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How to start an auto repair shop
Discover the ins and outs of starting your own automotive business.
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If you're a mechanic, opening your own auto repair shop is a great way to turn your skills into a profitable enterprise. In this guide, we've compiled the information you need to start your own automotive repair business.
What is an auto repair shop?
An auto repair shop specialises in providing car repairs and maintenance to consumers and businesses. Most auto repair shops provide vehicle repairs, safety inspections, air conditioning repairs, wheel alignment and more.
How to start an auto repair shop
Follow these steps to set up an auto repair shop:
- Develop a business plan. Write a business plan that takes into account market research, the estimated income and expenses for your business, and the pricing of your services.
- Find a suitable location. If you want to do repairs on site, you will need to find a suitable commercial space that is close to public transport with plenty of parking space for customers. Alternatively, you can run your auto repair business as a mobile business and send mechanics out to homes and offices.
- Create a brand name and logo. Unless you're planning on running the business under your own legal name, you need to register your business name with the Australian Securities and Investments Commission (ASIC). You may also need a logo to promote your business. If you don't have the budget for a graphic designer yet, you can use these graphic design tools and services to create your own logo.
- Consider loan options. Depending on the commercial space and equipment you need, you may need to apply for a loan to start your business. If you can't get a business loan, there are also personal loan options available.
- Choose the right structure for your business. For many business owners, operating as a Sole Trader or Partnership is simple and cost effective. However, there are advantages in registering your business as a company if there are external investors involved or if you wish to better protect yourself against the company's future liabilities.
- Consider legal requirements. You may need to get legal document templates such as a Service Agreement. If you're renting a commercial space to run the auto repair shop, you may also need to speak to a commercial lease lawyer.
- Market your business. Your marketing strategy will depend on how you run your business. If you have a shop in a high foot-traffic area, you can use signs to advertise the business or advertise to local groups. If you're running a mobile repair business, you will need to invest more in building a website and social media presence so customers can find you.
Skills needed to start an auto repair business
To get your automotive repair business off the ground, you will need:
- Experience in repairing cars. It's essential that you have experience in fixing popular models of cars.
- Customer service and organisational skills. It's also important to have the skills to provide customers with a positive experience. You need communication skills to set clear expectations for customers and organisational skills to prioritise more urgent tasks.
- Business skills. As a small business owner you will need some basic business skills such as bookkeeping and marketing. Write a business plan detailing how to finance your business, ongoing costs, how to grow and evolve, and your marketing strategy.
Courses or qualifications
To run an auto repair business, you will need a motor vehicle repairer's licence from your state or territory office.
In addition, in most states you will need a valid motor vehicle tradesperson's certificate if you want to do the repair work yourself. Anyone who carries out repairs in your business must also have a tradesperson certificate. Check with your state and territory office what the requirements are.
In order to get a motor vehicle tradesperson's certificate, you will need Certificate III or higher in the relevant discipline, such as Certificate III in Light Vehicle Mechanical Technology, Certificate III in Heavy Commercial Vehicle Mechanical Technology or Certificate III in Automotive Electrical Technology.
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Equipment and software needed to start an automotive repair business
To run an automotive repair business, you will need equipment including:
- Air compressor. This is a pneumatic device that uses energy to compress air. This energy can be in the form of chemical energy or electrical energy.
- Battery charger and jumper. You need a new battery charger and jumper to handle clients with dead car batteries or charging problems.
- Transmission jack. There are several jacks with different handling capabilities and features. A transmission jack helps you to remove and install transmissions into vehicles.
- Air conditioning machine. An air conditioning machine is important, especially if you are offering air conditioning services. This machine can help you in several ways, including recovering, recycling and recharging automotive A/C systems.
- Jack. You will need a jack to raise cars in order to conduct inspections and repairs underneath the car.
- Wrenches/spanners, screwdrivers and plier sets. These tools are used to assemble and disassemble car parts in the interior and exterior.
