New startup, large commercial site, am i risking too much here!

Discussion in 'General Business Forum' started by haryj, Jun 19, 2019.

  1. haryj

    haryj UKBF Newcomer Free Member

    18 0
    Hi All,

    I have been very interested in a fairly large site near me (London) it's approx 0.2 Acre. Previously it's been used as a Car sales forecourt with a small workshop (for their own use) on site and prior to this it was a fuel station, with few pumps still in operation.

    Being 0.2 Acre's it can host a very large number of vehicles and being close to 2 Major A roads. My plan for it would be to host a Hand car wash & Valeting centre in the forecourt area and also Auto repairs facility in the small workshop, which also has a potential to be extended side ways, as currently this only allows 2 vehicles to be worked on at one time. Future plans for a MOT test station.

    The Hand car wash & valeting centre will not be the typical type, owned by certain nationals from parts of europe, who seem to have given this industry a terrible name! It will also have detailing services and specialist paint protection services and maybe even a mobile service, offered in due course. Currently if vehicles are lined up correctly my estimation tells me on average 20 cars can be washed at one time. Yes, i understand staff play the main role in this also. But i'll come to that.

    As you can see the site hosts 2 businesses comfortably, Both can make a substantial income. There is another 2 garages opposite, one is a body shop and the other is servicing and tyres. But sadly both businesses are very dated, with poor lighting, worn out signage, mountain of rubbish always accumulated on their entrances, none of them give a comfortable appeal to the public. On the bright side there is a Cab office next door, who has in excess of 120 drivers under them, therefore plenty of work should be able to be generated from them.


    Now down to real business..

    (All figures are rough estimations only)

    PREMISES
    Rent approx £80k per annum
    Business rates £50k per annum
    Electric: £300 per month
    Water: £350-£400 Per month
    Trade insurance including liability cover, premises cover and etc: £5000 per annum

    CAR WASH (9am-7pm opening hours)
    Staff wages x4 to start with @ £8.21 per hour (minimum wage)
    Chemicals, cleaning additives, peripherals approx £300-£500 per week

    COST FOR CAR WASH
    Minimum charge per outside wash, £6
    In and out wash, £12

    These are for your standard 5 seat vehicles, 7 seaters and 4x4's will incur further charges
    Also bronze, silver, gold etc packages will be made available with more exclusive cleaning products used and in depth drying process with air compressor.

    AUTO REPAIRS FACILITY (8am - 6pm opening hours)

    This will carry our servicing and repairs to virtually all makes and models, and commercials upto 3.5ton.

    2 x Full time mechanics at around £12 per hour each.
    Workshop consumables and accessories £300-£500 per week


    Both businesses will be relying on social media, instagram & facebook. Daily posts and offers!

    Card payments will also be accepted for the car wash side, as well as the Auto repairs.

    There are many local businesses and also a small industrial estate with many vans present, i'm sure some deal can be stricken with these enterprises for both Washing/Cleaning & Servicing/Repairs.


    The big question now is, all of the above mentioned in terms of creating income and expanding the businesses slowly, will it be efficient enough to pay for overheads and pocket profit?



    Thanks for reading my ever so long post, looking to hear from you's soon.


    Regards,

    Harry
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #1
  2. MY OFFICE IN CHINA

    MY OFFICE IN CHINA UKBF Big Shot Full Member

    4,217 852
    You have omitted some very very important points:

    1. What will it cost to bring the site up to scratch in order for you to offer all the above services?

    2. What cash do you have to cover the work in point 1?

    3. What funds do you have in place for covering all your expenses for the first year (at least)? It takes time to build your trade.

    4. Your marketing seems focused only on social media, a cheap and ineffective route for your type of business. You must have a robust marketing campaign for the first year of the business in order to kick-start the flow of customers.

    5. Your post includes day to day running costs only. You will find there is a host of other areas that will require finance and these will not be small sums.

    I'm sure there will be a posters after me that will add much more to what is required and what you should include.

    When starting a business, you should do the following when projecting your cash flow:

    a. Double your anticipated expenses.

    b. Double your start up costs.

    c. Reduce your anticipated turnover for the first year to 20%.

