This company employs car mechanics that offer repairs and vehicle maintenance to individuals and companies. The auto repair company may also provide services such as custom radio and alarm system installation, window tinting, and aftermarket modifications.
Table of Contents
Follow these ten steps to start an auto repair shop:
Prepare your Auto Repair Shop
Create a legal entity for your auto repair business.
Register your Automobile Repair Shop for Taxes
Create a Business Bank Account and a Credit Card
Create Accounting for your Auto Repair Shop
Get the Permits and Licenses You Need for Your Car Repair Shop
Purchase Auto Repair Shop Insurance
Create a brand for your auto repair shop.
Make a website for your auto repair business.
Configure your Business Phone System
Starting a company entails more than just registering it with the state. This basic guide to beginning an auto repair service has been put together by us. These stages will guarantee that your new company is well-planned, correctly registered, and legally compliant.
STEP 1: Make a business plan.
A well-thought-out strategy is vital for entrepreneur success. It will assist you in mapping out the intricacies of your organisation and uncovering some unknowns. Consider the following crucial topics:
What are the initial and continuing expenses?
Who is your intended audience?
How much money may you charge your customers?
Fortunately, we have done a lot of the legwork for you.
What are the expenses of starting an auto repair shop?
The costs of opening a store vary, but often include:
A business licence costs between $50 and $100.
ASE certifications: $36 registration cost + $39 each certification, with the exception of L1, L2, and L3 certs, which are $78.
Insurance: $4,000 per year.
The mechanic’s hydraulic lift costs $3,700.
$5,000 to $10,000 for a diagnostic equipment.
Monthly shop leasing prices range from $1,500 to $15,000.
$15,000 for a mechanic’s tool kit including specialist tools.
Total cost: $50,000 or more
What are the continuing costs of running an auto repair shop?
Ongoing company expenditures include shop rental (unless the owner owns the shop facility), insurance, and labour costs
Mechanics may be paid anywhere from a fixed fee of $25 per hour to a rate of $100 per hour.
Insurance may cost up to $4,000 per year for business owners.
Overhead and supply expenses vary, but depending on the size of the store, they might range between $10,000 and $20,000 each month.
Who is the intended audience?
Clients for car repair shops are distinct in that they all have one feature: a damaged or serviceable vehicle. Customers that have a service contract are the best. Ongoing service contracts guarantee consistent revenue for the store and decrease cash flow issues in the short and long term.
One-time consumers who take advantage of exceptional offers may be the worst sort of customers. These clients are price shoppers and may end up costing the store money.
How does a mechanic business generate money?
An auto body shop or automobile repair company generates revenue by charging a fixed charge or an hourly cost for service. Owners of several businesses impose regular maintenance costs, charging a predetermined sum for basic maintenance such as an oil change. In other shops, all work is dependent on the cost of components and labour.
How much money may you charge your customers?
Labor rates differ based on how the shop is configured. Mechanics are compensated differently at a dealership than they are at an independent business. Location is a major impact in labour rates. Mechanics often earn more in cities and places where auto maintenance is more costly (usually this means a high concentration of high-end or luxury vehicles).
Customers often pay between $70 and $100 per hour in an independent store. The hourly rate at dealerships is between $80 and $150.
Some businesses charge clients a set amount for services such as periodic maintenance (e.g. oil changes, brake changes, and tune ups).
What kind of profit can a vehicle repair business make?
Mechanics earn between $30,000 and $50,000 each year, according to US News. So, a one-man operation may anticipate to earn around this amount. A bigger shop owner may easily earn $100,000 or more per year by managing a small crew of mechanics.
This article provides a cost-to-revenue split in percentages. Of course, the actual amount will depend on where your shop is situated, if you’ve specialised in any part of vehicle repair, and the overall market demand for your services.
How can you increase the profitability of your company?
Making the company more lucrative is a difficult task. It takes a lot of effort to run a store. Making additional money is often a question of expertise. Converting a regular vehicle repair business into a transmission expert, for example, would boost revenues since the firm could charge clients more for specialised labour. This is particularly true if your store is the only one of its kind in the neighbourhood.
STEP 2: Establish a legal entity
Sole proprietorship, partnership, limited liability company (LLC), and corporation are the most frequent business structure forms.
If your auto repair firm is sued, becoming a formal business organisation, such as an LLC or corporation, prevents you from being held personally accountable.
STEP 3: File your taxes
Before you can begin for business, you must register for a number of state and federal taxes.
To register for taxes, you will need to get an EIN. It’s really simple and completely free!
Taxes on Small Businesses
Depending on the business form you choose, you may have multiple choices for how your company is taxed. Some LLCs, for example, may benefit from being taxed as a S company (S corp).
These guides will teach you more about small company taxes:
Taxes on LLCs
LLC vs. sole proprietorship
Corporation vs. LLC
S Corp vs. LLC
How to Form a S Corporation
S Corporation vs. C Corporation
There may be state taxes that apply to your company. In our state sales tax guides, you may learn more about state sales taxes and franchise taxes.
