How to Start a Mechanic Shop

starting your own auto repair shop
 
Starting a mechanic shop can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful mechanic shop.

Importantly, a critical step in starting a mechanic shop is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.

14 Steps To Start Your Own Mechanic Shop:

  1. Choose the Name for Your Mechanic Shop
  2. Develop Your Mechanic Business Plan
  3. Choose the Legal Structure for Your Mechanic Shop
  4. Secure Startup Funding for Your Mechanic Business (If Needed)
  5. Secure Your Location
  6. Register Your Mechanic Business with the IRS
  7. Open a Business Bank Account
  8. Get a Business Credit Card
  9. Get the Required Business Licenses and Permits
  10. Get Business Insurance for Your Mechanic Shop
  11. Buy or Lease the Right Mechanic Specialty Tools & Equipment
  12. Develop Your Mechanic Business Marketing Materials
  13. Purchase and Setup the Software Needed to Run Your Mechanic Shop
  14. Open for Business

 

1. Choose the Name for Your Mechanic Shop

The first step to starting a mechanic business is to choose your business’ name.  

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your auto repair business:

  1. Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
  2. Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
  3. Think about marketing. Come up with a name that reflects the desired brand and/or focus of your mechanic business.

 

2. Develop Your Mechanic Business Plan

One of the most important steps in starting a car repair shop is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

Your business plan should include the following sections:

  1. Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your mechanic business.
  2. Company Overview – this section tells the reader about the history of your mechanic business and what type of mechanic business you operate. For example, there are a few different types of mechanic businesses. The most common is an independent garage, which is privately owned and fixes and maintains vehicles. The second most common is a specialty shop that services specific types of vehicles or trucks. Another type is one that sells and services vehicles. 
  3. Industry Analysis – here you will document key information about the mechanic business industry. Conduct market research and document how big the industry is and what trends are affecting it.
  4. Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
  5. Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
  6. Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
    • Product: Determine and document what products/services you will offer 
    • Prices: Document the prices of your products/services
    • Place: Where will your business be located and how will that location help you increase sales?
    • Promotions: What promotional methods will you use to attract customers to your mechanic business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
  1. Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
  2. Management Team – this section details the background of your company’s management team.
  3. Financial Plan – finally, the financial plan answers questions including the following:
    • What startup costs will you incur?
    • How will your mechanic business make money?
    • What are your projected sales and expenses for the next five years?
    • Do you need to raise funding to launch your business?

 

3. Choose the Legal Structure for Your Mechanic Shop

Next you need to choose a legal business structure for your mechanic business and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the business owner of the car repair business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a mechanic business together. The partners share in the profits and losses of the business. 

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A Limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the shop owners are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a mechanic business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a mechanic business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your mechanic business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your mechanic business.

 

4. Secure Startup Funding for Your Mechanic Business (If Needed)

In developing your mechanic business plan, you might have determined that you need to raise funding to launch your business. 

If so, the main sources of funding for a mechanic business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage auto repair businesses. Angel investors typically will invest in a mechanic business that they believe has high potential for growth.

 

5. Secure Your Business Location

One of the most important steps in starting a mechanic business is finding the right location. You’ll need a space that is big enough to accommodate your client’s cars and your equipment, and it should be in a location that is convenient for your customers. You may also want to consider whether you want to have a retail or office space or just a shop.

When scouting brick and mortar locations, you should take into account the kinds of expenses that come with it. For example, if you rent a space, there will be monthly rental fees and additional bills such as electricity and water. If you buy a building to use as your mechanic business location, in addition to utility expenses, you will have to pay for renovating and construction fees.

 

6. Register Your Mechanic Business with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN). The easiest way to complete the application is through the IRS website.

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.

 

7. Open a Business Bank Account

It is important to establish a bank account in your business name. This process is fairly simple and involves the following steps:

  1. Identify and contact the bank you want to use
  2. Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
  3. Complete the bank’s application form and provide all relevant information
  4. Meet with a banker to discuss your business needs and establish a relationship with them
If you’d like to quickly and easily complete your business plan, download Growthink’s Ultimate Business Plan Template and complete your business plan and financial model in hours.

8. Get a Business Credit Card

You should get a business credit card for your car repair shop to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.

 

9. Get the Required Business Licenses and Permits

In order to start a mechanic business, you will need to obtain the necessary licenses and permits. The types of licenses and permits you will need vary depending on your location, so it is important to check with your local government agency. Some of the most common licenses and permits needed for a mechanic business include a business license, trade license and zoning permit.

 

10. Get Business Insurance for Your Mechanic Shop

Below are the main types of insurance policies to consider for your business:

  • General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
  • Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
  • Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
  • Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
  • Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.

