How To Start an Automotive Repair Shop? A Step-by-Step Guide

Are you passionate about auto repairs and also want to become an entrepreneur? Then, opening your own automotive repair shop sounds like the perfect choice for you. 

But we all know that it is easier said than done, right?

After all, starting your own auto repair shop is no joke. There is real money involved, and you can also incur some hefty losses. But don’t panic just yet! If you follow this blueprint for starting an auto repair shop, you’ll almost certainly check all of the boxes. 

In fact, this guide is going to tell you all the tips and tricks you need to successfully jumpstart your auto repair business.

So keep going, there is a lot to learn.

The Step-by-Step Process For Starting Your Own Auto Repair Business

There is a lot more that goes into an auto repair business than simply registering it with the state. This straightforward guide to beginning your own car repair service has been put together by us to help you with that.

These processes will ensure that your new car repair shop is well-planned, correctly registered, and legally compliant. You can also use these strategies to expand your auto repair shop, once it is up and running.

Step 1: Make a Business Plan for Your Auto Repair Business

Auto repair businesses require a lot of hard work. First of all, you need to set a solid business plan for your own car repair shop.

A well-thought-out plan for auto repair shops is vital for entrepreneur success. It will assist you in mapping out the specifics of your automotive repair shop and uncovering some unknowns. A few key points to consider are:

What are the startup costs and operating expenses of car repair shops?

The costs of opening auto repair shops vary, but often include:

  • A business license costs between $50 and $100.
  • Automotive service excellence (ASE) certifications: $36 registration cost plus $39 per certification, with the exception of L1, L2, and L3 certs, which are $78.
  • Business insurance costs $4,000 per year.
  • The mechanic’s hydraulic lift costs $3,700.
  • Diagnostic equipment costs between $5,000 and $10,000.
  • Monthly shop rental prices range from $1,500 to $15,000.
  • $15,000 for a mechanic’s tool set with specialist tools.
  • Total cost: $50,000 or more

Ongoing business expenses of a car repair shop include shop the rental (unless the owner owns the shop facility), insurance, and labor costs.

Mechanics can be paid anywhere from a flat fee of $25 per hour to a rate of $100 per hour.

Insurance can cost up to $4,000 per year for shop owners.

Overhead and supply costs vary, but depending on the size of the car repair shop, they can range between $10,000 and $20,000 each month.

Who is your target market?

Customers for auto repair shops are distinct in that they all have one feature: a broken or serviceable vehicle. Generally, customers who have a service contract with the car repair shop are the best. Ongoing service contracts of an auto repair shop ensure consistent revenue and decrease cash flow issues in the short and long term.

One-time consumers who take advantage of special offers may be the worst type of customers! These customers are price shoppers and may end up costing the shop money.

However, a good strategy for auto repair shop owners to identify their target audience is through geographical segmentation. This means a car repair business should focus on customers located in their surrounding areas and focus on providing repair and maintenance services to them.

How much money will you charge your customers?

The sales revenue of car repair shops determines their profitability. With so many costs involved in providing auto repair services, it is imperative that you decide on the right price mix for you.

While deciding on the prices that you should charge, you need to look at the cost of providing services. The main cost that varies with each service is the labor cost.

Labor rates differ based on how the shop is configured. Mechanics are paid differently at a dealership than they are at an independent shop. The location also has a major impact on labor rates. Mechanics typically earn more in cities and places where auto maintenance is more expensive (usually this means a high concentration of high-end or luxury vehicles).

Customers often pay between $70 and $100 per hour in an independent shop. The hourly rate at dealerships is between $80 and $150.

Some businesses charge clients a set amount for services such as routine maintenance (e.g. oil changes, brake changes, and tune-ups). However, some auto repair shop owners prefer to charge their customers an hourly rate.

What will you call your auto repair shop?

Choosing the correct name is both crucial and difficult. If you don’t already have a name in mind, search for a guide or use a name generator to help you brainstorm.

If you run a solo proprietorship, you may choose to use a business name other than your own.

We recommend studying your business name before registering it by checking:

  • The business records of your state
  • Trademark registrations at the federal and state levels
  • Social networking sites
  • The availability of a web domain.

It is critical to register the domain name of your auto repair shop before someone else does. You will be needing a domain to set up your website and use search engine optimization (SEO) efforts.

What are your funding sources?

How are you going to raise funds? Will you use your savings to build your garage? Is it possible to get a bank loan? Tip: Try negotiating credit arrangements or a hire-purchase agreement with heavy-duty equipment vendors. 

