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How To Start An Auto Repair Shop

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As long as automobiles are the primary form of transportation, there will be opportunities to make money by keeping them running.  As the number of vehicles increase the demand for auto repair shops providing maintenance will also increase. With questions about the economy, people are expected to keep older cars running and that means opportunity.  There are some simple but important steps to be successful and the following are some of the top ones on how to start an auto repair shop.

Why Are You Doing This?

Before figuring out what equipment to purchase and where you want to set up shop you need to be honest with yourself.

Competition is fierce so what do you know about running an auto repair business?  I’m sure these may sound like an easy question but you may be great at working on cars but running a business is a whole other matter.  What do you know about bookkeeping, payroll taxes, customer satisfaction, marketing, employees and OSHA?  Knowing these and other business functions are critical to running a successful business in addition to having the technical knowledge.  A lot of people will gloss their lack of understanding in these concepts and say, “we will figure it out”.  Many do, though often poorly.  Sometimes they don’t figure it out and lose their life savings.   A good owner, while they may not be experts in all things in running a business (or even the best at fixing cars) educates themselves to have at least a working knowledge and is smart enough to have professionals help in the areas they don’t have time or desire to be experts in.  Who do you think is the best hamburger restaurant?  It probably isn’t McDonalds but they sell the most.  This just goes to show you don’t have to be the best to make a lot of money.

If you are asking about how to start an auto shop and know very little about cars, how will you know when your employees aren’t being honest with you (which they will often take advantage of your naivety).  Can you explain what’s wrong with the customer’s car.  If you can’t they aren’t going to trust you.  Also, this is a dirty, difficult business and your hands will have to get dirty to be able to talk to customers and they can tell you are being honest with them.  Are you willing to get your hands dirty?

Now that I’ve said that I can get off of my soapbox and move on.

What Do You Want To Do?

Are you going to start a new auto repair business or purchase an established one? By purchasing an existing auto repair shop, you will have immediate business coming in the door and equipment in place.  It’s easier to get a loan on a business with a proven track history, provided it’s profitable rather than a startup, but you are also paying for the owner’s sweat equity.

Next are you providing general auto repair services or are you going to specialize in certain areas such as HVAC, brakes, oil changes, exhaust, etc.  If you specialize you need to have enough customers to support that activity but you also have better recognition from the customer.

If You Fail To Plan, You Plan To Fail

Don’t think you need a business plan?  Think again.  The business plan is your roadmap to whether this venture has the potential to be successful.  It’s here you can make mistakes on paper and adjust course rather than lose your money because you thought it would be fun to own an auto repair business.

What goes into your plan?  There will be the basic what are you going to offer, where are you located, how will you market, employee needs and most important, the sales projections and costs to start an auto shop.

Here you can look on paper how many vehicles you will need to make a profit.  How many people and vehicles are in your area?  Balancing against the competition are there enough customers in your area to support another one?  Better to find out now before spending your life savings and find out that there isn’t enough demand to support another auto shop.

Don’t know how or want to write a business plan by yourself?  There are business plan templates, business plan software and help from the Small Business Development Centers or Score.org or

Not only is the business plan important in figuring out if your venture has potential but it will help you if you need financing to start an auto shop.

Where Are You Located?

Next you will need a location to work on vehicles.  If you are starting part-time to see if owning a car repair business is for you, a personal garage may work fine in the beginning.  Be sure to check on zoning first.  If you need a location, think about being convenient for customers and preferably located along a highly trafficked area as your location’s signage will be great advertising as the drive by traffic will see it.   When evaluating locations think about having a clean and comfortable waiting area and sufficient room for equipment.

How Will Customers Find You?

Even with a great location you will still need to market your auto shop.  Your marketing will be dependent on your business focus (whether you are a general or specialized shop), whether you are focused on the general public or fleet repairs or even based on the location and the demographic profiles of the people living in close proximity of your shop.

There are lots of ways (and more in this article) such as online, flyers, newspapers, radio, television, etc but put some thought in your advertising before you open your shop and write down how you will promote the business in your business plan so you can set a realistic budget.

Customer Service

After it’s all said and done, customers are the life blood of any business.  Auto repair shops are notorious at not being able to be trusted which give the good ones a bad name.  It just takes one bad customer telling eight (or more in today’s world with Facebook) of their friends to make the impact felt quickly.

Do you like talking to people?  You better be, because you will be the face of the business.  You had also be okay with people yelling at you because in this business, people typically think you are ripping them off because they don’t know much about cars.  “What do you mean you don’t know is wrong with my car, you do this for a living right? ”  You will probably hear that at least once a month since tracing problems can sometimes take awhile.  You also have to be able to take the technical jargon and relay it to your customer in everyman’s terms so they know what’s going on and believe you.

If you are starting out, your reputation may not be well known in your area yet and it takes awhile to get people’s trust.  One way to build trust is to stand behind your work.  People are comfortable with a guarantee, especially for an expensive repair.

Employees

If you are going to be bigger than a one-man shop, you will need employees.  Good employees are very difficult to find.  You will find some with decent mechanical skills but are late (or don’t show up) for work, bad tempered or lazy.  Treat your stars like gold.  The auto repair business is a service business and you can’t have service without employees.  Good employees will also keep your reputation high and keep your costs lower by not making mistakes.  Be sure to know your state laws on hiring and taxes.

Also, vehicles become more integrated with technology, you need to have employees who are interested in furthering their knowledge so your shop can stay on top of the curve.

Financing

How to start an auto repair shop without money?  You don’t.  If you haven’t put together a business plan (see above) then go back and figure out what it’s going to cost to open your doors.  Itemize all of the equipment (like lifts, tools, etc), building, renovations and working capital.  Figure out how much money you can put into the project.  In most cases you will need to put down 20% but there are other funding options that can help reduce that in some cases.  Then you have a number that a bank is going to need to finance.  When getting a loan to start your auto repair shop be sure to talk with your local Small Business Development Center or Score.org  to get free advice to look over your business plan and talk about how to best structure the financing to put you in the best situation to succeed.

As you can see from the few selected highlights there isn’t an easy answer to how to start an auto repair business.  It’s a hard business, especially if you plan to grow with employees but can be lucrative if you are willing to educate yourself on how to run a business.