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bobbyt

Planning to Buy running auto repair shop..

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Hello to everyone from Houston TX.

 

I need some advice on buying a running auto repair shop..But I am not a car mechanic..

 

I have a full time computer programmer job from last 15 years.I make decent living. But from a while now I am planing to own my business.

 

I am ready to quit my job and work full time on the business.

 

Typically I see if I buy a running shop, I will get 4 weeks of training from existing owner and my plan is to hire the owner as manager from another 3 months to make sure, I get enough time to settle in.

 

My only concern, without knowledge of cars know/how. can I run business successfully? How would I know what my mechanics are working on, how much time does it take to work on a job ? How do I hire new mechanics etc?

 

Any advice is highly appreciated!

 

 

Best

Bobby

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Hello to everyone from Houston TX.

 

I need some advice on buying a running auto repair shop..But I am not a car mechanic..

 

I have a full time computer programmer job from last 15 years.I make decent living. But from a while now I am planing to own my business.

 

I am ready to quit my job and work full time on the business.

 

Typically I see if I buy a running shop, I will get 4 weeks of training from existing owner and my plan is to hire the owner as manager from another 3 months to make sure, I get enough time to settle in.

 

My only concern, without knowledge of cars know/how. can I run business successfully? How would I know what my mechanics are working on, how much time does it take to work on a job ? How do I hire new mechanics etc?

 

Any advice is highly appreciated!

 

 

Best

Bobby

Best advice I can give is before you do anything go out of town to a successful shop and spend a week either working or observing. You have no idea what you are buying or what a well run shop should look like. That would give you some background. Also start getting training in the business. AC Delco, NAPA, Federal Mogul, etc. all offer online training including sales, service writing, and management. Buy and read all the books by Mitch Schneider before you do anything. If I had no background I would also hire someone who does (like Joe, or someone from Elite, or any other number of owners on this forum) to evaluate the business I am buying, the purchase price, and to tell me what they think of the deal. I would also read everything in this forum. There is a world of helpful information here. That is some of my initial thoughts. Everybody thinks they want to own their own business but I can tell you from experience that the automotive business is not an easy business. It took me about ten years to enjoy modest success. That was all possible only because of the people I found and hired. Your employees will make or break you.

 

Locally there was a guy in a situation similar to yours. He quit a job at Crane Naval Weapons. Used his retirement money to buy an auto repair franchise. He bought and renovated an existing building, hired employees, and opened up the business. He lasted less than 18 months. Closed up shop, sold everything off and went back to work at Crane minus his retirement money. The instant that I learned he had opened in the location he had chosen I knew he would not succeed. How did I know? The location doomed him to failure from the get go. It is hard enough to build a successful business in a good location let alone at the end of some dead end street that no one drives by especially when you are the new place in town. Without a clientele already established no one could have succeeded there. Evidently either the franchisee people who advised him were ignorant or were only interested in collected the up front franchise fee. Car-x would never have approved of that location in a million years.

 

May I ask why you want to own your own business and why would it be automotive?

 

By the way, welcome to the forum and good luck. I am not trying to be negative but trying to educate. I am an owner in a successful repair business and have been at it for over 16 years. However, If I went back in time I can honestly tell you that if I had to do it over again I would not do it. The reason is I believe that there are other business that I could have chosen that I would have been more successful with. There have many many days that I absolutely hated what I was doing but felt trapped. Five years in we were losing money and trying to sell the business. However, once I was $700K in debt it was either make this thing work or go bankrupt. I could not just walk away.

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Hi, Bob.

 

Quick questions, have you run any business before? Do you have any business experience?

 

The way it seems to me, you have two main obstacles to overcome: 1. You need business experience. 2. You need some technical experience into the automotive field.

 

If you have the right attitude, you can definitely make a go of it.

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I would suggest open a candy/ice cream shop, people always leave happy & if they are not so happy when they come in you just give them a free sample!

Dave

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Thanks Guys for very relevant questions..and advice..

 

The reason I wanted to quit my job and do my business is.. I have been doing job for 15 years.. basically I have been working for someone else.. making money for someone else from last 15 years.. so why not work for myself..at least I know putting more hours goona make me more money.. not to anyone else.. and I will have my own schedule..

 

I have zeroed on Gas Station, Auto repair/parts franchise like NAPA, PepBoys etc, or buy running local service shop (no franchise). Franchise is the my least preference..

 

I did looked at lot of other business too.. and noticed % of profit is more in auto service. and it should be as it is a specialized skilled business. Also in car service working hours are decent, weekends are off etc. and it's not pure retail business like gas station..

 

Also I do spend some time in my neighborhood service centers and I have never seen one without any cars..I mean they are always busy..

running business before...Yes I do have some experience running a gas station.. worked during my school days..

 

No business is easy it is true and I get that, but one has to start from somewhere..

 

"Best advice I can give is before you do anything go out of town to a successful shop and spend a week either working or observing.". I liked this idea a lot.. I am not sure if a online business course will help me..but If I get to spend a week or two on a successful running shop that would be give me first hand experience..

 

but not sure if any one will let me observe or work in their shop just like that.?

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I did looked at lot of other business too.. and noticed % of profit is more in auto service. and it should be as it is a specialized skilled business. Also in car service working hours are decent, weekends are off etc. and it's not pure retail business like gas station..

 

A significant portion of shops make less than 3% net profit yearly (poorly run shops).

Many of these businesses are actually losing money every year (negative profit & failing).

This means that if they have $500k of revenue each year, these shops have $15,000 profit or less at the end of the year.

