Quantcast
Jump to content

Startup Feasibility


Recommended Posts

Hey guys I had very good response to my last post so here is another one I need some help with.

 

I am currently in the planning stage of getting a shop going in Kansas. My question has a few parts to it.

 

1. How did you guys determine the feasibility or if the shop would make it in your area before starting? Also what resources helped you to come to this conclusion.

 

2. What types of strategies did you use to nudge your way into the market? Everyone is obviously already getting the work done on their car SOMEWHERE so how do you move into the market and start getting them into your shop? Any resources?

 

3. Lastly I would just like to hear peoples startup stories from a business perspective just to get an idea of what works and doesn't work in starting and growing an automotive shop.

 

 

Thanks guys love this forum!

Link to comment
Share on other sites

1. We saw a lot of opportunity for better quality customer relations with many of the shop in our town. Our internal motto has always been "we are the chic-fil-a of auto repair"(without any political/religious undertones) i.e. we will provide a consistent and positive experiences to every customer.

 

2. We open or doors officially later this month. We plan on heavy advertising(local papers, facebook (paid adverts), and mailers(cheap to do on rural routes) and branding. We have a high traffic location with plenty of road frontage.

 

3. I have wanted to step out of the corporate world for most of my short life but could not take a pay break from what I make now to starting a business. I finally found a partner I can say I trust. 2 years ago we starting the vision. We have been planning, working with our mentors, studying and trying to plan and learn for every possible scenario. This month it goes into action and we feel very well prepared.

 

From a business start up prospective: I went back to school to learn accounting and take small business classes. I read plenty of books including the famous "E-Myth". We worked with monthly action plans to keep us on target. We have a great mentor that runs a very successful(1.3mil) shop and if we succeed he will get most of the credit. And I saved like mad.

 

 

I may not be the best story because we haven't proven ourselves yet but failure is not an option for us.

Link to comment
Share on other sites

Great post. I would like to hear some startup stories myself.

 

I did the following analysis in our business plan to determine if our market area could support yet ANOTHER shop:

The average US household spends 1.5% of its income on vehicle maintenance1. This includes scheduled and unscheduled service as well as parts purchased directly from suppliers. Based on the 3 mile demographic data in the following section, this allows for $77MM of available automotive repair business annually. A conservative estimate of 60% of this business will return to the factory dealership for service2, leaving $31MM in available demand.

22 businesses are competing for this demand of $31MM. The average US repair facility annually generates $364M in gross revenue3. Assuming higher revenue of $1MM due to the higher income demographics, this shows a supply of $22MM, or a demand-supply deficit of $9MM.

Sources

1. ftp://ftp.bls.gov/pub/special.requests/ce/share/2004/age.txt

2. http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

3. http://www.underhoodservice.com/issue/article.aspx?contentid=39966

It was a bit tough to get the numbers, so I had to make a few assumptions. When making assumptions, I always made them in a way that made the scenario look worse. If the business plan still works even under the worst case scenario, you should be set.

 

Also, if you need a hand getting free demographic or traffic data for a corner, let me know.

  • Like 1
Link to comment
Share on other sites

Great post. I would like to hear some startup stories myself.

 

I did the following analysis in our business plan to determine if our market area could support yet ANOTHER shop:

The average US household spends 1.5% of its income on vehicle maintenance1. This includes scheduled and unscheduled service as well as parts purchased directly from suppliers. Based on the 3 mile demographic data in the following section, this allows for $77MM of available automotive repair business annually. A conservative estimate of 60% of this business will return to the factory dealership for service2, leaving $31MM in available demand.

22 businesses are competing for this demand of $31MM. The average US repair facility annually generates $364M in gross revenue3. Assuming higher revenue of $1MM due to the higher income demographics, this shows a supply of $22MM, or a demand-supply deficit of $9MM.

Sources

1. ftp://ftp.bls.gov/pub/special.requests/ce/share/2004/age.txt

2. http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

3. http://www.underhoodservice.com/issue/article.aspx?contentid=39966

It was a bit tough to get the numbers, so I had to make a few assumptions. When making assumptions, I always made them in a way that made the scenario look worse. If the business plan still works even under the worst case scenario, you should be set.

 

Also, if you need a hand getting free demographic or traffic data for a corner, let me know.

So did you calculate all this out based on the exact area that you are planning to open your shop or did you do this on a country wide scale?

 

Also yes i would really like to get my hands on some more demographic information for the city that i will be opening my shop in please let me know thanks!

Link to comment
Share on other sites

So did you calculate all this out based on the exact area that you are planning to open your shop or did you do this on a country wide scale?

 

Also yes i would really like to get my hands on some more demographic information for the city that i will be opening my shop in please let me know thanks!

