Auto detailing is often portrayed as a small business that can be started up for little upfront cash. While this may be possible, it is not advisable.
Auto detailing can be divided into maintenance services and restorative services.
Maintenance services are similar to those available at commercial car washes such as exterior washing, vacuuming, interior cleaning, shampooing, waxing, and dressings (e.g., tire shine).
Restorative services can be divided into reconditioning services and value-added services.
Reconditioning can be described as a comprehensive service that is designed to restore a vehicle’s “new car” look and feel.
Value-added services include specialized services such as ceramic coating, paintless dent removal, factory paint repair, headliner replacement, windshield repair, etc.
Detailers need a place to perform services. This means a location-based operation or mobile.
One attribute of mobile detailing is it can be operated as a home-based business. As a startup, a mobile detailer will need to make certain capital investments (cash) to bring the business to a commercially viable state.
Investment will be necessary to purchase equipment and supplies and to cover business operating expenses until the business makes a profit.
To illustrate, we can purchase a basic detail startup kit for $4,000. This kit contains enough supplies and equipment for one person to perform detail maintenance and reconditioning services but not the value-added services mentioned.
Operating expenses are costs that a mobile detailer will incur on a monthly basis such as liability insurance, telephone, website hosting fee, and auto expense (fuel, insurance, car payment). In Florida, the average total cost of these expenses is about $500 per month.
Small business experts recommend startups have cash on hand to cover at least six months of operating expenses. Consequently, the upfront cash needed for our example detailer is $7,000. This includes $4,000 for the startup kit plus another $3,000 to cover operating expenses ($500 X 6 months).
PROFIT
Now we can discuss profit.
Profit is the money a business makes after accounting for all expenses. For example, we have already discussed operating expenses that a detailer will incur on a monthly basis. These expenses are referred to as fixed cost.
Other expenses are those that occur each time that a service is rendered. These expenses are referred to as variable cost or cost of goods sold. For a mobile detailer, variable cost includes credit card processing fees, chemicals, supplies, and equipment maintenance.
Based on information in Auto Laundry News detail surveys, the variable unit cost to detail a car is about $20. Therefore, if we know what the average price is, we can calculate what is known as the breakeven point.
The breakeven point is the point at which total cost and total revenue are equal, meaning there is no loss or gain for the business. In short, breakeven indicates how much revenue must be generated before the business can turn a profit given its cost of operation.
Breakeven = fixed cost / (price – variable unit cost)
Shown above is the breakeven equation for units. To illustrate, let’s assume the average price for a detail is $150:
Breakeven units = ($500 X 12 months) / ($150 – $20)
Breakeven units = 46 (cars)
Breakeven in dollars is calculated by multiplying breakeven units and average price or $6,900 (46 X $150). In other words, our detailer would have to process almost one car per week before the business made a single penny.
Mobile Operation
Profit and loss is determined by summarizing revenues, costs, and expenses incurred during a specified period such as a month or fiscal year.
Shown above is the profit and loss for our mobile detailer based on processing an average of four cars per week at $150 per car versus processing five cars per week at $200 per car.
These figures underscore the main issue with mobile operations. On the one hand, it doesn’t cost a lot to start up a basic mobile detail business. On the other hand, you can’t make a lot of money unless you detail a lot of cars or offer value-added services that command higher prices and have better profit margins.
Location-Based Operation
Starting up a detail shop has different challenges. The first is finding a good location.
Generally speaking, detailers have two choices. One is to find a store front to rent on a high-traffic road in a high-income area. The other is to find an automotive or warehouse type property on a secondary road.
The former provides more access and exposure to pass-by traffic and nearby businesses albeit at the expense of higher rent whereas the latter provides larger floor area to produce more cars per day for less rent.
The typical cost to start-up a location-based detail operation is between $125,000 and $300,000.
Shown above is the profit and loss for a location-based detail shop using benchmarking data from ALN detail surveys.
