Starting a Successful Auto Repair Shop

According to entrepreneurial research from the US Small Business Administration (SBA), there are more than 30 million small businesses in America. That number is even more impressive when you consider that those small businesses account for 99.9% of our nation’s total businesses, employing 58 million employees.

Small businesses are truly the lifeblood of our economy. And this is a great time to think about starting a business of your own, as sales are on the rise and the business climate is optimal. The NFIB Research Foundation tracks these factors with their quarterly surveys. The foundation’s most recent report showed that entrepreneurs are enjoying noteworthy successes, and “2020 is off to an explosive start for the small business economy.”

There are certainly no guarantees for entrepreneurial success, but it’s unusual to have this number of factors so prominently in your favor. If starting an auto shop has been a goal of yours, this could be the time to take action.

“For many, owning a business is a part of the American Dream and a path to personal wealth.” says a business startup guide from the Advanced Technology Institute. “If you’re a mechanic or working on becoming a mechanic, reaching that dream might start with the idea of opening your own auto repair shop. You can set the hours, work with customers on pricing, specialize in interesting vehicles, and take control over the future of your career. When you work on the shop floor without ownership, your earnings top out at your salary or hourly wage. When you own the shop, the only limit on profits is the capacity of the garage.”

This guide will introduce some of the most important steps required for getting your auto repair shop up and running. They help lay a solid foundation that positions you for sustained success and future growth.

Make Sure Your Credentials Are In Order

Before you can even think about running an auto repair shop, you need to make sure you have the background and skills necessary. Much of your expertise will clearly come on the job, but you should have an associate’s degree or certification in automotive service training.

Additional certifications can also bolster your business and build client trust. Consider getting certified by the National Institute for Automotive Service Excellence (ASE). This nonprofit organization has certified 300,000 automotive technicians and service professionals, giving “tangible proof” for the technical knowledge they possess.

Some professional certifications out there lack heft, but an ASE certification takes considerable effort. The tests are difficult, and you must retake them every 5 years to stay updated on automotive technology.

The benefits of ASE certification extend beyond client trust. You may find it harder to qualify for financing or insurance without it. And, as an employer, you can use the certification as a way to screen job seekers so that you’re only bringing in those who have met the appropriate standard.

Put a Plan in Place

It will be essential for you to set time aside early on to create a business plan. This process is much more than just writing out your business wishes on a napkin. Your business plan should clearly articulate where you want your business to go and how you are going to get there.

“A good business plan guides you through each stage of starting and managing your business,” explains SBA.gov. “You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.”

To get the data necessary to complete this roadmap for your auto repair shop, you’ll need to look at multiple aspects of the business. Possible sections of your plan include:

• Services provided
• Projection for finances
• Analysis of the market
• Management strategy
• Marketing strategy
• Funding details
• Appendix

Each section will provide answers to multiple questions. For example, the “services provided” section would reveal whether your shop specializes in a certain type of repair, such as collision repair or large trucks. If you have niche skills that lend themselves to specialization and the market will support it, you may want to take this route. Also, will you add new services as your shop grows in the future, or do you plan to maintain the same approach you’re starting with?

The details you put in your plan will undoubtedly benefit your operations at the shop, but they also have relevance to a much larger audience. When you begin seeking financing to start your business, lenders will want to review your plan to assess your qualifications.

Figure Out Your Financial Needs

Speaking of lenders, your business plan should help you begin charting how much money you’ll need to start and run your shop. In addition to the dollar amount, you will also need to ascertain the timeline for the money. After all, you could qualify for the world’s most generous loan, but it wouldn’t help you much if the money arrives too late for its intended use.

Every new shop will face unique expenses, but you can often plan on the following:

• Tools
• Diagnostic machine
• Car lift
• Brake lathe
• Jacks
• Insurance
• Permits
• Advertising
• Payroll

Once you’ve assembled the costs and identified the total amount of money required, you’ll need to figure out where the funds will come from. Always plan on investing some of your money, as lenders will require this if you decide to seek a loan.

Beyond that, you’ll need to look for other sources of funding. If you have a wealthy great-aunt who generously hands out money to entrepreneurial family members, that’s excellent. Most of us, however, need to seek debt financing. The process of identifying your perfect loan will be discussed in a later section.

Register for Your EIN

Before you can do business, you must get your Employee Identification Number (EIN) from the IRS. Although it can sometimes be intimidating to work with the IRS, this process is relatively easy and painless. Just go to the EIN application page on IRS.gov, and you’ll find all the information you’ll need to complete this important step.

Your EIN will also enable you to open a business bank account. It’s worth looking around to see if any banks are offering incentives that you could take advantage of with your new account. On the other hand, it may just be easier to open the account wherever you already do your personal banking. The fact that the bank already knows you and has access to your information will expedite the approval and account creation process.

Finding the Right Location

There are plenty of considerations as you’re seeking the right place to house your auto repair shop. First, you’ll want to be situated near a main road in your city. Because accessibility is key, you’ll also want to ensure that your shop is within proximity to customers’ homes. You might find a killer deal on a small building tucked away behind your local mall, but if it doesn’t offer visibility, customers will probably never notice you.

As for the layout of the shop, you should look for a building that has an appealing storefront. This aesthetic can help customers trust you more. It’s also helpful to look for a building that offers some space to grow as your business scales. Finally, it’s ideal if the place has a waiting area for customers. It doesn’t have to be large. Even just having 7–10 chairs will make waiting onsite an option, which is what some of your customers will inevitably prefer.

