John Davids (0:00)

This company is making $100 million a year selling car washes. I was fascinated, so I spent two hours digging into this business. Here are the basics. The company is called Mammoth holdings. They own 135 car washes with names like Busy Bee and Silver Star. You'll find them in Knoxville, Miami, North Dakota and lots of other cities around the US and each location is making between a million and two and a half million dollars a year with a juicy profit. I'm. I'm gonna tell you exactly how they're doing it. Welcome to the podcast. My name is John Davids. You can call me J.D. if you're a fan of the show, make sure to subscribe wherever you're listening. But more importantly, leave a rating, leave a review on Apple and Spotify. I really appreciate it. Of course, if you want my best stuff to your inbox, head over to JohnDavids.com, get on that newsletter. Now let's talk about the hundred million dollar car wash. Foreign. You're listening to Making it with John Davids. So Mammoth follows a very simple playbook, but a very well oiled playbook to do what they do. Step one, they buy the biggest car wash in a small market. So Mammoth doesn't actually build car washes. They buy them to enter a region. They buy a brand with a few locations and they'll typically pick a pretty large brand, at least large for that market that has a customer base that has some brand equity and this gives them a wedge in that market. So now they've got one car wash, they keep that name and then they start picking up smaller car washes in the same market and rebranding them to match the big guy. So they can start with one location or two. They then they've got three, five, ten locations in a single city and they've rebranded them so they all have the same name. So that's how they get into the market. Before long, they can dominate that city. Step two, they implement a subscription model. So right away they're turning this into a much better business. You see, most of us pay for car washes each time we go to the car wash. But that can create a crummy business because you've got lumpy revenues, spotty sales. What if it rains one day? What if it's snowing? What if you just don't feel like going to the car wash and waiting in line? You don't go and they lose out on that revenue. They don't want that. They want to make sure they're making money Rain or shine, every day of the week with a subscription model. They can do that. They introduce the membership model right away after they buy a car wash. It's typically 18 to 35 bucks per month with unlimited washes. And each tier comes with its own perks like waxing and tire shining. This is a brilliant move. You see 60% of mammoth sales today come from membership. That's a recurring revenue business. Are you kidding me? That's like software numbers right there. Recurring revenue means predictable profits. Ooh la la. I love it. No spotty revenues here. You know exactly what you're making on the first day of the month. Number three, they put automation in place. So here's where it gets really good. You're making more money on the top line and you're saving money that goes straight to the bottom line. When you get a membership, Mammoth sticks this little tag, this little RFD tag on your windshield, and that makes the car wash totally self serve. You pull up, you flash your tag and you drive right through. The car wash automatically mixes the chemicals and gives you what you paid for. With this automation, a typical car wash can operate with just two employees. You don't need a whole bunch of people standing around pulling levers and, and pushing buttons. The tag makes it all self serve. And now you've just saved a whole bunch of money. And more importantly, you've made it more efficient and more enjoyable for the customer. Number four, acquire smart and finance well. So this is really, really interesting. Once Mammoth buys a car wash, they actually sell the real estate underneath. That land is worth a lot of money and it's tying up their capital. They want to liquidate it. They want that cash back so that they can buy more car washes. So they sell the land, lease it back from the new owner. Now they got a whole bunch of cash. This lets them pull out a chunk of money right away, which they can put back to work. I know it sounds weird, but they actually make more money recycling the cash into another car wash than letting it sit in real estate. Don't forget, this is a private equity business that has one asset class, car washes. They don't want to be in the real estate business, they want to be in the car wash business. So if you own a bunch of real estate and you can get out of it and put more money into the car washes, you can do a whole lot better. And the best part is there are plenty of real estate investors who want to buy the land underneath car washes because they know that the car washes do well, they can pay their rent. It's a good investment for them. Especially if Mammoth owns the car wash and is running it. There are plenty of real estate investors who would be happy to buy it. And by the way, this is a common practice. The land underneath hotels, the land underneath airports, skyscrapers, buildings of all kind typically will get sold and then leased back on these long term leases, 50 year, 100 year leases back to the person that's running that business so that they know that they have the business to run. They can pay rent and they can free up their money. Free up their money. Number five, keep people and train them up. So after an acquisition, Mammoth