STEP 4: Establish a company bank account and credit card
Personal asset protection requires the use of distinct business banking and credit accounts.
When you combine your personal and business accounts, your personal assets (your house, vehicle, and other possessions) are at danger if your company is sued. This is known as penetrating your company veil in business law.
Furthermore, understanding how to develop corporate credit may help you get credit cards and other financing in your company’s name (rather than your own), lower interest rates, larger lines of credit, and other benefits.
Establish a business bank account.
Opening a business bank account is not only required when asking for business financing, but it also:
Separates your personal assets from the assets of your firm, which is required for personal asset protection.
It simplifies bookkeeping and tax reporting.
Create a net 30 account.
Net 30 accounts are used to develop and grow company credit while also increasing cash flow. A net 30 account allows firms to purchase items and refund the whole debt within a 30-day period.
Many net 30 credit suppliers submit information to the main business credit agencies (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how firms establish business credit in order to get approved for credit cards and other lines of credit.
Apply for a business credit card.
Obtaining a business credit card benefits you in the following ways:
Put all of your company’s costs in one location to separate personal and business spending.
Build your company’s credit history, which will be important for raising funds in the future.
STEP 5: Establish business accounting
Recording your numerous costs and sources of revenue is crucial to assessing your company’s financial status. Keeping precise and thorough accounting also makes yearly tax filing much easier.
STEP 6: Obtain all required permissions and licences
Failure to get appropriate permissions and licences may result in significant penalties or possibly the closure of your firm.
Requirements for State and Local Business Licensing
All auto repair firms must follow federal and state environmental rules. Here is a checklist for complying with federal environmental standards.
A auto repair shop licence is required in the majority of states. Visit the SBA’s reference to state licences and permits to learn more about licencing requirements in your state.
For information on local licences and permissions, visit:
Check with the clerk’s office in your town, city, or county.
Contact one of the local organisations mentioned in the US Small Business Associations database of local business resources for help.
Occupancy Certificate
A automobile repair service is usually conducted out of a “garage,” which is a retail space that is specifically designed to store and repair cars. A Certificate of Occupancy is often required for businesses that operate from a physical site (CO). A certificate of occupancy certifies that all building rules, zoning laws, and government requirements have been satisfied.
If you intend to rent a garage:
In most cases, it is the landlord’s obligation to get a CO.
Before leasing, ensure that your landlord has or can get a valid CO for a Car Repair company.
A new CO is often required after a big remodelling. If your location will be refurbished before opening, incorporate wording in your leasing agreement saying that lease payments would not begin until a valid CO is given.
If you intend to buy or create a location:
It is your responsibility to secure a valid CO from a local government entity.
Examine all building laws and zoning standards for your business’s location to guarantee that your Car Repair company is in compliance and may receive a CO.
STEP 7: Obtain commercial insurance.
Insurance, like licences and permits, is required for your company to operate safely and legally. In the case of a covered loss, business insurance protects your company’s financial well-being.
There are several sorts of insurance plans designed for various types of companies with varying risks. If you are unaware about the hazards that your company may encounter, start with General Liability Insurance. This is the most popular coverage required by small companies, so it’s a good place to start for yours.
Workers’ Compensation Insurance is another important insurance product that many companies need. If your company will have workers, your state may require you to purchase Workers’ Compensation insurance.
STEP 8: Establish your brand
Your company’s brand is what it stands for, as well as how the public perceives it. A strong brand will help your company stand out from the crowd.
How to Market and Promote a Car Repair Shop
Finding new clients is often accomplished by word of mouth, but mechanics may network with other companies that may want their services. A store, for example, can collaborate with a local taxi business or limousine service to provide regular repairs and maintenance.
How to Keep Customers Returning
A car repair business might distinguish itself by providing services that other shops do not. For example, a store may promote itself as the only store in the region that provides bespoke installations of audio and alarm systems. A repair business might also stand out by refining its emphasis and specialising in certain makes and models.
An auto repair business that specialised in Hondas or Toyotas, for example, would distinguish itself from a regular mechanic’s shop. Another specialty is auto body repair.
STEP 9: Create your company’s website.
After you’ve defined your brand and designed your logo, the next step is to build a website for your company.
While developing a website is an important step, some may be concerned that it is out of their grasp due to a lack of website-building skills. While this was a fair concern in 2015, online technology has made significant advances in recent years, making the lives of small company owners considerably easier.
The following are the primary reasons why you should not put off developing your website:
Every genuine company has a website, period. When it comes to bringing your company online, it doesn’t matter what size or sector it is.
Social media accounts, such as Facebook pages or LinkedIn company profiles, are not a substitute for your own business website.
STEP 10: Install your company phone system.
Getting a phone for your company is one of the finest methods to keep your personal and professional lives distinct and private. That isn’t the only advantage; it also helps you automate your company, provides it legitimacy, and makes it simpler for prospective clients to identify and contact you.