 

11. Buy or Lease the Right Mechanic Specialty Tools & Equipment

You’ll need all the necessary tools to do repair vehicles, including wrenches, screwdrivers, and a socket set. You must also invest in diagnostic equipment, a hydraulic jack and a set of ramps.

 

12. Develop Your Mechanic Business Marketing Materials

Marketing materials will be required to attract and retain customers to your mechanic business.

The key marketing materials you will need are as follows:

  1. Logo: Spend some time developing a good logo for your mechanic business. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
  2. Website: Likewise, a professional mechanic business website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
  3. Social Media Platforms: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your mechanic business.

 

13. Purchase and Setup the Software Needed to Run Your Mechanic Shop

There are a few software programs that you will need in order to start a mechanic business.

One of the most important programs is an accounting program. This will allow you to keep track of your finances and make sure that your business is profitable. 

You will also need a customer management program. This will help you keep track of your customers’ information and contact details. 

Finally, you will need a repair database program. This will allow you to keep track of the repairs that you have performed, as well as the parts that you have used. 

 

14. Open for Business

You are now ready to open your mechanic business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.

 

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How to Start a Mechanic Business FAQs

No, it's not hard to start a mechanic business. However, there are a few things you need to do in order to get started. First, you'll need to find a space to open your shop. Next, you'll need to purchase some tools and equipment. Finally, you'll need to market your business and attract customers. If you can do these things, then you can successfully start your own mechanic business.

If you're looking to start a mechanic business but don't have any repair shop experience, there are a few things you can do. You can start by doing some research on the internet or reading books about mechanics. You can also attend mechanic workshops or classes to get started. Additionally, you can find a mentor who can help guide you through the process.

There is no one-size-fits-all answer to this question, as the success of a mechanic business will depend on a number of factors, such as the location of the business, the competition in the area, and the skills and experience of the owner. However, if you have the necessary skills and experience, and if there is a demand for mechanic services in your area, then starting a mechanic business could be a good idea and/or a good investment.

Some of the most common types of mechanic businesses include automotive repair, motorcycle repair, and aircraft maintenance. It is important to do your research and choose a niche that you are knowledgeable and passionate about, as this will help you attract customers and maintain a successful business.

The total cost of starting a mechanic business can vary depending on the size and type of business. However, there are some general costs that are associated with starting any business. Some of the initial expenses that you may incur include:

  • The cost of registering your business with the state and obtaining a business license
  • The cost of renting or purchasing a commercial space
  • The cost of purchasing equipment and tools
  • The cost of advertising and marketing your business
  • The cost of hiring employees
  • The cost of obtaining inventory
  • The cost of building a website to market your business online

The exact costs of starting a business can be less or more depending on your specific needs and location. 

There are a few ongoing expenses that are associated with running a mechanic business. Some of these expenses include advertising and marketing, employee salaries, insurance, and supplies. It's important to budget for these expenses and make sure that you have the necessary funds to cover them.

There are a variety of ways that mechanic businesses can make money. One common way is to charge by the hour for services rendered. Another option is to charge a fixed price for a specific repair or service. Sometimes businesses will also sell replacement parts or accessories, or they may receive commissions for referring customers to other businesses.

Yes, owning a mechanic business can be very profitable. 

The profitability of a mechanic business will depend on a variety of factors, such as the size and location of the business, the specialization of the services offered, and the competition in the area. However, there are a few things you can do to increase your chances of success:

  1. Research your local market. Make sure you have a good understanding of what services are available in your area and what kind of competition you will be facing.
  2. Choose a niche. Specializing in a particular area or type of service can help you attract more customers and stand out from the competition.
  3. Keep your prices competitive. It's important to be aware of the prices that your competitors are offering and to consider how they stack up against your own rates.
  4. Develop a Marketing Strategy. Advertising, building a website, and networking with other professionals in the industry can help you drive more traffic to your business.
  5. Keep detailed records. Tracking your income and expenses will help you identify areas that could benefit from improvement.
  6. Hire well-qualified employees. A mechanic business will only be profitable if it is run well, which means hiring mechanics who are experienced and knowledgeable about their job.
  7. Adopt good accounting practices. Good recordkeeping can make the difference between a successful mechanic business and one that is constantly struggling to stay afloat.

One of the most common reasons car repair shops fail is a lack of planning. This can include not having a business plan, marketing plan, or financial plan in place. Other reasons can include poor customer service, not fulfilling orders in a timely manner, cash flow problems, or not having the proper equipment and tools to do the job.


 

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