It will always be more affordable to purchase an existing shop than to get a new building and convert it into a shop. With an existing shop, you might also benefit from an established customer base and whatever equipment is already installed. On top of that, some of the necessary permits may already be in place, which can save you time and money.

Come Up with a Name

Naming your business is one of the most important steps you’ll take while setting up your shop. A good name can elevate any business, while a poorly chosen option can cause harm.

“Naming a business is a lot like laying the cornerstone of a building,” explains business naming expert Phil Davis. “Once it’s in place, the entire foundation and structure are aligned to that original stone. If it’s off, even just a bit, the rest of the building is off, and the misalignment becomes amplified. So if you have that gnawing sense that choosing a name for your new business is vitally important, you’re right.”

Start by making a list of your favorite name options. Even if you already have a name you’re sure is the right choice, it’s still helpful to come up with some other versions to make sure you’re going down the right avenue.

Speak each name out loud. It should be easy to say and sound natural. The goal is for people to be able to remember the name and comfortably use it in conversations.

Next, think about what the name represents. Does it stand out from the competition? Does it explain the services you provide? Does it convey a benefit? Does it evoke an emotion? Most business names won’t check all of these boxes, but the best names will accomplish 2–3 of them.

Once you’ve narrowed down your list, you’ll need to confirm that the name is available. Scan industry websites to make sure the name isn’t in use, then do a final inspection by searching the US Patent and Trademark Office (USPTO) website.

Identify the Best Business Structure

Every business needs to have a legal structure. If you’re unfamiliar with the advantages and drawbacks of various options, you should seek advice from an accountant or mentor. If you don’t already have an expert or mentor to talk with, you can connect with a host of resources and get free advice from the SBA Small Business Development Centers and a local SCORE chapter.

“Of all the decisions you make when starting a business, probably the most important one relating to taxes is the type of legal structure you select for your company,” says Entrepreneur. “Not only will this decision have an impact on how much you pay in taxes, but it will affect the amount of paperwork your business is required to do, the personal liability you face, and your ability to raise money.”

If you will be the only owner of the shop, consider setting up your business as a sole proprietorship. This structure is the simplest available and has low fees compared to other options. The biggest downside is that you will be personally liable for your business’s debts and losses.

For shops that will have multiple owners, you may want to move forward as a corporation. This option is a more expensive and time-intensive setup than a sole proprietorship, but it allows for multiple owners and protects each of them from financial liability.

Other viable business structure options include:

• Corporation
• General partnership
• Limited partnership
• S corporation

Find the Right Funding for Your Business

There is no shortage of financing options for small businesses, so you’ll need to allow plenty of time for due diligence. Look at the interest rates, repayment terms, and cost of each loan to get an idea of how it might fit into your financial strategy. The more preparation you put into the process, the smoother things will be on the back end.

Given the substantial equipment needs of auto body shops, it makes sense that equipment financing is one of the most popular choices. These loans range in size from $5,000 all the way up to $5,000,000. The interest rates usually start at 7.5%, with repayment terms between 1 and 5 years.

One major benefit of equipment financing is that it funds rapidly. Once approved, you can often get the money within 24 hours. Additionally, you can use the money for diverse purposes. For example, you could buy new chairs for your waiting area, a customer shuttle, or cutting-edge payment processing software for your office.

Here are 4 other types of small business financing that you should consider:

1. SBA loans: These loans are provided by private lenders and guaranteed by the US Small Business Administration (SBA). That guarantee lowers the risk for lenders so they’ll be more inclined to offer you generous rates and terms.
2. Business lines of credit: Much like a credit card, this type of financing connects you with a revolving form of credit. You use however much you need, then pay that exact amount back with interest. The chief advantages are the flexibility and affordability of the financing.
3. Term loans: These loans can have amounts as high as $2,000,000, with interest rates beginning at 6%. You can use the money for just about any need related to your business.
4. Short term loans: In its simplest form, a short term loan is a leaner version of a term loan. The dollar amounts are smaller, the repayment terms are shorter, and the approval and funding process is among the fastest in the business.

Making Your Business Presence Known

It’s now time to introduce your auto body shop to the public. Buy a domain that’s closely related to your business name and then open social media accounts. Common social media channels are Facebook, Twitter, Instagram, LinkedIn, and YouTube. But don’t feel pressured to have an account on a channel that doesn’t feel relevant to your business. The bottom line is you want to be where your customers are spending their time and will be most likely to connect with you.

You can streamline your social media and marketing efforts by using digital tools. Additionally, these tools can help with many of the other day-to-day tasks related to running your business. Here are some popular examples:

• Marketo: Integrates your social, email, digital, and mobile marketing.
• Mailchimp: Sends and tracks emails for your auto body shop.
• Hootsuite: Helps you post on every social media channel at the same time.
• Deluxe: Simplifies your payroll efforts and helps ensure accuracy.
• QuickBooks: Tracks business mileage and expense reports.
• Quip: Enhances collaboration and workflow management. 
• 17hats: Serves as a hub for your business contracts, invoices, and workflow.

By using the right tools, you’ll be able to take many tasks off your plate so you can focus on the core aspects of your business. For example, if an automated tool such as Quip or QuickBooks saved you 1 hour a day, that time could then be dedicated to your customer service efforts.

Starting your own business is an amazing accomplishment in its own right. You can walk into your shop each day knowing that you’ve created something truly unique and you’re making a positive impact in customers’ lives. And by following the steps in this guide, you’ll give it the best chance to not only survive but thrive.