Return on Investment calculations is extremely important for any new business or an existing ongoing business.Return on investment is also more popularly known as ROI and any financial institution or partners shall ask for it when you approach them for financial assistance. It is followed all over the world and also in United Kingdom.

English financial systems requires a detailed calculation along with breakup of the components. For this you need to understand the parts of ROI statement which would help you understand your business better. The Return on Investment comprises of two calculations -

  • Inflow
  • Outflow

Inflow Calculations

Fund Inflow calculations are the calculations that you need to predict if you are a new business and assume an average amount if you are an existing business.

If you are just planning to start a carwash business, and you do not have an idea about the number of cars, don't worry, just follow the below steps to get an approximate figure :

  1. Identification: Find and identify existing car wash businesses running within 2km (if within town) / 5km (if in outskirts of your town) .
  2. Survey: Once you identify the existing car wash businesses, ask them questions about their business, how many cars do they wash during the weekends and the weekdays. Generally, you would find that the weekend has a spike in visitors. 
  3. Calculations: Use your judgement to get to the magic number which you would expect at your place car wash station. This is an average value including both the weekdays and weekends.

 

Car Wash Income

Once you have the number of customers visiting your business, you need to have an average revenue per customer. In a car wash package you have multiple wash packages or wash programs like :

  1. Bronze
  2. Silver
  3. Gold
  4. Platinum
  1. Good
  2. Better
  3. Best
  4. Ultimate
  1. Basic
  2. Standard
  3. Super
  4. Ultra
  1. Bronze
  2. Silver
  3. Gold
  4. Platinum
  1. Silver
  2. Ruby
  3. Golden
  4. Diamond
  1. Emerald
  2. Ruby
  3. Sapphire
  4. Diamond

 You can find some more examples at artifax.net

Each wash program has a different price. The first one being the basic wash with wash cycles being added with each upgrade.

For estimation purposes, you can use the charge for the number 2 or 3 package as most people would opt for them.

 

Other Incomes

You might offer other services along with Automatic Car Wash like Interior Vacuuming, Detailing, Body Polishing , POS sale of car related products. You need to add their revenues to the inflow statement as well.

 

Outflow Calculations

Congratulations! you are half way through. We now start with the outflow calculations which will give you a fair idea about the kind of equipment to select and the kind of infrastructure to have. Most of the times it is a good idea to develop a facility as per the market demand and adjust your offerings to based on it.

Your outflows or the expenditures are of 2 types :

  1. Fixed Expenditure
  2. Variable Expenditure

 

Fixed Expenditure / Cost

Fixed Expenditures are the expenditures which remain constant and do not change with respect to the volume of the business you do. List a such expenses is as below :

  • Salaries
  • Rent
  • Property taxes
  • Insurance
  • Bank Interest
  • Utilities
  • Depriciation

Whether or not you wash even a single car, the above amounts are the amounts which you would have to pay.

 

Variable Expenditure /Cost

The costs which change based on the volume of business done are categorised under Variable Costs. Some examples of variable expenditures are :

  • Electricity used by machines
  • Water used by Machines
  • Chemicals
  • Contract Workers you hire for those extra busy days

If you see the above list, you would clearly understand that if you wash 100 cars a day, the chemicals required to  wash the car would more than what you would use on the days when you get just 10 cars.

If you see the graph below, you would understand that the Variable costs and Fixed Costs together account for the total cost for a Car Wash Business.

ROI - Break Even Point

 

If you see the graph above, the point where the Income increases more than the expenditure, is the point when your car wash business starts making profits. The area marked in Green colour is the profit value.

Earlier you have the breakeven point, better is your profitability and better it is for your car wash business.

 

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