Top 7 things to consider when you want to buy an auto repair shop

Thinking about buying an auto repair shop? There are a few things you need to understand, considering that it could be a significant investment. So opening a new repair shop without getting to know about the automotive industry would be a massive oversight.

As every car and truck requires constant maintenance to ensure performance and quality over time (Your customers are not going to drive their car around without ever going to a garage unless they have a Toyota pick-up truck or a Subaru), which means more business for your mechanic shop. But jumping into any business, including buying an auto repair shop without the proper knowledge, could prove to be quite detrimental.

Insights of investing in the auto repair shop

Having been running a successful enterprise in the automotive industry, we have a few insights to share with you.

In the last decade, the trend of buying and selling of garage workshops has gained popularity.
A lot of aspiring entrepreneurs have been able to turn around underperforming workshops into highly profitable businesses through the right planning and thorough execution.
The other side to this coin is also that a lot of entrepreneurs who invested in auto repair businesses with a lot of potential have been led to lower than scrap value because of poor management and lack of awareness of the industry.

In other words, when you plan to invest in an auto-repair business, we suggest you do your research and development.

So here are a few factors you might want to consider beforehand:

Location! Location! Location!

The location of your auto shop is one of the primary factors to be considered when choosing to buy one. For example, if you choose to buy an auto shop in a high-end area with great cars and in an ample amount, then the chances that your shop will succeed early are higher.

There are various factors that influence your auto repair shop business plan through location.

From a customer's point of view, they will look at various things as follows:

Convenience - They will only visit auto repair shops that are convenient for them to commute to and from work or home. They may also be looking at your location because if they have to wait, they would look for nice hangout places around your shop to wait and pass time.
Accessibility - Be it personal or public transport vehicles, be it heavy-duty vehicles or small trucks, no matter who the customer is, they are constantly looking for accessibility to your store. Nobody will take a long detour just for car servicing. So choose a location that is close to heavy traffic and a highly accessible route.
Resident Demographics- It is important to know the people and their range of income in your store’s vicinity. Not only could they be your potential customers but also long-term and loyal customers. A high-income household would help you increase your average repair order size.
Competition- Not everything has to be a competition. Not every business needs to launch in a cut-throat market. It is highly recommended that as a future auto repair business owner, you choose a location with little to no competition in at least a 5 Km radius. This will not only help you cater to your potential customers but will also help create much-needed employment and at large, you will be able to help the community flourish and become the best auto repair shop in that area in no time.
Rent Expense - Yes, great locations come with great rent quotations. In cases like these, you decide to compare the rent and the potential income. To stay profitable or at least break even through your first year, ensure that you do not buy an auto repair shop with steep rent and proportionally low income.
Suppliers - One of the biggest unaccounted expenses in auto repair shops is the logistics cost of materials purchased. If you can zero in on a location that has plenty of suppliers, you will be able to cut down on the logistics cost and will also be able to get the best pricing for your materials.

Value for Money

Be it an auto repair business or any other business for that matter, you are in it for earning profits and making a difference in the community. The reason that you buy an auto repair shop instead of starting one from scratch, is that the probability of an existing shop being immediately profitable is higher. Therefore, it is highly recommended that you make the most out of this deal and get your volume for money.

Customer lists: There may be auto repair shops with an outdated list of dormant customers, which is not your ideal choice. Before you buy an auto repair shop, make sure that you have an accurate database of its current customers.
Proof of profit: Various businesses may tell you that they were profitable but it is always better to ensure the authenticity of the statements by taking a look at the tax returns for at least the past five years.
Discard the non-performing assets: As a part of the deal of buying the auto repair shop, we recommend that you do a thorough check and list down the non-performing assets of the shop. You can tell the owner to discard those assets before evaluating the deal because access equipment that may not be generating revenue will only inflate the selling price and add no profit to your business.

Infrastructure

One of the most crucial factors with regard to any new business, the establishment is the quality of the infrastructure of the business. Ensuring that you have a suitable building for your auto repair shop will provide your customers with a high-quality user experience when compared to that of a poorly built establishment. Not only are we talking about the building, but also about various other infrastructures like repair beds, spare-part rooms, paint shop, washing station, upholstery, et cetera. It is also necessary as a business owner to make sure that your staff has ample space to work on. This means that you at least have the space of two cars being repaired simultaneously so that in the initial stages of your business, you do not disappoint customers by making them wait too long while their vehicle is getting work done. A larger space will also mean that workers who switch between the cars do not have to waste time while one car waits for its spare parts.

Revenue Earning Potential

One of the most important things on any business owner's mind while investing in an auto repair shop business plan is the revenue. And considering the type of expenditures required for your auto repair shop, you will have to ensure that the potential revenue of the first year is higher than these expenditures. Partnering up with a franchisee is one of the most sought-after options to remain in business during the initial few years of opening an auto repair shop. Not only will the franchise provide you with goodwill but also with the right guidance and higher revenue earning potential. This would eventually reduce your return on investment, but if you’re willing to let go of a small portion of your profits, then the franchise option is feasible for You.

What’s next after you buy?

Buying right and knowing how to manage a mechanic shop can help your business become successful. Set up systems and processes to improve employee productivity, build customer trust, and boost your profit margins. Invest in auto repair shop management software like RAMP to schedule customer appointments, track mechanic performance, and improve your online brand presence.