Any shop owners here?

[AstroVic]

For the past few years I've been contemplating the idea of opening my own automotive shop/garage. I'm not a mechanic and I've never owned a business in my life, but I have always been told that I should be in business for myself as I supposedly have a "business sense" about me. Plus, I think I would be very successful running my own business.

Shops around here typically charge $65-$90 per hour for labor. I figured if I opened a relatively small four-bay garage and if each bay averaged 6 billable hours per day, six days a week, that's 144 billable hours per week. If I paid my mechanics $25 per billable hour, I'd clear $5,760 per week (assuming I billed only $65 per hour). That's almost $300,000 for one year. Double the size of the garage or double the billable hours and we're talking $600,000 per year. Even if I spent a couple hundred grand each year on fixed expenses (rent, utilities, shop equipment, insurance, etc.) I'd come out way ahead.

I currently make about $50,000 per year working 40-50 hours per week. I have a bachelor's degree and I'm supposed to start graduate school this fall. (I was supposed to start law school May 30th, but I put it off two years in order to get my master's degree on a full scholarship.) I'd obviously like to make more money and I'd also like to continue pursuing my education - at least until I finish my master's degree in two more years.

I think it's perfectly reasonable to expect to make $100,000+ per year owning my own shop, and I even believe it would be possible to clear substantially more than that if I could expand. Of course, if it was easy then everyone would be doing it!

Does anyone have any advice, comments, suggestions, thoughts on this matter? Am I crazy to think this way? Should I just pursue my master's degree and law degree and forget about my crazy automotive dream?

BITOG has made me neurotic, you know! Just kidding.

 

[XS650]

You're taking an intelligent look at the numbers before you start which puts you ahead of the pack.

Running your own business is a full time plus job. Most people I know who go into business for theirselves and succeed put nearly their entire lives into the business.

Take some time and talk to some small business owners and get their perspective. Owning and running your own business is heaven for some, h3ll for others.

You just need to figure out which category you would fall into. It has lot to do with how you deal with people. Keeping your employees/subcontractors and customers satisfied, that will be by far the biggest part of your job.

Things like handling the money, insurance, legal hassles, rental etc will be small potatoes compared to dealing with the people.

 

[TooManyWheels]

Make sure your personality type is one that can stand repetition. Running a garage is a lot like running a restaurant, doing the same things over and over, day after day, no changes. I wouldn't last long in that situation. If you can imagine looking at a disgruntled customer and seeing a verbal balloon containing "blah, blah, blah", that might be the wrong choice.

By the way, financial sense is not the same as business sense. Business sense is about how to CREATE VALUE in a meta sense - making the choices and having the understanding about what path provides the most return for everyone involved, psychologically, financially, strategically. You can't taking money out of the business that you haven't created first. If your only orientation is toward numbers your business won't last long, because people won't work for you, and customer's won't come to you.

[ May 24, 2005, 08:53 AM: Message edited by: TooManyWheels ]

 

[AstroVic]

quote:

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Originally posted by TooManyWheels:
If you can imagine looking at a disgruntled customer and seeing a verbal balloon with "blah, blah, blah", that might be the wrong choice.

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Hahahahhaha! That actually gave me a good chuckle!

Seriously, I hadn't thought of it that way, but I suppose you're 100% right. Thanks for the input.

 

[ruking77]

BA and Masters here, full scholarship, VA benefits. I made it into the PHD program of my dreams with scholarship and stipend, decided not to pursue.

By way of training, I had 5 years in the Air Force as a Maintenance Control Officer in B52 bombers and F4 fighters. As big as those operations were, even with the directly applicable skills, they really were only 15% of the knowledge base needed to run a small business such as a auto repair shop.

The real question is, yes you make 50,000 per year at 50-60 hours a week; but can you see yourself making say 25,000 and working up to 100 hours per week? But the most important is how are you with the possible risk of losing it all? Another is how will you respond when absolutely nothing goes your way?

I have started, run and sold three businesses. On the positive side there is ABSOLUTELY NOTHING like your own business that is doing WELL. The whole structure is set up AGAINST the small businessman 70-85% failure rate in 5 years), but oxymoronically if your business is going well, the corporate and tax structures are ENTIRELY set up in FAVOR of the corporation entity, of which small business can utilize.

[ May 24, 2005, 10:47 AM: Message edited by: ruking77 ]

 

[Steve S]

There will always be comeback no matter how good some one is at repairing cars from bad parts etc. It seems that either some one has it or not when it comes to running a business. Also there may be a long time to build up a strong customer base or repeat customers and there is the one the in business that people don't think about that keeps it going ,,,is can you provide a product or service that will make your customer as happy giving you their money as you were receiving it? It should cost you more for a well trained tech.

