Business Plan of Clean Machine Hand Car Wash
Executive Summary
The owner of Clean Machine is a prominent figure in the Morningside, Johannesburg business district, and he hopes that his loyal business acquaintances and local friends will be a competitive advantage to him. Clean Machine is an exclusive hand car wash, and will be serving the Morningside community.
The Business
Clean Machine will aim to fulfil three types of needs in the car wash industry, namely interior cleaning and vacuuming, exterior hand wash and detailing. There are no other car washes in the vicinity that offers a good quality service like this, at affordable rates, and thus Clean Machine has no direct competitors in the area. The owner of Clean Machine believe in the value adding qualities of happy employees, and will focus on employing only the best workers, at more than the minimum wage.
The Customers
Clean Machine’s target market will be divided into three main categories: individual’s (or “walk-in’s”), dealerships, and the local business community. The average income of residents in this area is estimated to be over R70,000 a year. This means that their average customer is quite affluent, and that they will probably have expensive cars which they want to keep in mint condition. Being in the middle of a business centre, they will most likely attract the local businesses that have company cars and would need them washed on a regular basis. The most lucrative option, however, are the six different car dealerships that operate in the area and the owner of Clean Machine will target his marketing efforts on them.
Management
The owner, John, has over 10 years’ working experience in the car repair industry, of which 4 years as an operations manager. John feels that this experience, together with the friendships he has formed in the business community of Morningside, is Clean Machine’s main strength. His qualifications include an MBA from the University of Johannesburg.
Clean Machine will be the only exclusive hand car wash in the Morningside are and they estimates their market share on 20%. It is assumed that Clean Machine will achieve a 95% gross margin and an 11% net margin after the first year, and a 20.79% net margin after year three. The business will reach a yearly net profit of R48,000 by year three.
Objectives
Clean Machine’s objectives are:
1. To be the only exclusive car wash in Morningside.
2. To keep the gross profit margin over 95%.
3. To keep up the net profit margin of 10-15%.
4. To look at expansion opportunities after year 3.
Mission
Clean Machine’s mission is to be a premium quality car wash service for the residents and business owner in Morningside. John will strive to keep employees loyal and in high spirits to ensure customer satisfaction.
Company Summary
John Hue is the sole owner of Clean Machine, and he will contribute a start-up fee of R30,000 to the business. Clean Machine is registered as a Closed Corporation.
Company Ownerhip
John Hue is the sole owner of Clean Machine. John has over 10 years experience in the car industry and has an MBA obtained from the University of Johannesburg. He stumbled upon the location in Morningside by accident, and felt that it would be the ideal site for a car wash service.
Start-up Summary
John Hue will contribute a start-up fee of R30,000 out of his personal funds. The property is located in Main Road, and Clean Machine will sign a three year contract, starting in April 2001. The business will have the option to extend the lease contract of the expiry of the first contract.
John has negotiated with the owner of the property for a rent of R1,200 per month. He also has to pay an insurance fee of R200 per month, and will be responsible for the electricity bill, which is not included in the rental price.
Clean Machine will have to procure three high-power water pumps, three industrial vacuum cleaners, one computer and one cash register. The equipment will be depreciated on the accrual system over five years.
Services
Clean Machine will provide three services to its customers:
• Interior cleaning and vacuuming
• Exterior washing
• Car detailing.
Market Analysis Summary
The location of Clean Machine car wash holds plenty of market opportunities. The average resident in the area is considered to be affluent, and will want to keep their expensive cars in mint condition. There are also many local businesses with company cars that need to be washed on a regular basis, but the biggest opportunity for Clean Machine lies in the many car dealerships in the surrounding business centre.
Market Segmentation
Clean Machine’s Market segmentation is done demographically:
Luxury car owner: Clean Machine will focus on this segment for their premium hand wash service. Luxury car owner takes pride in their cars and would probably become regular customers over time.
Cost conscious car owner: Although Clean Machine will not focus on this segment, there are cheaper options available for those who just want an exterior quick wash. Our main service for this segment will be the “Wash and Go” serve, which is the cheapest service.
Dealerships: The dealerships in the area will constitute a large portion of the segmentation cake. Dealerships would want to keep their fleet of cars shiny and spotless and Clean Machine hopes to fulfil that need.
Local businesses: Many of the local businesses have company cars that need to be washed often. Clean Machine will target these businesses and give them the option to get discounts for regular washes.
Target Market Segment Strategy
After doing extensive market research, John has found that Mondays, Tuesdays and Wednesdays are the slowest days for a car wash. This might be due to the fact that many people wash their cars before they leave for a weekend away, after they return for a weekend away or simply has more time for things like washing the car during the weekend.
To counter this effect, Clean Machine will target cost conscious customers during these days, by offering specials and discounts on Mondays to Wednesdays.
Service Business Analysis
There are four other car wash services in a 3 kilometre radius from Clean Machine. However, none of these are focussed on the premium hand wash service for exclusive customers. Their primary target market are the cost conscious individual.
Competition and Buying Patterns
There are other low cost car wash services in the vicinity of Morningside, but John aims to attract loyal premium customers by offering a good quality and personal service. Also, he wants to sign contracts with local businesses and car dealerships, giving them discounts for regular washes. This makes it lucrative for them to continue washing their cars at Clean Machine.
Strategy and Implementation Summary
Clean Machine will outshine its competitors based on John Hue’s sense of business gained in his 10 years in the car repair industry. Clean Machine will depend greatly on its ability to create loyal customers and this will be its main strategy.
Competitive Edge
John Hue has also build voluble relations with the local business community and hopes that this will create loyal customers and in turn give Clean Machine a competitive edge.
In addition, John’s experience as an operations manager has been valuable in learning how to keep overhead expenses as low as possible, and this will come in handy when creating special offers and discounts for Monday to Wednesday customers.
Sales Strategy
Clean Machine will offer discounts and special offers on Mondays to Wednesdays in order to boost sales on those days. John will try to convince the business owner in the vicinity to sign contracts with lucrative benefits, and thus try to sell directly to businesses.
Sales Forecast
The table below is a sales forecast based on Market Research done by John.
Please insert a Sales forecast graph here, indicating the projected sales for 12 months.
Management Summary
John Hue is the sole owner and manager of Clean Machine. In addition, he will be helped (on an unofficial basis) by his father, Graig Hue. Bampho has over 30 years experience as an entrepreneur and has run several successful businesses
Personnel Plan
Clean Machine will employ three full time workers, and two additional part-time workers for the weekend rush.
Financial Plan
The Financial Plan below will outline the financial projections of Clean Machine. John Hue will finance the start-up expenses of Clean Machine, with a R30, 000 investments from his personal funds, and growth will be financed by cash flow. This will implicate a slow initial growth for the company, but John does not want to involve outside investors and jeopardise his control over the direction of the company. John hopes to be able to open a second location within 3 years.
Please refer to our Financial Plan page for more information on what the Financial Plan entails.
Break-even Analysis
Fixed monthly costs for Clean Machine are estimated to be approximately R7,500, and break even monthly units are 203 units per month.
Please refer to our Financial Plan page for a formula to calculate the Break-even point.
Projected Cash Flow
Click here to download a Cash Flow template.
Projected Income Statement (Profit and Loss)
Click here to download an Income Statement template.
Projected Balance Sheet
Click here to download a Balance Sheet template.
