How to start an auto body repair shop?
To start an auto repair shop, the first step is to make a detailed auto body repair business plan. For that purpose, you can read any example business plan auto repair shop available on the web like this sample business plan for auto repair shop. Or you can hire a professional to make your business plan for auto repair shop.
Is it profitable to own an auto body shop?
Owning an auto body or repair shop can be a profitable endeavor, especially since it is something that cannot go “out of style” and it is something needed year-round not seasonally. For many auto shop owners, they began as mechanics and eventually decided to transition to the owner, starting their own shops.
Is auto repair a profitable business?
Well, auto repair is one of those businesses that allow you to earn considerable profits even by managing a small team. The business provides repair and maintenance services for automobiles. Moreover, in many cases, auto repair shops also offer aftermarket modifications and upgradation services.
What type of business structure is best for an auto body shop?
The type of structure you select for your business varies by the number of owners that you have and the future plans for your business. In most cases, however, single owners of auto body shops lean toward LLCs, while businesses with more than one partner select the partnership business structure.
1. The ASSET VALUATION METHOD
Use the asset valuation method when a body shop does less than $400,000 a year in gross income. The seller is making wages, but no real profit above what he would be paid if working for another. On this size business, a buyer will pay for the assets of the business but little or nothing for goodwill (reputation and customer list).
2. The GROSS SALES METHOD
This is used when the sales are over $1,500,000 a year but the profit is unknown or financials are not available or not reliable. By experience, a body shop buyer can make reasonable estimates of future profits, if they have some basic information. The basic information includes rent, source of business, and the desirability of the location.
3. The NET PROFIT METHOD
This is the third and most used method of evaluating any business, including body shops. This method is based on the idea that a business is worth the income it generates, in profit and benefits, for an owner. Body shops, like so many other small businesses, often do not show a profit at the end of the year.
So What is Happening in the Market?
After saying all this, what is the value of a business based on the net profit method? People buying a businesses, especially auto body shops, appear to buy for between one to two years adjusted profit (book profit plus owners benefits added back in). Larger body shops doing over $2,000,000 in annual sales may sell for much more.
The Bottom Line on Buying a Business
The bottom-line, as I see it, is that if you sold a large shop under these terms and conditions, you sold your soul, not your business. One last comment on selling to large corporations. Heaven help the seller who sells his business for corporate stock or the corporation’s bonds.
Conclusion
Appraising a business, especially body shops, is an art not a science. No two people will appraise the value of a business the same. It is amazing that what one buyer thinks is a great asset is what another buyer thinks is a major negative. Differences of opinion are what make life interesting.
Who Am I?
You should know about who advises you, so I show you my qualifications as a business broker. As a new business broker in 1992, I specialized in one type of business. My auto mechanic suggested that I specialize in auto body shops, because they were a very profitable.
What is an auto body shop?
The auto body shop business is all about providing services regarding auto-body repairing, new bodybuilding, and selling spare parts and accessories related to the vehicle body. As the number of vehicles is growing, the business opportunity of auto-body stores is also increasing globally.
What is the biggest investment for opening an auto body shop?
The biggest investment for opening an auto body shop will be in buying tools and equipment. Apart from equipment, other cost includes company formation, licenses, and permits, insurances, manpower costs, etc.
How to advertise your auto service station?
Do some outdoor advertising activities. Go for some media publication. Establish a business relationship with other automobile service stations that don’t have a body repairing setup. Create an online presence of your business. Offer your customer some free value-added services.
What is the importance of naming an auto body shop?
Like any other business, naming an auto body shop is a critical aspect of long-term profitability and success. Choose a catchy and easy-to-remember business name in which customers can easily relate to your business services. Check this article to know more about naming a business.
What is the most important thing to start an auto body store?
The most important factor in starting a successful auto body store business is equipment and tools. Purchase the equipment from a reliable vendor at a reasonable price.
Do commercial vehicles need to be repaired?
Regardless of the state and country, vehicle accidents always happen unfortunately on a regular basis. Commercial vehicles need to get repairing for renewal of their registration and private vehicle owners are also searching for the best auto repairing store in their locality.
Who buys body shops?
Most of the buyers of body shops come from buyers who currently own one or more shops, or used to own a shop and sold it to do something else. These buyers know exactly what they are getting into and know the risks and rewards. There are quite a few prior body shop owners who sold their shops and went into something else, only to find out that they made more money in the auto body business. They then go back into the industry working for someone else until they can buy another shop for themselves. No matter how much they hated the business they find that they want back in. It gets into your blood. These buyers are what every seller is looking for.
What is the most important action that must be taken by any new body shop owner?
The single most important action that must be taken by any new body shop owner is to bring in new business. This is required for two reasons: Everyone wants more volume, but some buyers bought the shop based on their belief that they can do more volume than the last owner. You must replace the volume that will be lost by the transfer to you ...