 

Another large portion of shops that are better run but still have issues will make 3-20% net profit.

The best run shops can make 20+% net profit, but this takes extremely good planning, management and employees.

 

I don't know the actual numbers, but I'd be willing to bet that 20% of shops lose money, 30% make 0-3%, 40% make 3-20% and only 10% of shops make >20% profit.

 

Just make sure this is in line with what you are reading and planning about owning an auto repair shop.

 

If any shop owner is telling you they are making 50-60% profit, they are talking about gross profit, before expenses.

 

so why not work for myself..at least I know putting more hours goona make me more money.. not to anyone else.. and I will have my own schedule..

Be very careful about this, as there are many, many shop owners out there working 50-60 hour weeks and not making any money at all!

This is because they run their shops poorly, don't charge customers properly and generally don't know what it takes to run a business!

Take the time to go into a business ownership class for sure, this will earn you more money then anything else you can possibly do.

 

Also I do spend some time in my neighborhood service centers and I have never seen one without any cars..I mean they are always busy..

running business before...Yes I do have some experience running a gas station.. worked during my school days..

 

Some of the busiest shops are making no money, because they don't know how to run a business.

Once again, be careful of what you think you know. It sounds to me like you "managed" a gas station (1 man operation?), but that's not the same as owning a shop, not even close.

Setting prices, managing employees, hitting key performance indicators (KPIs) are all things that I'm guessing you don't have a lot of experience with.

 

All I'm saying is, do your research, get training, read books, websites and articles.

Write a business plan, speak to an accountant, lawyer, banker and insurance broker before doing anything.

Know everything you possibly can -before- buying/owning the business, or you most likely will be one of the failing businesses, or treading water with very little profits.

Also, be prepared for all the old mechanics to quit or be fired by you. They will most likely resist change or not fit into your vision/business plan.

 

Sorry for ranting...

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Hmm interesting numbers... I looked few of these stores on sale at bizbuysell.com and I have seen financial for couple of these.. for example one shop is for sale for 400,000 and SDE is 140,000. This is a good amount even after paying taxes? (these numbers are not exact but very close) I am sure I am missing something..

 

I am still 6-8 months away from getting into this business.. in mean time as you suggested I will gather/learn everything I can about this industry...and will hire professional for due diligence etc once close to make a deal.

 

Thanks for your guidance!

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Hmm interesting numbers... I looked few of these stores on sale at bizbuysell.com and I have seen financial for couple of these.. for example one shop is for sale for 400,000 and SDE is 140,000. This is a good amount even after paying taxes? (these numbers are not exact but very close) I am sure I am missing something..

 

I am still 6-8 months away from getting into this business.. in mean time as you suggested I will gather/learn everything I can about this industry...and will hire professional for due diligence etc once close to make a deal.

 

Thanks for your guidance!

 

http://www.autoshopowner.com/topic/9322-meeting-with-owner-about-to-buy-his-shop/

Check out post #14. Search is your friend, 80% of the questions you'll ask have already been answered on here.

 

400k is probably reasonable if the SDE is truly $140k based on the formula:

(2 x SDE) + inventory, since inventory will likely include equipment in the calculation.

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Hmm interesting numbers... I looked few of these stores on sale at bizbuysell.com and I have seen financial for couple of these.. for example one shop is for sale for 400,000 and SDE is 140,000. This is a good amount even after paying taxes? (these numbers are not exact but very close) I am sure I am missing something..

 

I am still 6-8 months away from getting into this business.. in mean time as you suggested I will gather/learn everything I can about this industry...and will hire professional for due diligence etc once close to make a deal.

 

Thanks for your guidance!

 

 

Mitch schneider has ran a shop in Santa Monica, CA for many years and is a writer. www.schneidersauto.net/ He is no more qualified than Joe or others on this forum but his works are published. I would invest in and read these books or borrow them from the library before going forward. I think he has 8 books in all but for you these might be the most important.

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Hello ASO Moderators,

I too am interested in starting an auto repair business. I do have some repair experience. I am currently gathering information as you suggested. Can I ask what an auto repair business earning/income like yours is, approximately? thanks

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My 2 cents.

If you do not know how to effectively run every aspect of the business, do not get involved. Getting into a business you do not have extensive experience in should be out of the question.

If you read through this forum you will find that perhaps 80-90% of the owners were technicians first and foremost. They could repair vehicles effectively. In the end almost all of them are struggling with the day to day aspect of RUNNING the business. They had never done much managing, marketing, payroll, accounting etc.. Most of them probably never had to even balance a check book before.

Without being an expert in at least 1/2 the business makes the chances for success very slim, and even then the learning curve is long and painful.

Employees will come and go (most at very inopportune times). You may/will be needed to fill any role in the company at any given time.(Example- I have 3 techs. In November I lost all 3 for 3 weeks due to various reasons. That left me and a service adviser. If I could not have filled the technician role, I would have had to close the doors. As it was we still had the best November ever.) With that being said, good employees are VERY hard to find, especially good techs. Good employees are hard to find, getting them to be loyal and to buy into what your trying to build or create is even harder.

Perhaps in your situation it might be better to partner with someone. Find a successful shop with a good reputation. One that has a good customer base. One that IS profitable. Someone that needs a partner for expansion purposes. Someone that would truly have a vested interest in training properly.

Just my 2 cents

A little more insight. This month is the beginning of year 5 for me. I pay myself $1200 a month. I hope to be able to cash the 20k in back pay checks I have in the drawer for myself. That's after having 30-50% growth after every year and starting out as a one man shop. I am one of the guy's with all the mechanical experience and none of the business experience.

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