tries to keep a few people on board. A few of the high performing employees at that car wash, they don't want to let them go, they want to keep them. They get them trained up on the new playbook, the Mammoth playbook and they can become regional managers. You can go from working at a single car wash to to running an entire city once Mammoth buys your car wash. After all, you already know the business. Why would they let you go? They want you working for them. Marketing executives, business owners. If you are running a company and looking for a fresh perspective on how to grow that company, take a look at Influicity. That's my marketing agency where we work with brands across influencer marketing, podcasts, social media, AI content, paid ads and so much more. But don't take my word for it. Go to Influicity. Check out our case studies from all the amazing clients we've worked with over the last decade. That's inf l u I c I t y influicity.com and I'll see you there. And number six, optimize everything. Of course we are going to take all those busy functions. We're talking hiring, training, customer service, payroll, accounting, all the stuff that you can centralize. You don't need to do it at that location of that particular car wash. Bring it back to Mammoth HQ so that you can bring costs down and make things more efficient. This way they can run an efficient operation and cut down on redundant work. And that, my friends, is how you make $100 million running a car wash. So I share this out on all my socials, Facebook, Instagram, LinkedIn, YouTube, TikTok. You guys liked it a lot I think because over 10 million of you saw thousands and thousands of comments and likes and shares. A lot of comments about Walter White. I know, I know Walter White in the car wash. Few things that popped out at me. So People who are in the car wash business actually chimed in and said, yeah, this isn't surprising. Car washes are a cash cow. These things print money. It's a cash business. Everyone needs car washes. There usually aren't a lot of them in any one city. So they do make a lot of money. The model itself is also something people were saying like, hey, John, this is nothing new. This private equity roll up model has existed for a long time. And my answer there is, yeah, I know, it's a brilliant model. And I'm not about reinventing business. I like to look at businesses that already exist and how can we make them more efficient, how can we make them more profitable, how can we make them run better? How can we make them grow faster, do better for our community, do better for our people? So I love these businesses. I'm not about rockets and reinventing the wheel. I'm about simple businesses that print money, that grow. This is what the economy is built on. So a bunch of lessons jumped out at me about the mammoth story that I want to talk about right now. The first one is at its simplest form, there's really two ways you can make more money in any business. I call it the two V's. You can increase your volume or you can increase your value. And there's a lot of misconception out there, I think, about scalability, like, oh, how do you scale? Or I need to have a business that's scales. Here's a news flash. Every business scales. Every single business in the world scales. And the reason I know that is because you look around, there is a big version of every business. There are lots of small versions of businesses, and there are big versions of businesses. There are big restaurants and small restaurants. There are small flower shops and big flower shops. There are small accounting firms and big accounting firms, right? There's examples of this in every business. When it comes to growing, you've gotta understand, if you've hit a plateau, you hit a ceiling. What do I need to do to unlock either more volume selling more units of my thing, or more value selling what I'm already selling. Same number of units, but for a lot more money. If you could sell one thing, and the most you could possibly charge for that One thing is $1, and you wanna make a million dollars, you, you've got to sell 1 million of those things. If you sell one thing, but you have price elasticity, you can sell it for $10 or 20 or 20,000 or 100,000 or a million, well, guess what? You could sell One of those things for a million dollars and make the same amount of money as you did in the first place. And when you think about how to know. All right, John, so cool. Volume or value? So which one should I pick? A good place to start is to look at your customer and look at what kind of cost your customer can absorb and what kind of value they want. So if you think about the difference between selling to a consumer and selling to a business, oftentimes when companies are selling to other businesses, they're selling things that are more expensive. And so that's the value lever, Right? I'm selling something with more value. If you can sell something to a customer that has more spending power because they're a business or they're high net worth or whatever, you can pull the value lever. But if you're something like a car wash, going back to the car wash example, and you say, hey, we have a car wash, but there's no way to grow. Well, yes, there is a way to grow. The way to grow is to have more car washes. To understand that you're not really in the car wash business. You're in the business of running and building and buying car washes. And that's exactly what Mammoth did. I don't know the origins of this company and how it started, but