    If you did the above 3 points, does the business model still work.

    I am not saying that your business model will not work, but you have to have finance in place in order to realise what you want to achieve.

    You should also run your plan/figures with both a competent accountant and someone who has experience in the business you want to open to ensure all costs are covered. You may be surprised what's involved.

    I wish you good luck with your venture and hope it takes off . . . . . .after taking on board the above points and due diligence.
     
    Posted: Jun 19, 2019 By: MY OFFICE IN CHINA Member since: Nov 16, 2011
    #2
  3. Noah

    Noah UKBF Ace Free Member

    1,161 290
    Have you asked them?
     
    Posted: Jun 19, 2019 By: Noah Member since: Sep 1, 2009
    #3
  4. fisicx

    fisicx It's Major Clanger! Staff Member

    30,358 8,923
    Where are you going to find mechanics for £12/hour?

    And your workshop running costs will be far higher than that. You haven’t costed utilities, waste disposal all the other daily costs.
     
    Posted: Jun 19, 2019 By: fisicx Member since: Sep 12, 2006
    #4
  5. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

    3,157 913
    Your ‘USP’ I’d not really sing Eastern European labour is meaningless and quite probably unachievable. (Actually, dependent on location, finding any labour at minimum wage might be unachievable)

    You’ve given more thought than many at this stage but you really need to dig down on the numbers my suggestion would be to get a cash flow forecast template and use that as a gauge.

    Marketing will be your biggie. It takes time effort and money to get reliable repeat custom.
     
    Posted: Jun 19, 2019 By: Mark T Jones Member since: Nov 4, 2015
    #5
  6. NickGrogan

    NickGrogan UKBF Ace Free Member

    1,885 419
    Utility costs will be higher. If you know the address it should be possible to find the water rates - it is based on part on rateable value.

    Staff costs will be much higher too.

    How are you going to get 20 cars lined up, with only 4 people washing? If I see more than 3 cars in the queue, I'll go elsewhere.

    Assuming 2 people on each car, that's 10 in each queue.
     
    Posted: Jun 19, 2019 By: NickGrogan Member since: Nov 15, 2012
    #6
  7. tony84

    tony84 UKBF Big Shot Free Member

    5,505 958
    Seems cheap?

    I am in Manchester and I think I pay around £15-17 for wash, vac and quick wipe down of my car. I would have expected London to be more expensive?

    What about the taxi firm, the local trading estate and obviously passing trade? He has mentioned more than just social media.

    The one near us especially on a sunny day can easily have about 7-8 cars going through with around another 6-8 cars in the queue waiting - I have seen 4-5 cars on the road outside waiting to turn in before now.



    -----
    On a side note, you have covered staff wages, what about pensions, NI, holiday and sick pay?
    How much for the card machine?
    Uniforms?
    You may find your water bill goes up if you are running a car wash.
     
    Posted: Jun 19, 2019 By: tony84 Member since: Apr 14, 2008
    #7
  8. Root 66 Woodshop

    Root 66 Woodshop UKBF Big Shot Free Member

    4,770 1,284
    Posted: Jun 19, 2019 By: Root 66 Woodshop Member since: Nov 22, 2011
    #8
  9. haryj

    haryj UKBF Newcomer Free Member

    18 0

    1. We have around £150k to invest (2 partners). We’re not looking to go crazy with brand name products, we’ve worked in the industry before, me personally, a level 3 tech at a Ford Stealership! Therefore i know basics.

    2. To bring the site up to scratch, it’s not terrible, its actually in good nick, advertising banners, sign boards and lighting will be one of the main costs also. We have plenty of friends who can help us out, as they reside in the construction industry and can do a lot of the labour installation. Tools and equipment we can purchase for around £30k we don’t need substantial amounts to begin with, for both businesses.

    Technicians/Mechanics are required to bring their own tools, as mentioned above i worked at a main dealer apart from trolley jacks, oil drainers and few other small equipment, they provided you NIL.

    3. We can set a side some from our initial investment.

    4. Would you care to share any idea’s? Social media and web advertising is one of the biggest influencers in this trade. Nobody is going to pick up yellow pages, dial 118 or even bother with your leaflets/flyers anymore. I know of a bodyshop businesses that have had a significant boost to their business, within the past 3 years, purely because of social media, currently 65-70k followers on instagram and customers driving down from every corner of the UK. Even launching a tv series very soon.

