Projections
Loans
Break out each loan (building, equipment, inventory)
Amount
Interest rate
Length
And any monthly costs not discussed in business plan narrative
Cost of goods/inventory
Advertising
Employee wages
Insurance
License & fees
Miscellaneous
Professional fees
Rent/property taxes
Repairs & maintenance
Supplies
Telephone
Utilities
Vehicle expense
Etc.
Anything else that needs to be explained in the financials that is not in the narrative
Financial Projection Sections
Startup
Expenses – These are all expenses you will incur prior to opening your
car wash. It is recommended to have quotes available or in the appendix
for the larger items. It is also recommended that you pad your numbers
some as there will always be unexpected expenses that were not accounted
for.
Sources and Uses of Funds – This section details how the
loan money will be used (inventory, car wash equipment, repairs and
improvements, working capital, etc) and who is providing it (bank,
investor or owner). You will likely need to be injecting 20% of your own
money and maybe more depending on the risk assessment of the business
and your personal finances.
Cash Flows - The cash-flow statement
is one of the most important pieces of your business plan. It shows a
schedule of the money coming into the business and expenses that need to
be paid and whether you have enough cash to sustain the business gained
during the warm month to cover the costs during the winter months.
Every part of your business plan is important, but none of it means a
thing if you run out of cash. Should this number be negative, you either
need to raise sales, reduce expenses or have more cash. Your cash flow
statement will typically be three years in length with the first year
analyzing the monthly figures and later years by quarter. Don’t be
intimidated with the cash flow statement as it is merely a future look
into your checking account.
Profit & Loss – This statement,
while similar to the cash flow statement but illustrated annually looks
at the effects of non-cash charges such as depreciation and amortization
to get an accounting overview of the operations of your business.
Balance
Sheet – The balance sheet is a summary of the value of all assets,
liabilities and equity for an organization at the end of each year. A
balance sheet is often described as a "snapshot" of a company's
financial condition and will show the value of the business over time.
Personal
Financial Statement – If you are looking at bank financing every person
who will have a 20% or more ownership position will need to provide a
personal financial statement to show how effective they are at managing
your money. This statement will show your assets (checking & savings
accounts, cd’s ira, 401K, valuables, home, vehicle, etc) as well as
assets (mortgages, credit card bills, installment accounts, etc)
Appendices
Appendix
items are various pieces of information that help make your case.
Include details and studies used in your business plan; for example:
Quotes for items over $500
Resumes of the management team
Industry research
Demographic data and trends
Maps/floorplans/blueprints of location
Leases and contracts
Letters of support
There
is a lot to creating your business plan but will definitely make your
business stronger. While it may seem easier to have someone else write
your plan, there is no substitute to writing it yourself. This is your
business and by writing it yourself you will have a better understanding
of your business and strategies for success. There are also many free
business plan templates and workbooks available on the web to help you
get started. You can use these to help get started creating your
business plan and then modify it for your car wash business