Are you willing to do the business actions necessary to do the business?
In this section I would like to discuss which actions are absolutely necessary to be successful in running a body shop and if not done will guarantee failure.
How to decide what size shop to buy?
If you expect the volume to remain the same as what is there currently, then you figure the rent and profit based on the sellers current numbers. If you know you can bring in corporate accounts, dealerships and other business then you can use a bigger shop. If you expect to only have what new business that you yourself bring in then a smaller shop may work perfectly.
What happens if you get too big a shop?
If you get too big a shop the rent will kill you. If you get too small you will limit your possible volume unless you put in a second shift and keep an eye on that 2nd shift. There are larger capacity shops doing small volume that can be bought very cheap or reasonably.
Can you buy a DRP shop?
If you are buying a shop that currently has DRP contracts, do not assume that you transfer them. In fact, you must assume you will loose them, the day escrow closes. Do not buy a shop that has DRP contracts unless you already have a relationship with those same insurance companies, at another shop location, you currently own. If you are reading my article, I can safely assume you are not a multiple shop owner, currently. Multiple shop owners know everything in this article already. There are a few, little known ways, that I have personally developed, to buy a DRP shop and not loose the contracts, but I cannot publish this information, in as much as if they read this, the insurance companies will prevent my approach from working, on future deals..
Can a buyer have no experience in a body shop?
Another group of buyers have had no body shop experience at all, but they grew up around cars and love them. This buyer may be interested in the restoration area, and should only buy a shop where he has a family member or close friend with body shop experience, that will be working with him. The other option is if the seller can be made to agree to stay for at least one year in order to teach the buyer, every part of the business.
What is a good business plan?
A good business plan outlines how to get from your starting point (launching your business) to your goal. Every entrepreneur has a different goal. Maybe yours is to run a successful local business that sets your family up for life. Maybe you have bigger goals — starting your own chain of auto body shops, for example.
How much does a mechanic make?
According to the Bureau of Labor Statistics, mechanics make approximately $39,550 per year. An auto body and glass repairer averages around $40,580 annually.
What is the simplest business structure?
A sole proprietorship is the simplest business structure. This is best for businesses with just one owner. Sole proprietors can file their business profits and losses on their personal income tax returns. No paperwork is required to register as a sole proprietorship. However, this structure isn’t without its drawbacks. Raising money as a sole proprietorship is difficult, and you are personally responsible for the liabilities of your business.
Is it cheaper to lease a commercial property on the outskirts of town?
You want to make sure that you purchase or lease the best location you can afford. Sure, that commercial property on the outskirts of town is much cheaper, but your customers have to be able to find you. Find a property that’s convenient for your customers and is located in a high-traffic area or at least off of a major road.
Is social media a good place to find new brands?
Social media doesn’t just connect friends and family members, either. It’s also a great place for users to find new brands and businesses.
The Asset valuation method.
The Gross Sales method.
- This is used when the sales are over $1,500,000 a year but the profit is unknown or financials are not available or not reliable. By experience, a body shop buyer can make reasonable estimates of future profits, if they have some basic information. The basic information includes rent, source of business, and the desirability of the location. The source of business may be Direct Repair Progr…
The Net Profit method.
- This is the third and most used method of evaluating any business, including body shops. This method is based on the idea that a business is worth the income it generates, in profit and benefits, for an owner. Body shops, like so many other small businesses, often do not show a profit at the end of the year. Strange, how so many businesses of different sizes all just happen t…
So What Is Happening in The Market?
- After saying all this, what is the value of a business based on the net profit method? People buying a businesses, especially auto body shops, appear to buy for between one to two years adjusted profit (book profit plus owners benefits added back in). Larger body shops doing over $2,000,000 in annual sales may sell for much more. This is because th...
The Bottom Line on Buying A Business
- The bottom-line, as I see it, is that if you sold a large shop under these terms and conditions, you sold your soul, not your business. One last comment on selling to large corporations. Heaven help the seller who sells his business for corporate stock or the corporation’s bonds. When the buying company goes broke or the stock market crashes, the seller looses. I had a close friend sell his …
Conclusion
- Appraising a business, especially body shops, is an art not a science. No two people will appraise the value of a business the same. It is amazing that what one buyer thinks is a great asset is what another buyer thinks is a major negative. Differences of opinion are what make life interesting. As a final word, I will make one comment about buying a business. I find that professional appraiser…
Who Am I?
- You should know about who advises you, so I show you my qualifications as a business broker. As a new business broker in 1992, I specialized in one type of business. My auto mechanic suggested that I specialize in auto body shops, because they were a very profitable. Being a very aggressive broker, I listed and marketed over 100 auto body shops in my first year. Over the yea…