let's just say, for example, it was a guy that owned one car wash, and he was running that car wash for years and years and a decade plus. And he said, you know, I kind of want to grow. What can I do? A business advisor might have said to him, well, get out of the car wash business and start a software company, because that's how you grow. Well, you could say, okay, I could do that, or I could stick with what I know, do the car wash, but focus on buying and buying and buying more car washes and putting my knowledge and expertise to use. So going back to the beginning here, you don't get stuck on the idea that only certain kind of businesses scale. Every business scales. And if you aren't sure of that, just look at this $100 million car wash. What's stopping this company from getting to 200 or $500 million? Maybe they're already there. Nothing, really. Just keep doing exactly what you're doing. I want to get into a few things that they're doing to make this business model so much better. So let's talk about the subscription model a little more. The idea that people go to car washes. And typically when you go to a car wash, you pay for it when you get there. And what Mammoth said was, well, what if we could do something where we could offer more value and more consistency to the customer so the customer is actually getting something that they want. And it also helps us because we are getting something we want. Recurring, predictable revenue. Now they're paying at the high end, $35 for a monthly subscription. And you might say, okay, well, what if somebody were to come and pay 40 or 50 or $60 on a transactional basis? If they didn't have a subscription, maybe they'd spend 40 or 50 or 60 bucks a month at the car wash. Yes. So Mammoth is losing out on that because somebody could come and for unlimited car washes, pay just $35. But what you're getting in return is 60% recurring revenue. You're getting the security of recurring revenue. So sometimes it actually is a benefit to lower the price if you will get something in return, more volume, or in this case, recurring revenue, giving people a little more. You know, there's a local business in my area, and I've often wondered, because we go there a lot, and I've often wondered, why don't you guys offer some kind of all you can eat pass, or all you, it's not a restaurant business, but quote, unquote, all you can eat pass? Because one thing that we do is we watch how much we go there because it costs a lot every time we go. And if you think about, if you have customers that are actually willing to come and willing to spend their money regularly, take a restaurant business, for example. Why not give somebody a card that says, this card is good for 10 meals, but it's the cost of eight meals. Or this car wash is good for, you know, $35 would normally buy you two or three washes, but you can get unlimited washes. We see this happening with memberships with loyalty programs. Amazon prime is a great example. Or Costco's membership. You've got to think about how to get the most money and the most optimization out of your customers without necessarily nickel and diming on, oh, I could make a little more if I do this or make a little less if I do that. If you have recurring revenue that's much, much better than transactional revenue, even if the occasional person is getting a little more than they would have otherwise paid for. The financing strategy is also really interesting here because if you think about it now, Mammoth is private equity backed. They've got money behind them, institutional money. But you could probably do something like this without much money at all. So think about yourself today. Maybe you own a car wash or a similar mud under your fingernails business, as I call it, a business where you're working hard to get the job done. You're a plumber, you run a car wash, you're changing tires, you're doing whatever. If you master the process of running one of those businesses, and then you can write the playbook, literally write down that playbook and you can pull together enough cash because you've been doing it for years and years and years. You put your profit away and you have some cash at the end of the day. And then you can go to the bank and get a loan against the existing business, which you can service because you've been doing it for five or 10 years. You can go out and get a second location, a third location, a fourth, fifth, 10th, 20th location. We've seen this happen. I've done stories about companies that do this in the retail space with convenience stores, that do it with repair shops, that do it with restaurants. There's so many examples. Tillman Fertitta did it with the restaurant business. Again, he did it eventually. He went public after many years. But he was doing it basically bootstrapping on his credit card. The guy had like a $2 million line of debt at one point because he was putting all of his eggs in the restaurant basket. So if you think about building a business like this, yes, you can go out and raise money, but you could also bootstrap this. And over the course of 10, 20 years, you could have 30 car washes printing money. There's a lot of money to be made in these. Blue collar, mud under your fingernails, sweaty businesses that are very, very simple, not too complicated. But if you have the playbook and you know what you're doing and you can put in the years of effort, you can make a lot of money. I want to know what you guys think. Let me know. Get me@johndavids.com and I'll talk to you guys next time.