 

This data needs to be calculated for your exact area. In reality, we were looking at 6 different shop locations in our city (Atlanta is pretty big). So, I did this calculation 6 different times.

 

The data you need will be:

  • How many people live within 1mi or 3mi from your shop (1mi for inner city, where folks travel less to get to shops, or 3mi out in the country)?
  • What is the median household income for that area?

With these two numbers, you can calculate how much wealth is in the area, and then take 1.5% of that to determine how much that area is going to spend on auto repair a year total. 1.5% is a national average that each household spends on car maintenance. This number will be lower in poorer areas and higher in wealthier areas.

 

Then, you need to figure out how much of that total repair is going to independent shops vs. dealerships. This one was tough, as it can vary so heavily based on how new the vehicles area in your area. I stayed conservative and just said, "60% of the cars in our area are going back to the dealership." I have no idea if this is correct or not, but it's on the safe side for certain.

 

Now you have the "demand" for repair in your area calculated. Now, all you need to do is calculate the "supply." To do this, I simply added up all the other indy shops in a 1mi or 3mi radius and guessed at how much work they did a year. It can be tough to figure out how much revenue another shop generates, but a good rule of thumb is $250k in sales per bay (link to R+W on this).

 

With the demand and supply figured out, you should have a good understanding of whether or not the area can support another shop. Hopefully, the demand is much greater than the supply, and you can entire the scene. If not, I would stay away.

 

Finally, even if the demand is heavy, I would recommend starting on a busy street or lighted corner where people stop and stare at your shop while waiting for the traffic to turn. This is debatable, but my mindset is "every dollar saved on rent in a poor location, you will pay out again in marketing to get people to your location."

 

Hope this helps.

  • Like 1
Link to comment
Share on other sites

Essentially I am wanting to follow a business model much like Quiktrip. When you think gas station you think grungy building with weird smells and bathrooms you wouldn't even want to see. But Quiktrip turned that idea on its head and has made a chain of gas stations that are clean modern upscale and that have a lot to offer.

 

I would like to do the same with a tire and auto shop, I want it to be a more upscale shop that yes will cost people maybe a little more to come to but a shop that people know that if they come to they will get more than quality service.

 

So how do I know that my area will support that specific business plan?

Link to comment
Share on other sites

  • 2 weeks later...

The local economic development center provided me with " automotive aftermarket" reports that break down what is spent on automotive items in my county. This allowed me to see that the market in my county was X dollars for auto repair. This in turn allowed me to formulate a plan.

Link to comment
Share on other sites

You can also talk to companies like Mudlick Mail who specialize in mass marketing mailers. I got a great study from them for free of my local homes in the area. Pretty cool idea and it was free :) I will probably be going with them for my mass mailing as soon as I can get the money set aside.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Have you checked out Joe's Latest Blog?

         13 comments
      Most shop owners would agree that the independent auto repair industry has been too cheap for too long regarding its pricing and labor rates. However, can we keep raising our labor rates and prices until we achieve the profit we desire and need? Is it that simple?
      The first step in achieving your required gross and net profit is understanding your numbers and establishing the correct labor and part margins. The next step is to find your business's inefficiencies that impact high production levels.
      Here are a few things to consider. First, do you have the workflow processes in place that is conducive to high production? What about your shop layout? Do you have all the right tools and equipment? Do you have a continuous training program in place? Are technicians waiting to use a particular scanner or waiting to access information from the shop's workstation computer?
      And lastly, are all the estimates written correctly? Is the labor correct for each job? Are you allowing extra time for rust, older vehicles, labor jobs with no parts included, and the fact that many published labor times are wrong? Let's not forget that perhaps the most significant labor loss is not charging enough labor time for testing, electrical work, and other complicated repairs.  
      Once you have determined the correct labor rate and pricing, review your entire operation. Then, tighten up on all those labor leaks and inefficiencies. Improving production and paying close attention to the labor on each job will add much-needed dollars to your bottom line.
  • Similar Topics

    • By Transmission Repair

      Premium Member Content 

      This content is hidden to guests, one of the benefits of a paid membership. Please login or register to view this content.

