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So we are looking at moving our shop to a really nice shop here in town that has some amenities that we are very excited about but I got to talking with the landlord about the past few shops that had been in there and he told me that he didn't think this location could sustain a $70-80 labor rate. He thought that was probably why the last shop didn't stay busy enough to keep the doors open.

 

I have always thought that while location can be a great plus that it really truly depends on how you package things and how well you do with marketing and advertising. Ive always seen that good customers will travel a little bit just to come to a shop they like.

 

What do you all think? How much value should I put in what the landlord was saying? How much does location truly have to do with a shops success? How far will customers travel to come to a good quality shop they love?

Edited by ncsvoboda7
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I think location is crucial, I estimate that every new customer I get that wasn't referred by someone came in because they saw us driving by. That's a lot of business from no advertising dollars. A shop off the beaten path can survive with enough of an advertising budget.

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Our new location is by no means off the beaten path, it is on a street with 12k traffic count and then a main highway with over 80k traffic count and an exit for easy access. I guess my main question is more the median income around us is not exactly our clientele and that's what I'm wondering about...

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Look at our Thoroughgood shop on Google maps. We are at the end of a dead end street. It's definitely tougher to draw a crowd when you are off the main drag, but if you advertise and bring them in and MAKE THEM COME BACK by being the best in town, you can be successful. I know a lot of great shops that are in miserable locations.

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I know what you mean about the socio-economics; ie Demographics of the location. If the landlord told you that it would be hard to have a $70 to $80 labor rate, then that is a very important bit of information to consider. Think about this: the landlord has a vested interest in leasing the building and receiving the stream of income. For him to go against his interests and try to dissuade you from locating there, it may be the #1 reason NOT to move there. There are locations only 15 minutes from me that I would not own a shop in because they have a lower income population, and it would be like swimming upstream to make money there.

 

You cannot make money off people that have no money!!!

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Well he wasn't necessarily dissuading me but just telling me that we could only hold about a $50-60 labor rate. But that is because the previous shop was targeting that local area which we are not. We are targeting the higher income earners but it just so happens they dont live in the very close vicinity.

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Are your higher end customers willing to travel to a lower end area to have their cars serviced? Might there be a stigma attached to doing business in this area that the high earners will avoid? It might be a great shop but if those you are targeting aren't willing to come to this area it's going to be a big problem.

 

I waited almost 2 years to find the right location. I almost made a deal on a shop that was only 1 block off the beaten path but ended up passing, and glad it did, someone else took it and failed. The ultimate location finally turned up and I'm so glad I waited because it was an immediate success in my first year there. Be patient and do your due diligence.

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From my experience, as long as the shop you are looking at is in a decent area. Middle-class minimum, and the retail areas around it are clean, the higher end customers will come. We are in a area where about 2% of our customers are within 15min of our shop. You will have to advertise a lot to get the customers you prefer. Most of our customers come from higher-end areas even though we have no amenities around. It can be done, but it will take a lot of cash and patience.

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The landlord might also just be ignorant to the auto repair industry. The last shop might have failed due to mismanagement, poor customer relations, dishonesty, sloppy mechanics, and a host of other things that aren't posted on the wall as prominently as the labor rate. In my opinion, a shop that fails charging $80/hr would probably also fail charging $60. Unless of course the average labor rate in that neighborhood is $45.

 

Location is king, but even a perfect location can't make up for a bad reputation

Edited by alfredauto
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Ya from the sounds of it the previous guy didn't really have a good vision for the business. He started selling cars and then was not super into the mechanic side and I have heard he simply didn't want to show up sometimes. I guess the only thing I was worried about was the landlord saying that location could only handle a $50-60/hr labor rate because our business plan is built around roughly $80/hr.

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Ya from the sounds of it the previous guy didn't really have a good vision for the business. He started selling cars and then was not super into the mechanic side and I have heard he simply didn't want to show up sometimes. I guess the only thing I was worried about was the landlord saying that location could only handle a $50-60/hr labor rate because our business plan is built around roughly $80/hr.

 

I would be too worried about the other business. There could have been multiple contributing factors for why it failed. You will have to test your labor rate anyway. You also can't only base your business on price alone. People will pay more for great customer service.

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I have been told repeatedly that the customer base is 3-5 miles of your location.

 

It does depend on your location though. Most of our customer base comes from 10-20 miles away.

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I have been told repeatedly that the customer base is 3-5 miles radius of your location.

I'm sure I'm an exception due to the trailer and hitch side of my business, but I've got customers in almost every town in the U.P. of MI. I have a customer coming from Calumet tomorrow for a new fifth wheel hitch on his brand new 2015 F250 diesel, it's a $1,450 sale. He also drove here last fall for a hitch and wiring on another vehicle. He's over 2 hours away, some have come farther. I've asked a few why they drove all the way here for a hitch installation/wiring package and in almost every case they said they don't have anyone local who specializes in it or who they would trust. My web presence has brought those customers in and I believe that's very important in this day and age.

