How to Start a Custom Auto Shop

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If MTV has taught you anything, it’s that custom auto shops can be a whole lot of fun. Millennials in the early ‘00s learned this by watching Xzibit’s ridiculously over-the-top custom car series "Pimp My Ride." While most custom auto shops aren’t regularly loading cars with cotton candy machines or fish tanks, the world of the custom auto is still a creative, hands-on industry that’s worth a pretty penny.

In the United States alone, the auto mechanics industry brings in $67 billion a year, and it’s only expected to grow. If you’re looking to launch your own custom auto shop, these tips can help you get started.

Find Your Niche

Custom auto shops are a dime a dozen. There are more than 250,000 spread across the U.S. This means that if you want to get noticed by consumers, you’ll have to stand out. How? Find a unique niche or specialty (and no, this doesn’t mean offering to install hot tubs in the back of vans like West Coast Customs).

“To start a business in the mechanical industry that is going to stand the test of time, you need to specialize in something,” said Karl Chopra, founder of Design911. “Be the absolute best at that and never sacrifice on quality.”

Over the last 20 years, Chopra transformed his custom car business from nothing into one of the UK’s leading Porsche repair, restoration and customization shops. His secret? He never spread himself too thin. Rather than learning the ins and outs of every make and model, Chopra decided to focus on the luxury brand, whose cars have a variety of quirks that often require a specialist.

“Don't be a jack of all trades, but a master of one,” he said. “If you are passionate about paintwork, become the paintwork experts. Offering other services is, of course, OK, but know your individual strength, your unique selling point as a body shop and spend time and effort in developing that.”

Hatch a Custom Car Shop Business Plan

The hallmark of a booming business is a solid business plan. It can guide you through the murky financial waters of opening a brand-new business. Your custom auto shop business plan should outline everything from costs and potential revenue streams to marketing plans and pathways for growth. Don’t know where to start? Andrea Roebker, a spokesperson for the Small Business Administration, recommends delving into some of the agency’s many tools, which range from bank loan and business plan assistance to mentorship programs.

“Knowing that small businesses that receive three or four hours of mentoring achieve higher revenues and increased business growth, someone looking to start an auto body shop should also seek out a mentor,” said Roebker. This is a particularly fruitful option for those who’ve never owned a business before. Roebker said it can help newbies “gain the confidence to move forward.”

Choose a Location

Location is everything when it comes to custom car businesses. Placing a repair shop near a particularly accident-prone intersection may seem grim, but it’s also just good business. You want to find a location for your garage that isn’t rife with competition and actually needs your services. Custom auto shops catering to luxury cars typically do better in affluent areas where people actually own luxury cars, whereas tire repair shops might thrive in a pothole-laden urban landscape.

Space is also a key requirement, as most custom auto shops need a sizeable plot of land. Spray-painting services often take the largest chunk of space because you need an enclosed space with proper ventilation and a designated filtration method in order to be legally compliant. As a rule, eight service bays is a good place to start if you plan to go full service. Make sure they’re tall enough to hoist large vehicles for underbody work if you plan to service trucks and 15-passenger vans.

Seek Out Insurance Partnerships

Where cars go to get fixed, insurance companies follow. If you’re launching a custom car shop, it’s a pretty safe bet that you’ll be on the more frustrating side of car insurance claims because you’ll miss out on customers if you’re not enrolled in their preferred programs.

Brian Haggerty, whose business Cross Island Collision has been servicing the Nassau County and Queens, New York area for the last 42 years, believes getting in with insurance providers can be a custom auto shop’s largest obstacle.

“A big obstacle has been insurance companies steering our customers away from us and instead toward insurance company preferred shops,” he said. “We overcame that by participating in as many as we could and doing quality work to try to keep our customers.”

Invest in Quality Equipment

One of the largest expenses for custom car businesses is the equipment. A few things, like lifts, metal inert gas welders and hazardous waste disposal systems, are required by law depending on the state. A 100-piece comprehensive mechanic tool set could cost $40,000 alone. Beyond that, you’ll need diagnostic machines ($3,000 to $4,000), a refrigerated evaporating system ($1,500 to $3,500), air tools ($60 to $200) and loads more.

Though you may be tempted to buy used equipment or skimp on certain tools to save some cash, Chopra believes this could end up hurting your business in the long run. “Always seek to do it to the highest quality,” said Chopra. “In the short term, cutting corners may seem like a harmless and cost-effective option, but it is not sustainable, especially in an industry so heavily reliant on word of mouth and personal recommendations.”

Before your launch, you’ll also need to secure suppliers. This is how you get parts when you’re refurbishing or repairing cars. Suppliers can give you a make-or-break deal that either keeps your rates competitive or forces your customers to shoulder a larger expense. For this reason, Chopra said fostering supplier relationships should be a priority.

Get the Proper Insurance and Licenses

Like most businesses, you’ll probably want to invest in a number of insurances. This includes general liability insurance, fire insurance, employee insurances like workers' compensation and more specialized insurances like garage liability insurance and garage keepers' legal liability. Those industry-specific insurances protect your business if one of your own mechanics hits another vehicle or injures a person on the job.

Beyond insurance, you’ll also need a variety of licenses and permits depending on the state and the type of business you plan to run. For example, in New Jersey, auto body repair facilities need a heavy-duty vehicle endorsement if they’re working on vehicles weighing more than 14,000 pounds. A full-service custom car shop needs a full-service license, whereas you might be able to get away with an auto body limited license if you don’t offer spray-painting services. You can find the local requirements and applications online or at your local department of motor vehicles, but you’ll need to first establish your business as an entity with the IRS in order to apply.

Hire Your Staff

Odds are you’ll need some additional hands on deck, even if you’re the most experienced mechanic in the garage. Your staff is the heart of your custom car business and can offer an amazing, knowledgeable customer service experience or turn customers away forever.

“You never know how much going that extra mile to make the job pristine can help your business in the future,” said Chopra. In other words, hire a staff with a can-do attitude who take great pride in their work.

Employees working directly on vehicles should have the required Automotive Service Excellence certifications. This varies based on the types of vehicles you service: cars, trucks, buses or all of the above. You can also require your staff to get a number of secondary certifications and manufacturers' certifications for a leg up on the competition.

Reach Out to Your Community

Without a solid marketing plan, your business won’t get off the ground. You need visibility. Most small businesses opt for pages on Yelp, Facebook and Google. While this is definitely a tried-and-true method, it may also be worth it to get off the computer and get into the real world. Becoming an active member in your community can serve as invaluable self-promotion.

Haggerty’s approach with Cross Island Collision involves working closely with the local volunteer department and civic associations. He regularly donates to charities and local churches and temples in exchange for advertising space in their bulletins. “Try to connect to your community,” said Haggerty. “At Cross Island Collision, we have done this in numerous ways, such as sponsoring local sports teams and donating to local organizations.”

Though marketing is great, especially if your marketing plan involves supporting local charities, the best work speaks for itself. “Quality work is everything and said a lot about your shop,” said Haggerty. “Be prepared to work hard – but the rewards are worth it!”

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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.