    • By Joe Marconi
      Many auto repair shops are still busy, and many are booked out from a few days to weeks.  After the initial shock of Covid, the recovery for our independent auto repair industry has been quite good, with many positive indicators for the future.
      However, how many of the auto repair shops that did suffer a great loss in business during the lockdown phase of Covid would have survived if not for the SBA loans, the Pay Protection Program and the Employee Retention Credit?  
      Building a cash reserve is crucial to prepare yourself for the next economic downturn.  How much should you set aside?  That depends on your business model, how much debt you have and other financial conditions.  Speak to your accountant, financial advisor and business coach, if you have one. 
      Rule of thumb, you should have at least three months of operating expenses set aside in a dedicated bank account.  Some accountants and financial advisors may suggest up to six months. 
    • By carmcapriotto
      Recorded Live at the 2023 Institute Summit, shop owner turned coach Jennifer Hulbert discusses the value of joining a coaching group. Find out what it's like to be in a coaching group with the Institute, and why she is passionate about celebrating other people's accomplishments.
      Jennifer Hulbert, Service Plus Automotive, Calcium, NY. Facilitator for the Institute for Automotive Business Excellence.
      Show Notes
      Has 3 coaching clients- discovering finances, gross profit, structuring segments of business, increasing billable hours, and implementing a parts matrix. Facilitating- a group usually consists of 18 to 20 shop owners. They are assigned a partner, they have an individual accountability partner along with access to their facilitator coach. Have three in-person meetings a year. Part of those in-person meetings is to evaluate the whole shop. Go in,  do a full evaluation of the shop, and give the owner feedback on areas for improvement. The other time is spent with training, and reviewing financial numbers, because if you don't know your numbers, you're never going to grow your business. In between, they have a couple of Zoom meetings as an entire group, and then the facilitator does reach out individually once a month.  Never be the smartest person in the room If you’re not learning, you’re not growing Celebrate other people's accomplishments Joining a coaching company- understand profits, understand the structure of a business, understand your numbers, and structure your finances to make a profit.  “Mama Bear of the Team”- Jennifer wants to see individual employees and their families succeed. Ensuring whatever decision you are making about the company is going to benefit your employees Women can do anything that a man can do Read the book “Traction: Get a Grip on Your Business”- communicate clear goals, build a leadership team, and hold each other accountable. Increased sales by 38% 
      Thanks to our Partner, NAPA AUTO CARE Learn more about NAPA AUTO CARE and the benefits of being part of the NAPA family by visiting www.NAPAAutoCare.com Connect with the Podcast: -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections
         
      Click to go to the Podcast on Remarkable Results Radio
    • By carmcapriotto
      California is mandating 100% of new cars and light trucks sold will be zero-emission vehicles by 2035. How will electric vehicles change the composition of our industry? What are the service opportunities? Should you start working on hybrids if you haven't already? Hear from the perspectives of 3 California shop owners that are ready and prepared for the future. John Gustafson, Gustafson Brothers, Huntington Beach, CA. John’s previous episodes HERE Dave Kusa, AutoTrend Diagnostics in Campbell, CA. Listen to Dave’s other episodes HERE John Eppstein, John’s Automotive Care, San Diego, CA. Listen to John’s other episodes HERE
      Show Notes:
      California non pretrolium zero emission no sales 2035 Start working on hybrids- EV is a hybrid without a gas motor What are the service opportunities on EVs? Preventative maintenance package, component replacement, and programming. Where will you plug your car in? At home? Infrastructure? Staying in contact with customers on a consistent basis will be more important than it is now- visit per customer dropping but ARO going up Range anxiety Fleet average age 12 years old Train service advisors- learn the language, get the trust of the EV customers As a shop, if you're not working on hybrids now, you need to start. You need to learn it. You need to get that training because an EV is simply a hybrid without a gas motor for all intents and purposes. If you understand and have experience with the hybrid aspects, the electric side of hybrid vehicles, EVs will just come naturally.
      Thanks to our Partners Shop-Ware and Delphi Technologies Shop-Ware: More Time. More Profit. Shop-Ware Shop Management getshopware.com Delphi Technologies: Keeping current on the latest vehicle systems and how to repair them is a must for today’s technicians. DelphiAftermarket.com
      Connect with the Podcast
      -Join our Insider List: https://remarkableresults.biz/insider -All books mentioned on our podcasts: https://remarkableresults.biz/books -Our Classroom page for personal or team learning: https://remarkableresults.biz/classroom -Buy Me a Coffee: https://www.buymeacoffee.com/carm -The Aftermarket Radio Network: https://aftermarketradionetwork.com -Special episode collections: https://remarkableresults.biz/collections
      Support our partners:
           


      Click to go to the Podcast on Remarkable Results Radio
    • By Ruben Van Zenden
      Today, we simply cannot ignore social media, everyone is using it whether you are a fan or not. Personally, I think it has its negative and positive sides. 
      I have been looking at 100+ car repair shops and noticed that only a hand full are using social media marketing, for example, Facebook advertising. 
      Why are so few car repair shops making use of this, in my opinion, great opportunity to increase car count? 


  • Our Sponsors



×
×
  • Create New...