It doesn't take you to be an investment analyst or accountant to decide whether to set up a workshop or not. At the initial stage, it is enough to understand whether the company's income will cover its expenses.
What specifically should be taken into consideration?
1. What line of business to choose? What kind of services to render? Does it make sense to sell auto parts or not? Whether to offer any cross-services (auto washing, tire fitting, etc.), or to stick to some frontline service for the beginning?
All this requires some research of the market and analysis of competitors’ business: what others do and how they do it, which rooms in the market are already occupied and which are still available and why (a free market room doesn't always mean worthy). Even if your list of services is the same as your competitor's, don't scratch your head over it trying to reinvent the wheel - invest heavily in competitive advantage, price policy, and quality of services.
As soon as the list of services is settled, you can decide what kind of equipment and repair tools you need for quick and quality work of the shop staff.
2. Decide on the clients you are after: individual customers, business structures, or government authorities and institutions? Figure out the way they operate, their needs, and their expectations concerning car servicing, the generation they belong, and other stuff like that. This knowledge will give you a clear idea of how to promote your business.
3. The expenses. How much money should be invested to launch your auto service business? After summing up the figures, you'll know the amount of money you need, whether you have it or not, where and on what terms you can get it.
Here are one-time expenses you will bear from the start:
- purchase of premises (in case you don’t rent)
- renovation to the premises;
- vehicle parking facilities;
- equipment and tool costs (by the time of opening);
- purchase of workshop furniture (tool storage cabinets, carts, tool boxes, workbenches, etc.);
- purchase of furniture for waiting and reception areas;
- furnishing of receiving employees and managers’ stations;
- official registration of papers;
- shop-sign making;
- site development and promotional campaign running.
These were one-time expenses. However, there will be fixed expenses as well:
- rent payment;
- utility and internet charges;
- wages and salaries;
- taxes and social transfers, banking services fees;
- office upkeep expenses;
- workshop equipment depreciation and maintenance expenses;
- purchase of consumables, technical fluids, detergents and lubricants for diagnostics and repair;
- website maintenance and advertisement expenses.
Certainly, the list of your fixed expenses can be different.
4. Profits. It’s time to get a rough estimate of the money you will be able to earn. Now, when the list of services is settled and the prices are fixed, when you know the number of lift platforms and the stuff you need, as well as the number of operations that can be performed per unit of time, then you already have an idea about the capacity of your service station.
5. The answer to the question «should I open a service station or should I not?” is a profit margin. The owners of profitable vehicle service stations say that the daily income of no less than USD300 ensures normal operation and development of a business.
However, you should be prepared that in the beginning, your business will show neither profit nor loss, which is normal. After all, you need to regain the invested money, whether it's your own, sponsored, or loaned from a bank.
A business plan for vehicle service station
A business plan is what you need to structure all the above factors, cover all the subtle aspects, and leave no detail to chance. You can either make it yourself or draw on the resources of professionals – it depends on the size of the project. This plan will show whether the car service business is profitable under the existing conditions and provide the necessary corrections.
You need a business plan to do the following:
- research the market and get a clear idea of your competitors, the way they work, the services they offer, their prices and clients;
- decide on the list of services
- define who and how to sell your services, i.e. to develop a kind of marketing plan;
- decide on the amount of investment for launching the business (both best- and worst-case scenarios should be evaluated);
- calculate the cost of each service and the approximate profit it can bring;
- calculate the profitability and cost-effectiveness
Of course, no business plan will guarantee that everything will work out exactly as planned – there is always a risk that something may go wrong. However, it will help you to get your yes-or-no-answer. From then on, the success will depend on a number factors including your own further actions.
Over time, the profitability should increase. For this purpose, it is necessary to develop a marketing strategy, promote business, solicit customers, manage demand, develop and maintain reputation, and generate values for the customers. Bu the way, the marketing strategy must work right from the get-go, before the physical start of the shop (which is when you open the gate for the first time). Yet, this strategy will be different from the one aimed at development and promotion.
Let’s sum up
Develop a business plan including budgeting and count all the costs before you launch your service station.
It doesn’t make sense to borrow a business plan from your colleagues – each business is individually tailored and you will have to consider all the subtle aspects that may affect your profits.
Don’t give up when you see the figure – everything takes time and effort. Low or zero profit for the first little while should not scare you – before you start earning, the investment must be paid off.
And above all, if you are burning with desire to have your own business and you have a sense of purpose, you will find a way to turn it to reality.
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