 

[medic]

Steve hit the nail on the head. You will need good techs to do good work. I don't know about your area, but around here a good mechanic is hard to find. Then, if you do find a good one, you'll need to treat him very good to keep him.

If you were a good mechanic and your boss was paying you $25/hr ($52,000/yr) and you saw that he was making a good dollar off of your services and tools, you would really consider going into business for yourself. And, the best part is that you will take many of your customers with you.

It can also work the other way. My regular mechanic ran his own business for years. He worked his butt of, starting around 6 am and going home around 7 pm. He finally decided that it wasn't worth the hassle and made a deal with another local garage. Now he works 40 hours/week and all of his customers followed him to this new garage. This is the type of mechanic you need to look for and I am sure it will cost you more than $52,000/year.

 

[Pablo]

Good advice.

I have detailed out two complete business plans.

My two comments:

1) One can never do enough research on foot traffic and still it's a guess. This seems to be the part that stops me. You'll pay big money for a "good" location....or you'll pay good money for an existing business........word of mouth from minute one can never be underestimated.

2) Double your "non-recurring costs", then add them back in for every year.....because in the automotive repair business I think keeping up the equipment, certifications and training can be expensive. Don't forget to pay off the local EPA.

 

[moribundman]

I believe that in the near future (think within 5-10 years), it will become difficult for independent shops to work on new cars. Special tools, specialized diagnostic tools, etc, will make it harder to compete with dealerships. I've already had small shops turn me down for lack of required tools and equipment, and I only drive a '96 model! With more and more hybrids and elctric cars coming, I believe the shop business will change. Maybe I'm just nuts, but future changes in the business might be something to consider.

 

[Gary Allan]

mori,

Sure. My friend does only maintenance on most OBDII stuff. I've even left my cheap OBDII scanner there for his use. He doesn't run into anything that often. He has a Snap~On scanner ..but they hit him pretty hard for the software update modules.

The typical shop doesn't see a car for 3 or 4 model years for anything aside from an oil change ..maybe brakes. The investment in the current offerings from All Data®, Snap~On, Matco, etc. are substantial. Why buy for the sake of a very few vehicles for such limited use? This is especially true if you already have enough work without doing it.

I also know permier shops that maintain near state of the art equipment and software to give 99% dealer like service. They subscribe to all the publications ..get their updates on time and go to their clinics. If you weigh it up, they're doing more to maintain the tool/school/service part of the trade then they are enhancing their wallets.

A good bit of it has to do with the age of the shop ownership. If the shop owner is near retirement, he's not going to invest in state of the art goods.

 

[Silk]

It all sounds good on paper,the real world is a bit different.I own a small shop with a couple of mechanics working with me,it's a lot of work for small return...but then I'm a humble mechanic,not a numbers man.You'll need 3 bays per mech,they will seldom start and finish one job at a time,you'll be waiting on parts,outwork or the customer for go ahead,I strip cars in the morning,then order parts for the days work - oh,you can push them outside,but that's too much work.You need mechs with different skills - one who can do diagnostics,but he's smart and won't want to do boring repetitive work,so you want another to churn out the daily grind,you want someone who can think on their feet and be able to fabricate small parts....he's the guy who can do an engine conversion,he likes to get stuck into big stuff.

In New Zealand all our mechanics were able to do anything and were in demand around the world,Formula One teams were full of Kiwi's,but these days we too are turning into specialists,you find guys who can only work on a Honda,don't know what to do with a welder...Diagnostic gear is a huge expense,I doubt if it could ever be paid for before it becomes redunant.

 

[JHZR2]

Silk has it just right.

Imnot all that great of a mechanic, and tend to have most things go poorly for me when I try car projects.

Ive used dealers, and some dedicated-to-one-brand type shops. The better shops that Ive dealt with are set up just like Silk says. Or else its a VERY small shop with one guy with a strong rep, that doenst schedule work easily or in any short type term.

Youll only be able to have 2 workers if you have 4 bays. Unless youre doing only oil changes and brakes (which may be the case in the beginning).

IMO, one of the best ways to do it is to speciaize. Do BMW or MB only, or something similar to this. Ill pay a premium to find a guy who really knows my BMW or my MB. I will NOT go to a generic shop, and tend not to even in my chevy or my mother's plymouth.

JMH

 

[AstroVic]

Very good points guys.

Around here, I've talked with several Master ASE Mechanics I know and they've all pretty much told me the same thing. They receive roughly $25 per hour.

