How to Start an Auto Shop

After gaining some experience in the field, some auto mechanics choose to open their own shops. Having your own business allows you to be your own boss, set your schedule and prices, and decide on a specialty if you want one.

Create a Business Plan

Although drafting a business plan takes effort, it is key to the future success of your company. In addition to saving you energy and countless issues down the road, if you're looking for external financing from investors or lenders, most will demand that you have a comprehensive business plan.

A business plan is like a map of your newly planned business. It details the steps you'll take to achieve your objectives while operating in the current market. Having these plans down on paper makes them more real and easier to handle.

Set Up Your Business as a Legal Entity

After you have completed your business plan, the next step is organizing all of the legal aspects. Every new company needs to get business licenses from its state in order to operate legally. This applies to your repair shop as well.

The legal structure of your repair shop is important to consider as it will affect taxation. The options available for the legal structure of your repair shop include a limited liability company (LLC), corporation, partnership, and sole proprietorship — each with its own advantages and disadvantages.

The best legal structures for auto repair businesses are LLCs or corporations. These protect the owner from having to pay damages out of their personal finances if they're sued. You can register the shop as an LLC on your own, at a low state cost, or hire a professional LLC service for a reasonable fee.

Find Financing

If you want to open a car repair shop, equipment, location costs, employee salaries, and insurance coverage can quickly become expensive. A way to finance your new business that is gaining popularity is through Small Business Administration (SBA) loans. Lenders offer more flexible terms and better interest rates for SBA-backed loans as the Federal Government insures them. So if a borrower defaults on their loan, the government will help pay back the loss to the bank.

Businesses Licenses

Before opening an auto shop, obtain the necessary business licenses and permits to avoid being fined or shut down. Pay state fees for the appropriate licenses. In addition, car repair shops must follow mandatory federal and state-level environmental regulations.

Business Credit Cards and Bank Accounts

To protect your personal assets, opening a business bank account and acquiring a credit card is advisable to manage your auto shop's finances. If your business is sued and you use your personal account for business-related expenses, your personal assets can be targeted.

Having a different credit card for business purposes is also advantageous to start building up your company's credit score. Good credit scores typically provide access to more favorable future investments.

Business Insurance

You will need to insure your shop to protect against any unfortunate incidents, like natural disasters or accidents involving customers and employees. Business property insurance is also crucial for all auto repair shop owners to secure their business assets.

General Liability Insurance is one of small businesses' most common coverage options. If you're unsure about which risks your business may face or which insurance type would be the best fit, starting with a basic program like this one is a good idea.

Workers' compensation is an important type of coverage that can help to protect your business from employee lawsuits. For example, if a mechanic was to get injured while working on a car, workers' compensation would help by covering their medical expenses and lost wages.