Generating a steady stream of business and getting a good price requires a strong value proposition. For example, people go to a commercial car wash because it’s a convenient, fast, and economical way for them to clean, shine, and protect their vehicles.
The demand for commercial car washing is quite large. The market consists of both DIY and DIFM segments and most folks who use a professional car wash visit, on average, about 12 times per year.
Conversely, the typical detail customer may need to visit only once or twice a year to restore that “new car” look and feel. Consequently, the key to achieving greater sales and profits is to specialize in value-added services that provide great margins.
For example, one of the highest value and profit-margin services in the detailing industry is ceramic coating sales and applications. According to ceramic suppliers, achieving a gross margin of 50 percent of sales is not uncommon.
Other services that have great margins are paintless dent removal, glass repair, and factory paint correction. However, value-added services require professional training to ensure a high level of quality and customer satisfaction.
For mobile operators, value-added services may include deodorizing, water-less car wash, headlight restoration, and paint touch-up.
A location-based detail operation captures value from pass-by traffic and surrounding businesses and residential development.
Consequently, the shop should be located in an area that has a sufficient number of households and businesses with the incomes and revenues to afford the prices.
Conversely, mobile operations have two options. One is to offer service by appointment as an independent owner/operator. Another is to join one of the digital networks (e.g., Washe) and provide on-demand service.
Competitive advantage is what allows a business to outperform its competitors. Generally speaking, companies can attempt to create advantage by means of cost strategy, differentiation, or niche strategy.
For example, if most mobile detailers in the area are cleaning cars with water or steam, using water-less car wash products may provide an edge up on the competition.
Express detail services have an excellent profit margin. However, according to ALN surveys, only about 25 percent of detailers provide such services. Consequently, offering express service may be a way of carving out a very profitable niche market. Moreover, detailers can choose to differentiate by vehicle type such as aircraft, boats, RVs, motorcycles, etc.
Car-care maintenance services such as hand washing, vacuuming, shampooing, waxing, and dressing interior surfaces can be easily learned and performed.
Reconditioning and value-added services require formal training in procedures and material use and, in some cases, certification to validate product warranties (e.g., ceramic coating).
Detail training resources are not in short supply. There are many opportunities (too numerous to list here) for hands-on classroom instruction, online instruction, and training manuals and videos. Besides this, there is a number of detailing blogs and detailing social networks available online.
The International Detailing Association (IDA) is the leading industry association for professional detailing operators, suppliers, and consultants.
IDA is dedicated to promoting the value of professional detailing, the recognition of professional detailing as a trade, and empowering detailing industry professionals at each stage in their career.
Networking opportunities include Mobile Tech Expo also known as the Mobile Auto Recon and Dent Repair Show and SEMA (Specialty Equipment Market Association). SEMA is the largest automotive show and provides exposure to many detailing products as well as the big names in auto detailing including IDA which offers a certification-in-a-day event.
In the final analysis, growing and sustaining a detail business takes more than being a good technician. Knowing what to do and how to do it is crucial but so are administration and management.
For example, every detail operation should have a business plan. The purpose of a business plan is to help manage the company by stating what the goals and objectives are, how they will be achieved, and when. The plan should summarize the business purpose, how the company’s products and services will achieve this purpose, and how it will get done.
Saving or retaining a portion of earnings is also essential to ensure there is cash available in the future for emergencies or to invest in new equipment or expand operations.
It also takes time. It is not possible to go from lot porter or car wash employee to application of a $1,500 ceramic coat after watching “in 10 easy steps” videos.
Unlike commercial car washing that is suited for a work-based training model, detailing is more suited to the apprenticeship model. The goal of an apprenticeship is to provide a high-quality career pathway where employers can develop and prepare their future workforce. Participants can obtain paid work experience, classroom instruction, mentorship, and a portable credential.
Bob Roman is a car wash consultant. You can reach Bob via e-mail at bob@carwashplan.com or by visiting www.carwashplan.com.