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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on February 25, 2022
Investment range
$23,050 - $39,200
Revenue potential
$93,000 - $470,000 p.a.
Time to build
1 – 3 months
Profit potential
$55,000 - $95,000 p.a.
Industry trend
Growing
Commitment
Flexible
Here are the most essential things to consider when you want to start a car repair shop:
Starting a car repair shop has pros and cons to consider before deciding if it’s right for you.
Trends
Challenges
Startup costs for a car repair shop range from $23,000 to $40,000. The main costs include renting a garage, equipment, and tools.
You could go to a trade school and learn to be an auto mechanic in about a year for around $8,000, or take an $800 online course at Penn Foster. It’s probably best to be certified by the National Institute for Automotive Service Excellence (ASE). You can take a test near you for less than $100.
You’ll need a handful of items to successfully launch your car repair shop business, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150–$200 | $175 |
| Business licenses and permits | $100–$300 | $200 |
| Insurance | $100–$300 | $200 |
| Business cards and brochures | $200–$300 | $250 |
| Website setup | $1,000–$3,000 | $2,000 |
| Shop rental deposit | $2,500–$5,000 | $3,750 |
| Hydraulic lift | $4,000–$5,000 | $4,500 |
| Diagnostic machine | $5,000–$10,000 | $7,500 |
| Mechanics tool | $10,000–$15,000 | $12,500 |
| ASE certifications | $0–$100 | $50 |
| Total | $23,050–$39,200 | $31,125 |
The average car repair bill is $600. When working as a solopreneur, your profit margin after rent and overhead should be about 60%.
In your first year or two, you could work by yourself and do three repairs per week, bringing in about $93,000 in annual revenue. This would mean $55,000 in profit, assuming that 60% margin. As your brand gains recognition and you get repeat customers and referrals, sales could climb to 15 repairs per week. At this stage, you’d hire staff including other mechanics, reducing your profit margin to around 20%. With an annual revenue of almost $470,000, you’d make a tidy profit of $95,000.
There are a few barriers to entry for a car repair shop. Your biggest challenges will be:
Now that you know what’s involved in starting a car repair shop, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research car repair shops online and in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a car repair shop that makes house calls.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as brakes or mufflers.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Your services will depend on your skills and equipment. You could just offer oil changes and tune-ups or a full range of services all the way up to engine replacement. The more you can do, the better.
Prices will vary based on the repairs to be done. Your prices should work out to $75 to $130 per hour for labor. Your costs will be for overhead, rent, and labor. Once you have other mechanics working for you, you should aim for a profit margin of about 20%.
Once you know your costs, you can use our profit margin calculator to determine your markup and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be anyone who owns a car, so you should spread out your marketing to sites like TikTok, Instagram, Facebook, and LinkedIn. You could also partner with tow truck companies to get and give referrals.
You’ll need to find a garage/shop space to rent. Find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Discover over 380 unique car repair shop name ideas here. If you want your business name to include specific keywords, you can also use our car repair shop name generator. Just type in a few keywords and, hit Generate, and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to car repair shops.
If you’re willing to move, you could really maximize your business! Keep in mind that it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your car repair shop will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number or EIN. You can file for your EIN online, or by mail/fax. Visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding a car repair shop.
Starting a car repair shop business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your car repair shop business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as shopmonkey, AutoLeap, or Shop Boss, to manage your appointments, workflows, invoicing, and payments.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.
However, people are unlikely to find your website unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Today’s customers are inundated with buying options, so you’ll have a real advantage if they can quickly grasp how your car repair shop meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your car repair shop business could be:
You may not like to network or use personal connections for business gain but your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a car repair shop, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in car repair for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in car repair shops. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a car repair shop business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
If you’re a mechanic, why work for someone else when you could be the boss of your own shop? It will take a significant investment to get started, but you’ll soon grab a slice of the $80 billion market and get a nice return.
Now that you’ve honed your entrepreneurial skills, it’s time to get your tools ready and start driving toward auto repair success!
A car repair shop can be extremely profitable. The average repair bill is $600, so a handful of those a week adds up fast.
You should use software to track your appointments, invoices, and workflows. In terms of the physical space, you should have stations that are equipped with all the tools needed for common repairs.
When customers choose a car shop, they look for three things: Speed, Reliability, and Good prices.
You can grow a car repair shop business by offering as many services as possible or expanding to new locations. You could even franchise your car repair shop at some point.
It is possible to do car repairs as a side hustle. However, having a full-fledged repair shop is a full-time business.
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