Things You Should Know BEFORE Starting an Auto Repair Business
Table of Contents
If you’re thinking about starting your own auto repair shop, there are a few things you need to know first. Many new business owners make common mistakes such as not knowing labor rates or not using auto detailing software. These are easily avoidable with a bit of preparation.
I asked a lot of different auto repair shop owners about what they have learned after starting their business. Some of the answers surprised me, and I’m guessing you’ll be surprised as well! Here’s a summary of what they had to say.
Know Why You Want To Start Your Own Shop
This is perhaps one of the most important questions if you are looking to start your own auto repair shop – why exactly do you want to run your own auto repair shop? Is it because you want to make more money? Or maybe you want to be your own boss and not answer to anybody? If these are among your reasons to start your own business, you might want to revisit the idea of starting your shop.
When you own your own business, you have less time, less flexibility, less money and less chance to mess up. Also, instead of answering to one boss, you are answerable to all of your employees. The feds, the state, even your customers are like your boss.
It is a good idea to spend some time researching the WHY before the HOW. Because trust me, if you are into this thinking everything will be easier than working for someone else… things might not turn out so well.
As a technician, you focus on your own tasks, not the entire business. It’s just one piece of the entire puzzle. However, as a boss, you need to look at the big picture. You won’t be turning wrenches anymore. Instead, you’ll be busy running your own business.
If you’re a technician looking to start your own repair shop, keep in mind that you will no longer be a technician. Instead, you will probably spend most of your time managing the operations in your shop. So, if you love repairing cars, running an auto repair shop might not be the best idea.
Don’t Get Stuck In a Long Lease
Keeping your overheads low is Business 101. Take your time and look for a decent space for cheap. For example, if you’re in Vegas, you will typically pay $1.25/sq. ft for a building space and anywhere from $0.10-$0.15/sq. ft for yard space. To put this into perspective, as of writing this, an 8,000 sq ft space will set you back $12,000 every month. Often, both space costs are added into the base rent so you’ll have to go out and look for options.
If you find a suitable space, make sure the lease is, at most, 1 to 2 years. A longer lease is cheaper but it will cause problems in the future. If your business grows and you start getting more customers, you might not be able to upgrade to a bigger space because you’re stuck in a long lease.
Also, a very important thing to note is that always add the clause “I’ll finish my lease once I get my automotive repair license approved.” In case the city delays or rejects your license, you don’t want to get stuck in a lease.
Bring the Right Tools for the Job
Now is a good time to mention that you should ALWAYS use the right tools for the right job. And I’m not talking about just your drawer full of torque wrenches. Remember when I said you’ll eventually get busy managing your shop instead of fixing cars? Once your business starts gaining traction, paperwork and spreadsheets won’t cut it.
Before you get buried under a myriad of tasks and a mountain of paperwork, you might look at what other auto repair shops in the USA are doing to combat this problem. Among others, a very simple solution is using auto detailing software.
Moving on to other tools, here are a few must-have tools to start up your auto repair shop. Many shop owners make the mistake of buying a very fancy toolbox as soon as they start their business. I get it, a shiny new toolbox with an assortment of tools is very tempting, However, you will be better off investing in a few other tools first such as hydraulic lifts, welders, compressors and transmission jacks, to name a few. So in the bigger picture, using your money to cover all bases will be much better than having a fancy toolbox sitting on your shelf.
Stay on Top of Your Accounting Details
When you’re running your own auto repair or detailing shop, it’s important to keep track of all the accounting details. This will help you stay organized and make sure that your business is profitable. If you track your accounting details properly, you can avoid fraudulent activities or anything that might harm your business.
Here are a few reasons why you should know how to keep track of all accounting details when running your repair business:
1. It’s essential to have a good understanding of your financials in order to make sound business decisions.
2. Detailed accounting records will help you track your expenses and revenue, so you can see where your business is making money and where it could stand to improve.
3. Keeping good records will help you stay compliant with tax laws and regulations.
4. A well-run accounting system will help you make more informed decisions about your business’s future.
As a business owner, you should know your numbers. Where is all the money is going? How much are you earning? As a technician, you don’t really care about how much a brake cleaner costs. Or how many alignments do you need to do to pay off that $6,000 alignment rack? However, as a business owner, you should be on the top of your numbers game.
Pro Tip: An auto detailing software can easily help you manage your accounting details, usually with Quickbooks integration!
Know Your Laws. Especially Tax and Zoning Laws.
One of the most important things you need to know when starting your own auto repair shop is tax laws. You’ll need to know what taxes you’re liable for and how to file your returns. You’ll also need to keep track of your expenses and income so you can stay in compliance with the IRS. Ignorance of the law is not an excuse, so make sure you do your research and understand what’s expected of you.
Always stay up-to-date on current tax laws that affect the automotive industry. Ignorance of the law can lead to costly fines and penalties down the road, so it’s better to be safe than sorry. By knowing what you need to do in order to stay compliant, you can avoid any potential headaches down the road. You can read more about laws related to auto repair shops here.
Another thing to keep in mind is zoning laws. Make sure you are aware of any restrictions or regulations that may affect your business before starting it up. You don’t want to invest time and money into a business only to find out that you can’t operate it due to zoning restrictions.
For example, if you live in a residential neighborhood, you may not be able to offer repairs that require loud noises or large amounts of workspace.
Before finding the perfect location for an auto repair shop, determine who your customers are going to be. Is there a concentration of car owners in one part of town? If so, go where the people are—not necessarily where the rent is cheap or available space is large enough for a garage.
The Final Words
The auto repair industry is a lucrative one. It is a whopping $880 billion industry. However, money is only a small part of the entire equation. As a business owner, you should learn how to crunch your numbers, the legalities of how you run your shop, and use the right tools such as auto detailing software.
So, are you going to start your own repair business? If you are already in the auto repair business, let us know if you have more tips. Good luck!