I'm thinking about starting out small - just two to four lifts in a small, leased shop. Most of the business would be word of mouth and building my reputation would be my utmost priority. I know two or three excellent mechanics who would probably come work for me. (They're great mechanics, but they don't have that "business sense" about them.)

 

[Drew99GT]

I personally think there is a HUGE market for truely genuine, good, honest, fair auto repair facilities. 99.99999% of them are crooks. I say go for it! It will definetally be hard and financially draining at 1st, but if you build a reputation for actually giving a **** about your customers, especially females, and you honestly communicate as much as posible to customers, you could make it big time. Also, I know the good shops around my area treat their mechanics like they're PHDs. Mechanic with high morale who don't feel like they're being crapped on will do a great job. Also, I've found that smaller is better. 3 bays is enough IMO if your goal is 100% customer satisfaction and correct, thurough repairs. You may have less bottom line, but having a solid, happy customer base is the best advertising tool you can have.

 

[Gary Allan]

Simple solution to keeping a good mechanic ... don't limit their ability to make money. You effectively turn them into a profit partner with them determing how much they make. Most employees cost anywhere from 150-175% of their hourly wage ..so a $25/hour wrench costs you about $45/hour just to be there. The owner typically then manages the profit and adds wrenches as need due to demand. His mechanics still make $25/hour ..and typically have the same throughput per week (assuming that you're not short on work). If you, however, put no ceiling on what a GOOD wrench can make ..he has no reason to leave since he's got a vested interest in making you money. Adjust labor charges to changing norms ..and the rest takes care of itself.

If I were doing this I would view it as a service that I would provide for an ambitious and accomplished mechanic. Effectively (after you shake out all the various modalities that money really flows) leasing him access to vend his service. You take a cut of that to maintain his access to unlimited revenue.

Cherry pick your wrenches that you offer this "profit partnership" and sit back and reap the benefits. You just assure that you have the best deal going.

 

[goodoleboy]

quote:

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Originally posted by Silk:
oh,you can push them outside,but that's too much work.

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I agree, $25 an hour to push cars around is alot of money. Ive seen many shops with only 2 lifts and the had cars on floor jacks doing work in the back.
I have a brother who is a serivce manager with a large chain and it gets slow in the winter he says.

 

[Silk]

quote:

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Originally posted by goodoleboy:
[I have a brother who is a serivce manager with a large chain and it gets slow in the winter he says.

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That's another thing I forgot to mention - 35 years in this trade,and I've work for a lot of different companies in various fields...never have I worked in a place where the shop is working 100% every day of the year,sometimes there is too much work and you have to turn it away....then there is a slow down and output is lucky to be 50%.Sometimes it's seasonal,sometimes political,sometimes you just don't know where the work's gone,but it always comes back.

 

[blupupher]

I have a friend in Katy that owns his own shop, has for 10 years. He is now going ito fab work instead, just can't stay busy enough. Most of his loyal customers have bought new cars in the past 2-5 years, and any work goes to the dealer for warranty. His days are very sporadic. He may have 4-5 cars 1 day, and nothing the next. A few years ago, he was busy 6 days a week. He has 2 lifts and an assistant and I work part time for him when needed (which has not been much lately). He had a mechanic move about a year ago and he never replaced him. Didn't have the volume. He leases his shop from his cousin, and gets a good deal on that, but he is always behind on bills. Part of it is he is not the best as far as investing (he likes his toys) but his fab work is doing much better than his shop ever did, and he is just getting started.
Let me know if you want his # to talk. Maybe that is what he needs, a good shop manager.

 

[Gary Allan]

What's the safety inspection in Texas like? PA is just about the most thorough. That may account for the steady stream of throughput in most of the shops that I know. You have inspections near the end of every month ..even though you are eligible to have it performed in 90 day window before its expiration. We used to have inspections every 6 months in the 70's

Both emissions ($45) and the safety inspection ($35) w/oil change will run over $100 plus tax. Add any failed items to the tab. Since the emissions equipment is so expensive, several shops use one shop for all the testing. They get discounted rates due the assistance that they provide "en-mass" in paying for the hardware(typically $10 off). The state gets $5 per data transmission/ per vehicle to maintain the database.

 

[wileyE]

Vic, my bud has a sucessful repair shop with 5 employees. He tells me that he has more money tied up in meters and special test eqpt and specialty tools than his building and property is worth! thats not counting all the hand tools, tire machine, compressor etc. Its just the stuff to work on these new cars. He always kids around that he's going to sell it all someday and buy a minute lube and only have to worry about oil and filters.