How to write a stellar business plan for an auto repair shop
Are you passionate about fixing cars and restoring them to their former glory? If so, you may have been dreaming about setting up your very own car garage for some time. Before fully taking the plunge, however, you'll need a tailor-made business plan.
To guide you through this process, we've written the guide below to offer our top tips for making your auto repair shop business plan a reality.
1. Why do you need an auto repair shop business plan?
Did you know that 60% of all new businesses in the UK are likely to cease trading within their first three years? Durham City Incubator believes that a "lack of business planning" is the number one reason for the failure rate being so high.
Writing out an auto repair shop business plan is, therefore, essential for your new business.
An auto repair shop business plan allows you to identify the level of initial financing that is required. It also helps you:
- Anticipate any potential cash flow problems along the way
- Estimate how much profit your business is likely to make, within its first three to five years of trading
- Obtain financing from the bank - Small Biz Trends concludes that you are twice as likely to secure funding if you have a business plan
2. What type of auto repair shop should I open?
According to A Plus Auto Glass, there are multiple types of auto repair shops that you could open:
Auto repair service technicians
This is perhaps the most standardized service from the lot. It entails basic checks such as oil fluid levels and electricals.
You'll likely receive several repeat customers if you choose this model (especially those who drive a considerable amount) because servicing a car is recommended every 12 months or 10,000-12,000 miles (whichever comes first)!
Diagnostic technicians
This model is slightly more specialized. Such technicians carry out skilled checks that underline any issues vehicles might have.
It requires a higher level of skill because these issues cannot be seen on the vehicle's surface.
Auto system expert
If you choose to offer this model, you will specialize in surveying key systems that the vehicle has.
Engines, brakes and gear sets are all critical systems in most vehicles.
This business model has the potential to earn you high revenue.
Auto body repair clinic
This clinic or repair centre deals with vehicles that have been involved in accidents or roadside crashes.
If you choose this model, you may not have the volume of customers that the previous models may have but the revenue per sale is likely to be much higher.
You'll repair and retouch cars to ensure that they look as good as new and that any scratches or broken parts are fixed.
Auto repair painters
If you choose this model, you will repaint vehicles or add touches to them.
Vehicles often need a fresh layer of paint, especially if they are being driven in areas where there is a lot of environmental pollution.
Expert auto glass repair
This model offers customers the chance to repair their windshield, windows or any other glass-related parts from their vehicle.
You'll likely require a high level of skill to do so but the rewards can be exponential, earnings wise.
You might also receive several clients who just want to repair small cracks in their vehicles.
3. What do you need to create your auto repair shop business plan?
Before writing your auto repair shop business plan and creating the financial forecast for your auto repair shop, you must first gather the data needed to create a comprehensive business plan.
You'll achieve this by...
- Carrying out market research for your auto repair shop
- Building your marketing plan
- Evaluating the operational costs and investments involved in setting up your business
Conducting market research for an auto repair shop
This is the longest and, admittedly, most tedious step in creating an auto repair shop business plan, but once you've got the right method - there's no excuse for mistakes.
As you move through the market research, you'll develop an understanding of the needs of your target market, as well as the current state of the industry.
This enables you to then determine hot industry trends and identify where you should position yourself within the market to make your auto repair shop a success.
Should your auto repair shop provide in-depth expertise on electronics, for example, or should it focus instead on motorcycle repairs or the sale of spare parts?
You must also assess the area in which you want to place your auto repair shop. This will give you a better idea of the local market, including the needs of residents and what services competitors are already offering.
Developing the marketing plan for your auto repair shop
Once the market research is completed, the next step is setting out the marketing strategy for your auto repair shop's business plan.
This is an opportunity to identify how you'll get your name out on the market and stand out from your competitors.
There are many ways of promoting an auto repair shop, from setting up a website and social media network to paid newspaper advertising and handing out street flyers.
Taking the time to decide which marketing actions you want to go for will help you determine how much money you need to set aside for each one and how many customers you can expect, which you can then factor into your financial forecast later on.
Evaluating operational costs and investments
To keep an auto repair shop running smoothly, you need a team you can count on. Typically, the size of a small car garage team is around 3 to 4 employees. You'll need a receptionist to welcome customers and at least two employees with experience in car mechanics - with the salary of each staff member being allocated according to their qualifications.
Additionally, you'll need a lot of technical equipment to get an auto repair shop up and running. Repairing vehicles requires having the right tools, as well as a full stock of car parts to help you meet the diverse demands of each car owner.
To get an exact figure for the price of each item, you'll need to contact suppliers and ask them for quotes to integrate in your business plan for an auto repair shop. These quotes will then be integrated into the financial forecast.
4. What is the financial forecast for an auto repair shop?
Establishing the financial forecast is an integral step in the development of your auto repair shop's business plan.
