How to Establish a Key-Cutting Business

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Odds are that at some point in your life, you're going to need a copy of a key. Whether you've lost a key or need a spare set for a partner or friend, this industry is in demand, and the startup costs are shockingly low compared to other industries. The best way to set up your own key-making business is to use it as an add-on to an existing business. Key duplicating isn’t the most lucrative job on its own, but it can bring a bunch of additional profit to your locksmith business or hardware store.

Consider Purchasing a Franchise

When you’re looking to get into the key-making industry, it may just be easiest to open a franchise rather than to start from scratch. This is something you’re going to have to weigh because franchises typically require a greater amount of initial funding but have built-in brand recognition and a trusted base of consumers.

If you want to go the route of a franchise, you’ll have to pick one that works for you. For example, the Keyless Shop has franchising options and promises owners 50% gross margins, even though getting a key cut at a Keyless Shop costs consumers 50% less than a car dealership. This is also touted as a lucrative add-on to existing mechanic shops and only costs $30,000 to $50,000 to launch on average. Nonetheless, it still may be more expensive than launching a key-making business from home, where the equipment costs several thousand.

Pick a Target Market

You’ll need to write a solid business plan for your key-cutting business, which should include a target demographic. If you’re opening a full-fledged locksmith service, you’ll encounter a number of customers, from corporations to private residents.

Your business model depends on what kind of work you’re looking to do. For example, on-call locksmiths can charge a premium for working outside of traditional business hours. That sort of business model will also probably need a service vehicle to visit clients but is probably not a good fit for a single parent who has children sleeping at home.

Handle the Legal Requirements

There’s a lot of legal requirements that all businesses have to go through before they can officially open up shop. For a key-cutting business, you’ll need to get a business license from your local government. You’ll also need to register your business with the IRS and get an employer identification number.

Choose your business structure. This could be as simple as a sole proprietorship if you’re the sole operator, but you’ll probably want some liability protection. Most businesses in this industry operate as LLCs, which should protect your personal assets if your business goes belly up.

At this stage of business, you should also get the required insurance. General liability insurance and a commercial auto plan (if you’re going to have service trucks) is a must. You’ll also need workers' compensation if you have employees, and you may want to get some sort of protection for your locksmith equipment and key-making equipment.

Find a Location

Location is important for any business, but it’s probably not most lucrative to run a key-making business in its own storefront. Typically, a key-making business is most profitable as an add-on to an existing business like a hardware store, auto shop or full-fledged locksmith. This is why you’ll almost always see people getting a key cut at places like Home Depot or True Value.

You can take two approaches. You may want to pitch your key-cutting business to a local hardware store that doesn’t have the service to see if you can negotiate rent on a portion of the store. You can also find a small storefront in an area without much competition. A key-cutting business will not be successful if you’re opening it next to a major chain unless you have extremely competitive pricing, which simply won’t be possible if you’re renting out an entire storefront on your own.

Purchase the Blank Keys

Mechanical key making is probably the easiest. These are all metal keys that don’t have chips or electronics. For example, your house key is probably a mechanical key. In order to get started with this type of key, you’ll have to purchase the keys to cut. Beginners will probably want to purchase:

  • A starter pack of automotive mechanical keys: This can run anywhere from $500 to over $1,000 for the initial investment but will prepare you to copy keys for a number of popular car brands like Subaru, Toyota, Volvo and more. You can buy this from a key-supply store.

  • A starter pack of high-security mechanical keys: The newest car models require high-security mechanical keys, so a small bundle will fill in gaps where your starter pack fails. This should only be a couple hundred dollars.

  • Miscellaneous blank keys: This is great for everything that isn’t a brand-specific automotive key, like an apartment or house. 

In today’s age of technology, it’s not always as simple as getting a key cut. You’ll probably have to program electronic automotive keys and key fobs. If you’re including transponder keys in your business, you should purchase:

  • A starter pack of transponder keys: This will prepare you to create keys for the majority of car models, but car manufacturers do update their keys every year.

  • High-security transponder keys

  • GM single and double-sided VAT keys: These aren’t exactly transponder keys, but GM uses VAT keys with a chip for their cars. A pack of 15 will cost under $40.

Purchase the Key-Making Machines

You’ll need a couple key-making machines to fill out your roster of equipment, including a standard key-duplicator machine (which can cost less than $500), a code-cutting machine and programmers, testers and cloners for transponder keys (these can run several thousand dollars each). Other options include laser key-cutting machines, tubular key-cutting machines and decoders, which determine how to cut a key without disassembling the lock.

Figure out your budget and expand where you want. You can start with basic residential and commercial keys and then expand to include programmable key fobs. Remember that key duplication is probably going to be a hefty portion of your business, so don’t skimp on a cheap duplicator machine. Look at something in the $1,500 price range. It’s also worth noting that after the initial investment of a programmer, you may also have to pay monthly costs since car manufacturers update keys so often.

Set Your Pricing Structure

Most locksmiths charge between $1.50 and $4 for getting a key cut as long as the key isn’t specialized. Specialized or programmable transponder keys typically cost between $50 and $175. If you’re offering locksmith services as well, you can charge a mobile fee of between $30 and $150 (during standard hours) and between $40 and $100 per lock. Make sure you have a mobile minimum fee so you don’t waste your time traveling miles to install a $20 lock.

Market Your Business

As a key maker or locksmith, the best way to market your business is through positive Yelp and Google reviews. You should also sign up for a tradesman website like Angie’s List. Encourage your customers to leave positive reviews and consider having a special deal for first-time customers.

References

About the Author

Mariel Loveland is a small business owner, content strategist and writer from New Jersey. Throughout her career, she's worked with numerous startups creating content to help small business owners bridge the gap between technology and sales. Her work has been featured in publications like Business Insider and Vice.