    5. I understand there will be other hidden costs, isn’t this always the case. Especially maintenance costs.


    Thanks for your input, i see what your aiming at expenses, turnover and startup costs. Kind of expect the worse case scenario within it also and do we still manage with it.
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #9
  10. haryj

    haryj UKBF Newcomer Free Member

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    Nope, but i’m sure an Ind estate that caters for over 100 vans at least, someone will look into your direction for business, these are small to medium businesses i’m referring to. Who often look out to keep their expenses low.

    I’m thinking more on volume from this and it’s just a slight boost to get the ball rolling.
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #10
  11. Root 66 Woodshop

    Root 66 Woodshop UKBF Big Shot Free Member

    4,770 1,284
    Have you considered your Security? changing locks, additional locking products, upgrading an alarm (if there is one) CCTV, Access control (not always needed, but standard Digital combination locks on office doors is a good deterrent).
     
    Posted: Jun 19, 2019 By: Root 66 Woodshop Member since: Nov 22, 2011
    #11
  12. Financial-Modeller

    Financial-Modeller UKBF Regular Full Member

    311 87
    A couple of immediate thoughts:
    1. The guy who will work as a mechanic for £12 per hour is unlikely to be the guy you want meeting clients, diagnosing problems, ordering parts, etc. You will need to pay more &/or outsource diagnostics &/or manage admin.
    2. Harder to start up the garage side so I would concentrate on the carwash side first.
    3. How many cars will you wash per week? Ignoring the workshop, and rounding your numbers a bit you'll be washing the first 1000 cars every week just to pay your costs!
    4. Be ready to receive a visit from disgruntled owners of other car washing spaces locally!
    5. Car washing seems to be a race to the bottom. Detailing on the other hand looks appealing as you can detail and prepare cars for the local garages for your bread and butter, and do far higher-margin work for retail customers in addition.
     
    Posted: Jun 19, 2019 By: Financial-Modeller Member since: Jul 3, 2012
    #12
  13. Mr D

    Mr D UKBF Legend Free Member

    14,883 1,624
    Don't forget to factor in your pension costs and recruitment costs for staff, not to mention cover during their 28 days holiday a year and any sickness they have.
    Your car wash has multiple shifts? Your auto facility has multiple shifts? Got enough staff to cover?
    Oh and the 4.8% or so pay rise every year.

    Then there is the marketing - what happens if you don't get enough business? What happens if nearby facilities try taking your customers? What happens if some Eastern European guys open up a car washing facility nearby and undercut you?
    I think you may be relying on social media too much. Great if a company already has a hundred thousand fans, not so great if unknown.

    I worked briefly at a car wash when I was 16, between 4 of us we had around 50 cars a day, some paying full price as listed, a lot paying contract price which was lower. We covered several taxi companies.
     
    Posted: Jun 19, 2019 By: Mr D Member since: Feb 12, 2017
    #13
  14. The Byre

    The Byre UKBF Ace Free Member

    8,627 3,350
    I'm all for a gung-ho and blue-eyed optimistic approach, but I feel a degree of madness is setting in here!

    The gross average wage for a provincial (i.e. not London) car mechanic as reported on a pay-slip is £14, which means that the employer must budget about £20 per hour (payroll taxes, insurance, sickness, holidays, Christmas bonus).

    Again, add at least 50% to that figure to find out what it will cost you.

    0.2 of an acre is 800 sq m - that is very little when dealing with cars, as they need to be parked, moved and some will be waiting to be repaired and others waiting to be picked up. 800 sq m is about the size of a garden. You have forgotten that the first cars of the day have to be brought in the previous day, so up to eight cars have to be found space overnight.

    And then they sit there, waiting for ther owners to pick them up after work!

    A guy near us runs a four-bay repair shop, plus an MOT bay. He has parking for 28 cars and each bay takes up about 50 sq m of the building if we include all additional space for tools and other fixtures. Running four bays requires two managers, three office and reception staff, one workshop manager, six mechanics and one MOT tester. The whole site with buildings is about one acre - and it's bloody cramped!