It is composed of 4 main tables, highlighting different financial aspects of the company:
- Projected profit and loss statement
- Projected balance sheet
- Projected cash flow statement
- Initial financing plan
The projected P&L of your auto repair shop
This table, which starts with the turnover, allows you to evaluate the growth, evolution of the cost structure of your auto repair shop, and its expected profitability over the coming years.
The projected balance sheet of your auto repair shop
This table shows the value of the company's assets at a given time, and, in particular, the value of the assets (what the company owns) and liabilities (what the company owes to suppliers, lenders, etc.).
The projected cash flow statement
This table is essential in helping you keep an eye on the company's cash flow, particularly to ensure that the company generates enough cash to be able to repay its loans and regularly renew equipment.
The initial financing plan
This table gives your bank or potential investor a quick overview of the resources needed to launch your auto repair shop and their costs - as well as the personal contribution you plan to make.
5. What does the written part of an auto repair shop business plan look like?
This part cannot be neglected. To be able to interpret your figures and judge the relevance of the assumptions used to build your forecast, it's necessary to have sufficient details about the project.
The editorial part of your business plan is made up of the following sections:
The executive summary
The executive summary for your auto repair shop's business plan is the equivalent of a cover letter for your auto repair shop business plan.
The aim here is to introduce your business project to investors in as engaging and concise a way as possible, encouraging them to read on and learn more about your exciting venture.
Company
In this part, you place a spotlight on the business's partners and their roles, as well as the distribution of the company's capital and the location of the auto repair shop.
Be sure to mention who the business is managed by and the percentage of ownership that each partner possesses.
In terms of the management team, you should list any relevant experience that staff or managers hold, along with any qualifications achieved.
Products and services
This section explains the products and services offered by your auto repair shop.
For example, if you choose a traditional auto repair shop model, this section could look something like this:
Change of oil
As part of our routine maintenance, we recommend that you carry out this service each time you visit our garage (provided it's within a reasonable time frame).
Brake repairs
This includes inspecting the brake pads or checking how smooth the brakes are on your vehicle. Again, this is part of our routine maintenance.
Full diagnosis
This service includes both of the above and as well as other aspects such as headlights and coolant/fluid levels.
Market research
It's within this section that you'll present the results of the market research we mentioned at the beginning of this article.
The objective here is to demonstrate that there is indeed a viable business opportunity for a new garage in the area you've chosen.
Mention why you have a unique selling point over other auto repair shops and how your skill set helps you in this regard.
Strategy
In this part, you'll reveal three key plans for your auto repair shop business plan:
- Your pricing strategy- the prices you'll set for your services / spare parts / new parts
- Your marketing strategy - the actions you'll take to attract customers and build customer loyalty
- Your risk management strategy - how you'll minimise the risks related to your business
The operational part
From your employees to your relationship with suppliers, you'll detail the operational organisation of your business within your auto repair shop business plan.
It's important to mention what suppliers you'll be using to source your spare parts and equipment from. You might have few or many suppliers, depending on your concept.
Also, think about the payment terms that you might obtain with them. Are you a new business? If so, you may need to pay upfront.
The financial plan
The financial plan puts your numbers into tables that you'll be able to present to potential investors so they get a better idea as to your expected profitability and how much funding you need.
6. What tool should I use to write my business plan?
We've established that to set up your auto repair shop, you need a business plan. What you may not know yet, however, is how you'd like to write it. There are three options available to you:
Write your business plan using Word or Excel
This solution has one major advantage: it's cheap.
Be wary, however, that you'll need to have an accounting background (or at least be very good with numbers) to write your plan in this way without making mistakes in the calculations.
Hiring a consultant to write your financial forecast
Hiring a chartered accountant or consultant to take care of the financial part of your business is a good way to avoid errors.
However, the fees are generally quite expensive: budget around £1.5k ($2.0k) for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders).
Using online business plan software for your auto repair shop's business plan
If you're not used to writing business plans, another good solution would be to use our online business plan software.
There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the financial calculations for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up to The Business Plan Shop today.
7. Business plan template of an auto repair shop.
A business plan template will give you a better understanding of how to frame your own business plan, as well as what investors are looking for.
Our auto repair shop business plan template will be off great help to you!
8. Three things you should know before writing an auto repair shop business plan
Firstly, make a list of the potential risks that your auto repair shop could face. This could include both external and internal factors. Think about how you might deal with them efficiently.
Secondly, consider trends that are currently high-flying in the auto repair industry. For example, auto parts are being replaced much less frequently thanks to advanced technology resulting in greater durability.
Thirdly, the same study also believes that there is a shortage in the number of skilled automobile technicians. This is because several experienced workers have now retired or moved on from the industry.
That's it for now, we hope this article has helped you better understand how to write an auto repair shop plan. If you have any questions related to setting up your business, please do not hesitate to contact us.
Also on The Business Plan Shop
- Business plan vs budget: what's the difference?
- How to buy an existing auto repair shop?
- How to create a financial forecast for your auto repair shop?
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