Capital is required to open an auto repair shop. Before you dive in headfirst, it’s critical to understand the initial costs of an auto repair service. Many small firms fail within the first few years of operation due to a lack of financial preparation.

Take as much time as you need to ensure that your auto repair business plan is well-thought-out, and solicit feedback from anyone who will provide it to you. Mistakes committed during the first planning stages can lead to unnecessary complications later on. 

Remember that a business plan isn’t written in stone, but rather serves as a guide to show you where your mechanic shop should be in a given amount of time.

Step 2: Form a legal entity

When you are setting up your own business, you will need to make sure it is a legal entity. This will also be needed for opening your business bank account.

Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.

If your car repair shop is sued, becoming a legal business entity, such as an LLC or corporation, prevents you (the business owner) from being held personally liable.

Step 3: Get Financing (if needed)

Every new business needs to sort out its business capital situation. Before you set up an auto body shop, you need to figure out how you will finance your business.

To open an auto repair shop, you’ll most likely require a loan to cover the costs of equipment, location acquisition, employee salaries, insurance coverage, and so on. Before making a bank loan to a business owner or investing in a new venture, the first inquiry is always, “Will you be able to pay us back?” So make sure your business plan has covered how it will generate revenue from potential customers.

Small Business Administration (SBA) loans are a popular source of funding for auto repair firms. Because SBA-backed loans are insured by the federal government, lenders can provide more flexible terms and lower interest rates. If a borrower fails on their loan, the Small Business Administration (SBA) steps in and pays the bank a specified sum to assist mitigate the loss.

Step 4: Get the necessary permits and licenses

You can not operate an auto shop without getting the necessary permits. Failure to get appropriate permits and licenses can result in significant fines or possibly the closure of your business.

Requirements for State and Local Business Licensing

All car repair shops must follow federal and state environmental rules. Here is a checklist for complying with federal environmental standards.

A car repair shop license is required in the majority of states. Visit the SBA’s reference to state licenses and permits to learn more about licensing requirements in your state.

For more information, you can also:

  • Check with the clerk’s office in your town, city, or county.
  • Contact one of the local associations mentioned in the US Small Business Associations’ database of local business resources for assistance.

Step 5: Open Your Business Bank Account

Once you have obtained the permits for your own shop, proceed to set up a bank account. Personal asset protection requires the use of distinct business banking and credit accounts.

When you mix your personal and business accounts, your personal assets (your home, car, and other possessions) are in danger if your company is sued. This is known as piercing your company veil in business law.

Furthermore, learning how to build corporate credit can help you obtain credit cards and other financing options in your company’s name (rather than your own), better interest rates, larger lines of credit, and other benefits.

Step 6: Get insurance

Insurance, like licenses and permits, is required for your business to operate safely and legally. In the case of a covered loss, business insurance like commercial property insurance protects your company’s financial well-being.

There are several sorts of insurance plans designed for various types of businesses with varying risks. If you’re unaware of the types of dangers that your organization may face, begin with General Liability Insurance. This is the most popular coverage required by small businesses, so it’s a good place to start for yours.

Workers’ Compensation Insurance is another important insurance product that many businesses require. If your company will have employees, your state may require you to purchase Workers’ Compensation insurance.

You can read this guide to insurance for an auto repair shop for more details. 

Step 7: Get yourself a team

To deliver the finest experience that encourages repeat business from your existing clients, you’ll need to hire the top technicians and front-office staff. Finding the proper workers should be your top goal, as auto repair technicians have a significant impact on how well your firm succeeds.

To be profitable, it is critical to provide excellent customer service and deliver outcomes, which may include hiring employees with relevant job experience and a willingness to learn and improve.

Step 8: Define your brand, and marketing strategy and start selling

Make your major communication to potential consumers that your services are more expensive than others in the area because you value quality above quantity. A powerful and distinct brand identity will help you stand out.

Build your brand’s website

After you’ve defined your brand and designed your logo, the next step is to build a website for your company.

The following are the primary reasons why you should not put off developing your website:

  • Every genuine business has a website, period. When it comes to bringing your business online, it doesn’t matter what size or industry it is.
  • Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a replacement for your own business website.
  • Website builder programmes, such as GoDaddy Website Builder, have made it relatively simple to create a basic website. You don’t need to pay a web developer or designer to make a website you’re proud of.

Once you have your website up and running, you need to invest in search engine optimization (SEO). SEO is a proven tactic to increase traffic to your website and attract more customers to your shop through the search engine.

Ending Thoughts

Your big day has arrived—host a grand opening so potential customers in the region may come and discover what sets you apart from the competition. To entice clients to come to your shop, you may advertise promotional discounts for the first week (or month) or offer free maintenance services. 


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