Past Issue

Simple Car Wash - A Prototype for the Mom and Pop Investor

By Robert Roman

11/01/16

I found an article in my Penn State News magazine about Taylor Mitcham, a then recent graduate who majored in mining engineering. What is unique about Taylor is that she developed a successful car wash business while in school.

Taylor Mitcham

Simple Car Wash™, headquartered in State College, PA, was founded in July 2014 with the goal of making a clean car simple. Simple Car Wash is a web-based business with five employees who go to the customer’s location and hand clean vehicles with waterless car wash products.

Simple offers exterior wash, full-service, and interior-only options. Prices start at $20 and there is a fleet program. According to the company’s website, exterior cleaning on a sedan takes between 15 to 40 minutes and total combo on an SUV can take one to two hours depending on how dirty it is.

“When this business started, I couldn’t even sell a ketchup packet,” said Mitcham. “Now I’m negotiating $100,000 contracts (with car dealerships). It’s pretty surreal.” Taylor’s short-term goal is to build the local market to more than $250,000. If successful, this would be equal to industry same-store sales (industry wash revenue/number of establishments).

Mitcham’s idea for Simple came about because “I waited for half an hour…to clean my car the first time I went to a car wash,” said Mitcham. “That just wasn’t going to work for my schedule.”

State College may be somewhat isolated, but it’s not like Simple has no competition. The region includes a conveyor wash with multiple profit centers, several self-serves with multiple in-bays, a freestanding hand-wash, a dual-in-bay site, and several detail businesses.

Moreover, as in most college towns, resorts, and other isolated areas, the car wash business is often challenging. During the winter, Happy Valley is windy, frigid, and snowy. During the summer, the place looks like a ghost town because there is basically nothing to do when school is out.

Although the region’s daytime population can exceed 80,000, the market segment does not rate high for car washing. For example, 56 percent of the population is between 18 and 25 years old. Almost 70 percent of homes are rented. Fifty percent of households have income of less than $35,000. Only 15 percent of the population is married.

If we apply standard research methods against the area’s demographic profile, we would expect the total available market to be roughly 60 percent of the norm.

So, how did Mitcham mitigate these risks?

A simple process.

Her first step was due diligence. This included using services offered at Penn State’s Small Business Development Center to learn how to operate a legal business and the College of Communications to learn how to develop a marketing strategy with a certain budget to promote the business.

To keep track of customers, Mitcham uses a barcode scanning app. “We can use barcodes already on the vehicle — an inspection sticker or oil change reminder — and scan them into our database using an existing app that I tweaked to better fit our needs,” said Mitcham.

In addition to calling, e-mailing, or scheduling online, Mitcham is also developing an app that will allow customers to take a picture of the vehicle they want washed and then GeoTag it so she knows exactly where they want her to go.

To help keep customers loyal and grow the customer base, Mitcham has developed a subscription membership. “Now you can pay a monthly fee and we will come out twice a month or even an unlimited number of times per month,” said Mitcham. “We’ve more than doubled our customer base in the last year.”

And finally, the waterless washing means Simple Car Wash is helping with water conservation efforts, something the California native is passionate about. For example, Mitcham created Operation 1 for 100, where for every 100 gallons of water saved by her waterless car washes, she will donate one dollar to a local charity.

And there you have it, a twenty-something college graduate that is on track to generate profit that is equal to or greater than many self-serve and in-bay car washes but without the real estate, building, or equipment.

After she builds out the State College market, Mitcham’s long-term goal is to franchise specifically to other universities. “Penn State has been amazingly helpful with getting me started. I’m excited to expand Simple Car Wash and see what happens.”

Hopefully, Mitcham’s due diligence will include car wash industry resources before she does this. Here, she would learn of the many failed attempts at consolidation and franchising, as well as the  fact that the Internet that has been awash for years with MLM schemes for waterless car wash products and businesses.

Not to mention the recent failed attempt by Cherry.com once described as the Uber of car washing. Like Simple, Cherry was a web-based service to “book” a car wash where you wanted it.

In December 2012, Cherry shut down its service after raising venture funds.

Techies say Cherry failed because of transaction volume, margins unable to sustain excess labor supply, and scale — it’s much harder, more expensive, and more time consuming to scale a business offline and into new locations than an online business.

I believe Cherry failed because, unlike Mitcham, its founder did not first create a lifestyle business. Instead, Cherry assembled venture capital and tried to grow quickly by focusing on proprietary technology rather than the car wash business first.

For example, some of the measures of technical viability for a new business venture are capacity, availability and quality of resources, and production process.

Simple’s car wash process is simple, it doesn’t require much material or equipment and there is a deep pool of high quality labor (young, energetic college students). Most important to a new venture is market viability, which involves the size, sustainability, and potential value of the market.

Unlike Cherry, which tried to serve the congested San Francisco Bay Area (18,000 people per square mile), Simple serves a much smaller trade area with 1,000 people per square mile. Since Simple can easily reach its customer base, this allows the company to focus most of its resources on satisfying the needs and wants of its clients.

In the final analysis, Simple Car Wash could serve as a newprototype for the mom and pop investor. Unlike self-serve car washing that is almost prohibitive due to cost and resale exit strategy, Mitcham has demonstrated proof of concept at a fraction of the cost and risk.

The business model could be duplicated, but it is unlikely because many self-serve and express owners got into the business to avoid managing labor expense.

 

Bob Roman is president of RJR Enterprises – Consulting Services (www.carwashplan.com). You can reach Bob via e-mail at bob@carwashplan.com.

 

 



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