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"Auto Repair Shop Business": How to Get Started

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With car ownerships increase with every passing year, there are more than 250 million cars in the U.S. alone. With that, also come many business opportunities related to the auto industry. One of the most lucrative ones is the auto repair business.

To start, you'll need experience as a technician, or you can simply hire technicians and handle the business side of things. Managed properly, this business can turn into a profitable one with scalability potential. On the other hand, if you're an experienced technician, it's a good idea to partner up with someone who can handle the managerial. The most common mistake people made is they can't differentiate technical expertise with a managerial expertise. Both are valuable for this, and any business, and it's very rare that someone possesses both.

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Interested to start this business?
Here are some pointers to help get you started:

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1. Startup Cost
For a basic auto repair shop, you will need around $15,000-25,000 for tools and equipment, $5,000 for insurance, $5000 for lift installation, and six months of rent cost, which will vary depending on your location. In total, you can start with around $50,000 outside operational expense like spare parts, labor cost, etc.

2. Location, location, location
Determine how you choose an auto repair shop.Most of the time it's either a) you go to the place you already frequented and b) you choose the nearest one when a car malfunction happen. Due to that reason, the location of your business will be very important. Most car's failed to start after parking, so choose a place with a dense residential area or big parking lots like shopping malls and department store. Research for the number of vehicles roughly 20 miles around your geographical area,

3. Stocking Spare Parts
Some spare parts are needed to be in store, yet some can devalue quickly or simply too expensive to stock. You'll need to determine which are which, and stock only items that are frequently used like lubricants, fan belts, etc. Other more expensive items can be bought on a case by case basis, but make sure you have a ready supplier of whom you can buy quickly when needed.

On the other hand, you should maintain spare part cost not higher than 70% of sales price, outside your service fee. The optimal cost should be around 30%-50%, but sometimes it's hard to maintain for certain items. Research your competitor's pricing strategy to get a better picture of the market.

4. Labor Costs
Since this business is relatively labor heavy, you have to make sure the labor cost doesn't overwhelm you in the end. The healthy labor cost of this industry is around 15%-25% of your projected revenue.

Earning Potential

The average people will spend around $1,000 in a year for car repair (including insurance coverage). Meaning, on average they'll spend $83.3 monthly. Assuming you can get 20 cars repaired a month, you can earn $1,600 with that assumption, or $20,000 annually.

Of course, you shouldn't aim for only 20 cars a month. An average performing auto repair garage in a decent area can get 100 customers each month, even more for top performing ones.