    You want to have a two-bay setup, so going by that yardstick, you'll need half an acre just for the two bays. But you want to add car cleaning to that in a site that is the size of a large suburban lawn.

    If you are both L3 and have your own hand-tools, I would seriously consider concentrating on servicing and repairs only - at least for starters!

    But all that said, your anual costs for this site are going to be (without materials and wages) about £150k (rent 80; rates 50; water/electric/heat 12; insurance 5) and you will need two lifts, tyre/wheel balancer and airtools, etc., etc., etc. and add to the list of toys and repair old and worn-out toys.

    That means each bay will have to clear £40 per hour gross margin after wages and other costs and be rocking eight hours a day, five days a week for 50 weeks - just to break even!

    Or to put it another way - the bloody site is too expensive! Step away from this one and get something cheaper, larger and more realistic!
     
    Posted: Jun 19, 2019 By: The Byre Member since: Aug 13, 2013
    #14
  15. haryj

    haryj UKBF Newcomer Free Member

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    I worked as a level 3 technician at a Ford Stealership for £13/hour, 10hr shift with less than a 59minute lunch break, unbelievable targets, where you need to basically lie through your teeth! to get them a sale and that’s the honest truth . Of course at some point i will have to pay more for staff, but this is just initial a basic going rate, that i’ve researched within the area.

    Waste disposal a local licensed scrap merchants will take our metal free of charge and general waste will be at a cost of per refuse sack. I don’t currently have the figures for this.
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #15
  16. haryj

    haryj UKBF Newcomer Free Member

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    Thanks i’ll keep this in mind!
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #16
  17. haryj

    haryj UKBF Newcomer Free Member

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    We can find out the water rates from neighbouring garages, as a rough guide i suppose and also ask the utility company for their cubic meter rates.

    20 cars is what i’m saying can be lined up, it may not be the case we will have all 20 cars in at once. I’ve been to washes with 6-7 cars in front, because they do/did a decent job i was prepared to wait. A good business will attract loyal customers!
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #17
  18. haryj

    haryj UKBF Newcomer Free Member

    18 0
    Average car size is approx 4.8m x 2.4m = 11.52 sq m. Therefore a site at approx 800sq m will hold somewhere around 69 vehicles, yes halved for car washinf. You honestly think this space is the size of a garden? How many gardens do you know of that can hold 69 vehicles

    We will have strict policy’s in place, you bring your vehicle in and agree to our terms to take the vehicle upon completion of works, unless otherwise agreed. If these terms are not met, storage charges will begin and this will cover our costs to move these vehicles elsewhere, should we need to.

    I know of a garage in my local home area which services around 60 vehicles a week, 40-50 Mot’s a week and has 3 mechanics/technicians. None of whom are receiving much more than what i will be offering as a initial start. There is only one manager and the owner himself. The garage is been there for many years, 10-15. Zero marketing involved, purely ran on local community and he’s thriving.

    Certain equipment is available in good used condition, plenty of workshops closing down up n down the country, these are well cheap.

    It seems you garage you are referring to is taking on more they can handle, wouldn’t we all want the income, but you can only deal with so much, every business has its own mindset and goals.
     
    Posted: Jun 19, 2019 By: haryj Member since: Apr 11, 2013
    #18
  19. Mr D

    Mr D UKBF Legend Free Member

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    He can have zero marketing spend now. You starting off will struggle with being noticed.
     
    Posted: Jun 19, 2019 By: Mr D Member since: Feb 12, 2017
    #19
  20. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

    3,157 913
    My neighbour seems to manage:D

    But seriously; one of the tougher things for an optimistic start up is to strike a balance between naive optimism and harsh reality. One of the basic rules of a start-up business plan is 'if you haven't found the point at which it falls over, you haven't tested it properly'

    It might be that the feedback you are given here is overly pessimistic. Statistically, it is almost certainly the case that your own assumptions are overly optimistic. A good starting point would be to create your initial plan at a point halfway between to 2 and see how it looks.
     
    Posted: Jun 19, 2019 By: Mark T Jones Member since: Nov 4, 2015
    #20