How to Open an Auto Repair Shop
Opening a mechanic shop can be a rewarding career, especially if you want to do something with your hands. People need their cars to get around, so there’s always a need to keep them running smoothly. If you want to open an auto shop the right way, getting started will take a little bit of time, some training and solid planning.
You don’t technically need any education to open an auto shop, but your business will garner a certain amount of respect if your mechanics are certified by the National Institute for Automotive Service Excellence. Of course, you can always hire mechanics who followed that path, but odds are that if you’re interested in opening a mechanic shop, you’re a mechanic yourself.
To get ASE certified, you’ll need two years of on-the-job training. You can do some of this through formal education, like a trade school or community college, or you can fast track your path by taking an ASE-accredited certificate program. After you’ve accumulated two years of credit, you have to pass a written test, and it’s not the easiest, either. Only two-thirds of people pass the exam on their first try.
It’s true that you can succeed as an all-around general mechanic, but shops that specialize can actually bring in more customers if they play it smart. Perhaps you live in an area with highly congested highways and confusing turn-offs. Wouldn’t you want to open a mechanic shop that specializes in collision in an area where collisions are likely to happen?
Or perhaps you notice there are few shops that specialize in transmissions in the area. You can fill this hole. With ASE certification, you can pick a specialty from specific car manufacturers for things like truck equipment, heavy machinery and collision repair.
If you want to open an auto shop, know that location is everything. Your company probably won’t succeed if you choose to set up your business in an area with few cars or where few people drive. For example, a mechanic who opens a shop on Bald Head Island in North Carolina would surely fail unless he's in the golf cart business because the island does not allow cars.
For a traditional mechanic shop, a location near a highway or a place where people regularly break down is your best bet. Also, make sure that you have enough space for all the lifts you need and to park customer cars.
Opening auto shops is not cheap. You’re likely going to spend around $4,000 per lift and $4,000 on related insurances each year. Your tools can cost around $15,000 just to get started, and a diagnostics machine alone is $5,000 to $10,000.
With all the startup costs, you could be spending around $25,000 to $75,000 just to open your shop, and that can skyrocket if you buy your lot instead of rent it. Overall, this isn’t much compared to most businesses, but it’s certainly not a small chunk of change.
If you don’t have this kind of funding yourself, you may want to consider approaching a bank or the Small Business Administration for a loan. Make sure you have a solid business plan in place to get the absolute best rates.
Every business has to run through the same legal hoops. You need to form a legal business entity (LLC, S Corp, etc.), register with the IRS and get an employer identification number so you can pay taxes. You'll also need to acquire a business license from your local government and get the required insurance.
For an auto shop, you’ll need a general liability plan, but you’ll also need workers' compensation if you plan to hire employees. Commercial auto insurance isn’t required, but it is a good idea. This protects your company if any of your employees get into an accident while driving a customer’s car around your lot. After you get the proper insurance, you can start hiring employees.
Auto shops generally make most of their money from 10 popular services that average out at $144.10 per job. This includes:
- Oil and lube (which accounts for around 20 jobs per week on average)
- Brake services
- A/C repair
- Refrigerant recycling/recharging
- Electronic engine control services
- Emission control services
- Spark plug replacement
- Alternator repair and replacement
Make sure your prices remain competitive. A/C services generally rake in the most at an average of $276 per job. Brake services come in second at an average of $223 per job. Oil and lube is the cheapest at an average of $30 per job.
An auto shop won't succeed if no one knows it's there. Advertise your shop online with services like Yelp, Google and Angie's List. Also consider calling towing companies and giving them incentives to refer customers because they are, after all, dealing with broken-down cars. Coupons for discounted services, like $10 oil changes, will help bring in new customers who may become repeat customers.