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For Module 1, you did research on consumer demand and pricing for your business idea. Continue with the same business idea that you wrote about for Module 1, but now look at the cost side of your business. (at bottom)Do some research on various potential start-up expenses for your business based on research on wages, office space rental rates, etc., in your home town. More specifically, write a three-page paper answering the following questions:What do you think the main expenses will be for your business? Make sure to discuss labor, rent, equipment, and any other major expense you can think of.Do some research on the internet or from your own personal contacts to get a ballpark estimate of how much the specific expenses are in your home town for the items that you listed in your answer to Question 1 above. You can use Craig’s List or similar webpages to get an idea about wages for different positions that you may need to hire for, and there are many webpages that have advertisements for renting commercial property in different parts of the country.Finally, break down your expenses into fixed plus variable costs. Make sure to cite two of the required background readings as justification for your classifications of your different expenses into the fixed and variable cost categories.SLP Assignment ExpectationsAnswer the assignment questions directly.Stay focused on the precise assignment questions. Do not go off on tangents or devote a lot of space to summarizing general background materials.Make sure to use reliable and credible sources as your references. Articles published in established newspapers or business journals/magazines are preferred. If you find articles on the Internet, make sure they are from a credible source.Reference your sources of information with both a bibliography and in-text citations.
A
business that I want to start is a High-Tech Car Wash. There are several
reasons why I want to start a car wash business. One reason is that many
households in the country own one or more cars and those cars need to be
regularly washed. The need for regular washing means that the flow of clients
will likely be constant. Another reason why I want to start a high-tech car
wash is that high costs are only incurred at the inception of the business.
Purchasing and installing the technology needed for the business will be
costly, but once that is complete, the cost of operations will go down. Funds
will be often used to pay employees, pay electricity bills, and buy detergents
among other miscellaneous expenses. Thirdly, a car wash will be easy to manage
as operations are not complicated compared to many other businesses.
I also have a personal connection to
a high-tech car wash business and the relationship has strongly influenced me
to start such an undertaking. The personal connection is that my uncle used to
manage a car wash business. He used to explain to us that the business is easy
to operate and that the flow of clients is constant. I visited him several
times at the business and was impressed by how many clients seeks their
services especially on weekends. Taking our vehicle to car washes with my
parents also helped deepen my connection with the business. There are several
sources of information for the business that I plan to use in the SLP. One
source is my uncle who, although no longer works in a car wash, knows a lot
about the business. Another source of information is credible and reliable
online and printed articles on the subject. I also plan to gather more
information through visiting nearby car wash businesses and consult with
managers of such enterprises.
Prices Charged by Businesses in the
Industry
Businesses
in the car wash industry usually charge differing prices. Various factors
determine the rates. Factors include the quality of service, location of the
car wash, type of service offered among other things (Thind & Alexander,
2017). Businesses that provide high-quality
services typically charge higher prices compared to those who offer low-quality services (Thind & Alexander,
2017). Businesses located in states or cities where the cost of doing
businesses is higher also charge higher prices. Car washes charge higher rates
for a full car wash compared to other types of washes such as exterior only
wash (Professional Carwashing & Detailing, 2016). Some businesses also
charge higher prices to attract high-end clients. Those that operate in a
similar location are likely to charge close prices due to competition (Thind &
Alexander, 2017). Table 1 below lists the rates charged by different businesses
in the industry and their perceived quality of service. To ensure a fair
comparison, the prices listed in the table are for a full car wash
service.
No
Business Name
Prices
Quality of Service
1.
Charlie’s Car Wash
$24
Medium-end
2.
Fabulous Freddy’s
Car Wash
$32
High-end
3.
Express Car Wash Group
$35
High-end
4.
Car Pool Car Washes
$32.45
High-end
5.
Weiss Guys Express Wash
$29.99
Medium-end
6.
Clean Freak Car Wash
$15
Lower-end
7.
Tidal Wave Auto Spa
$29.99
Medium-end
8.
Rain Storm Car Wash
$30
High-end
9.
Super Star Car Wash
$29
High-end
10.
Super Car Wash
$40
High-end
Table
1: Prices of Select Car Wash Businesses in the Industry
Price Range
The
range of prices of the businesses listed in Table 1 above is not large.
Although it ranges from $15-$40, only one company charges $15 and, only one
charges $40 (Professional Carwashing & Detailing, 2016). The majority of
the businesses charge between $24-$35. The price range in the overall industry
is $20-$50 for full wash services (Professional Carwashing & Detailing,
2016). High-end businesses that operate in posh neighborhoods charge more to
their customers. To justify the high prices, the companies to endeavor to offer
superior quality services. Many car wash businesses are keen on marketing. They
run websites and social media accounts that inform the visitor about the
services that they offer and the charges for the services. The cost of
marketing is likely to impact the businesses’ pricing. Companies that spend more
on marketing are likely to charge higher prices (Octavian & Bernardus, 2016).
Companies that can attract more customers through marketing are also likely to
charge lower rates to outcompete their rivals.
Demand Elasticity
The
service will not have highly elastic demand. Small changes in prices are
unlikely to result in significant changes in demand for car wash services. The
price range in the country is said to be between $20-$50. People are willing to
pay varying amounts to enjoy the service. A significant increase in the price
of the service, however, is likely to result in a substantial decline in the
demand for car wash services. One reason is that the service can be substituted
(Gillespie, 2014). People can choose to wash their cars in their homes. Businesses in the industry charge reasonable
fees to customers as charging unreasonable fees is likely to result in the
customers preferring to clean their cars at home. High-income customers comfortably pay higher prices if they
perceive the quality of service offered by their preferred service provider
matches their social class. Pricing is crucial to an individual business as it
can attract or repel customers.
References
Gillespie, A. (2014). Foundations
of economics. Oxford University Press.
Octavian, S., & Bernardus, D.
(2016). The Planning of Splash N’Dash Carwash Workshop Seen From Marketing Mix
Aspect.
Professional Carwashing &
Detailing. (2016). The 2016 Top 50 list of conveyor carwashes | Professional
Carwashing & Detailing. Retrieved from http://www.carwash.com/2016-top-50-list/
Thind, D., & Alexander, P. (2017).
Methods to attract customers in Carwash.
Retrieved from: http://researcharchive.wintec.ac.nz/6086/
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