 

People will travel for the right shop but getting that reputation and customer base will take some time, effort and money. It's hard enough being in a good location and a real challenge if you're not. Why handicap yourself right from the start? I mentioned I waited almost 2 years for my shop and it was worth it, my location is everything. I can tell someone coming from 3 hours away in one or two sentences how to find my shop. My shop itself could be bigger, I could use 2 more bays but I wouldn't trade my location for a bigger better shop, no way not worth it. Good luck man think hard about this and don't make any rash decisions.

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I see that you are a BMW only shop. Did you start in your current location? Did you have a personal following before you opened? If you have a good reputation and following it can be done. However, if you are like me and know nothing about the business and open a store it is much harder. Before I was in this business I was an environmental consultant/engineer. I did work in Twinsburg, OH, near you for Coca Cola Enterprises at the bottling plant they had there.

 

Did it a couple years out of a home garage first, then moved where we are 11 years ago. We did have a small following. We started out upgrading differentials and doing conversions, then changed over to a complete repair shop. It was hard at the beginning, but every years gets better and better. Do you miss the great weather up here in Northeast Ohio?

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I just closed on 1.5 acres yesterday to move my shop to a much better location. We've been open for 22 months. I started out by myself and now have 2 full time employees. The number 1 complaint we get is our location. All of our customers live more than 5 minutes away.... ALL! Most probably live over 10 minutes away. Half probably live 15 minutes or further. I've had too many customers come to our place, say how much they love the service, but can't justify the drive. A lot say they would rather pay more at the local dealer than drive all the way out to see us, even after they say our service is way better and refer all their friends to come see us! So for us, location is important. I've managed to grow in a terrible location, but now I'm ready more. I think it's different for every business.

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We chose our shop on one of the busiest roads in our city (38k cars a day drive by). Additionally, we are in a very high end neighborhood ($80k+ median income). This means that not only do we get a LOT of walk-ins, but we also get a LOT of high-end "just get it fixed" customers. Our service adviser looked at me the other day and said, "you know, great customers are the majority of our customer base. The weird customers are the minority. Every shop I have ever worked at, it's been the opposite."

 

Simply put, based on our location, we do not have to deal with the normal stuff shops deal with ...

- very few price shoppers

- most have a spare car

- dense urban environment, so a dropoff is only a $5 uber fare away

- few arguments with billing

- etc.

 

It's not because we are doing an awesome job (we try to), but rather simply due to the location and the people around us that walk in. It's like playing shopkeeper on easy mode... location made it this way.

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It amazes me how "far" is relative to the environment. My shop is rural, meaning the population as a whole is accustomed to driving 30 minutes to a grocery store, 20 minutes to school, an hour to the doctor, 2 1/2 hours to the shopping mall. My garage is "close" to town, meaning 15-20 minutes. Makes for a lot of driving.

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  • 2 years later...

Thought I would chime in with a suggestion. Have you considered taking a walk around the area to talk to other business owners?? The landlord may be looking through "different glasses". I bet there's a story about that shop - and maybe even a customer or two that could enlighten you about what REALLY happened. 

Besides, in your post you mentioned something about the owner "not showing up". I can't remember who said it, (I think it was Woody Allen) that 90% of success is just showing up. 

But a little "intel" may be worth more than all the location surveys and high ticket consultants. 

Hope this helps!

Matthew Lee
"The Car Count Fixer"

Get "The Official Guide to Auto Service Marketing"
Got an hour? Join me on this Training Webinar

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  • Have you checked out Joe's Latest Blog?

         0 comments
      It always amazes me when I hear about a technician who quits one repair shop to go work at another shop for less money. I know you have heard of this too, and you’ve probably asked yourself, “Can this be true? And Why?” The answer rests within the culture of the company. More specifically, the boss, manager, or a toxic work environment literally pushed the technician out the door.
      While money and benefits tend to attract people to a company, it won’t keep them there. When a technician begins to look over the fence for greener grass, that is usually a sign that something is wrong within the workplace. It also means that his or her heart is probably already gone. If the issue is not resolved, no amount of money will keep that technician for the long term. The heart is always the first to leave. The last thing that leaves is the technician’s toolbox.
      Shop owners: Focus more on employee retention than acquisition. This is not to say that you should not be constantly recruiting. You should. What it does means is that once you hire someone, your job isn’t over, that’s when it begins. Get to know your technicians. Build strong relationships. Have frequent one-on-ones. Engage in meaningful conversation. Find what truly motivates your technicians. You may be surprised that while money is a motivator, it’s usually not the prime motivator.
      One last thing; the cost of technician turnover can be financially devastating. It also affects shop morale. Do all you can to create a workplace where technicians feel they are respected, recognized, and know that their work contributes to the overall success of the company. This will lead to improved morale and team spirit. Remember, when you see a technician’s toolbox rolling out of the bay on its way to another shop, the heart was most likely gone long before that.
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