You may also want to invest in software and equipment to make running the back end of your business a little easier:
- A good computer
- Printer
- Payment software
- Accounting software
- A Point of Sale (POS) system
- Online booking system so customers can make a booking online
Loan options for auto repair business
Depending on the level of your savings, the commercial space you're renting and the equipment you need to buy up-front, you may need to get a loan to start your business.
Our guide on small business loans can help you figure out which option is the best for you. Keep in mind some lenders will require you to have been operating the business for at least 6 months to a year, while other lenders will require a minimum annual turnover of at least $100,000.
If you're just starting your business, you may need to think about getting personal loans instead. Before you apply, always make sure you're able to afford all repayments, including any additional fees or charges.
How to structure an automotive repair business
Before you register for an automotive repair business, you need to choose a business structure. Depending on how you will raise your capital, you can decide to choose between the following business structures:
Sole Trader
This type of business structure comprises one person who is the business owner. As a Sole Trader, you have to raise the entire capital for starting the business and run the business alone.
Partnership
This structure can be suitable if you decide to partner with one or more people to start your automotive repair business.
Company
This type of business structure allows multiple shareholders to own the business. It can be suitable if there are external investors involved or if you want to protect yourself from the Company's liabilities.
Before you start operating an automotive repair business, you also need to get an Australian Business Number (ABN).
Do I need legal documents and advice?
You may need several legal documents before opening your automotive repair business. If you're not sure of how to go about this, you can find legal documents online at websites like LegalVision or Lawpath. There is a range of legal documents to suit your needs. They include:
- Service Agreement. A Service Agreement should explain the services you provide to your customers, what your and your client's responsibilities are and payment terms.
- Partnership Agreement. This document spells out all the responsibilities of each partner, how the partners share profits and losses, and the percentage of ownership.
- Tax invoices. You may need to give your customers tax invoices after they have paid for repair services. This document is also important when you are inputting tax on your business expenses.
- Employment Agreement. When you need to hire employees to help you with your business, you will need an Employment Agreement.
You may also need to speak to a lawyer to make sure your business is legally compliant and to have all your paperwork reviewed. These lawyers could be helpful:
- Small business lawyers. Small business lawyers specialise in helping people set up and run a business. They can advise you on how to structure the business and how to negotiate contracts.
- Commercial lease lawyers. Unless you're running a mobile auto repair business, you will need to rent a commercial space to run your business. Before signing a commercial lease, it can be a good idea to have the contract reviewed by a commercial lease lawyer to make sure the lease terms protect your business interests.
- Franchise lawyers. In some cases, joining an existing franchise provides an easier way to start an auto repairs shop than starting from scratch. If you're joining an existing franchise, it's a good idea to speak to a franchise lawyer to go over the franchise agreement and make sure your business interests are protected.
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How to find customers
Good marketing skills may attract customers. You may opt for online ads if you have a business website to advertise your products and services. Offering clients guarantees is one of the sure ways to win their loyalty. You can also use word of mouth and email marketing to find new clients.
Online marketplaces are another way to build your customer base. Some of popular platforms include:
How much should I charge my customers?
You can charge customers a fixed rate or an hourly rate for labour. Many automotive repair shops will also charge customers for the various parts needed for a repair.
According to ServiceSeeking, auto repair shops in Australia charge between $60 to $88 an hour, depending on factors such as:
- The severity of the problem
- Whether the repair requires work from a specialist
- The location you operate in
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Does my automotive repair business need management software?
Your business may need a customer relationship management (CRM) software to help make your work easier. Software that might come in handy includes 5iQ Workshop Software, ARI and Auto Repair Bill.
Do I have to wear protective gear when working?
You should wear protective gear every time you are repairing. This includes gloves, goggles and steel-capped boots.
What are the pros and cons of running your auto repair business from a shop vs running a mobile repair business?
If you want to run your auto repair shop from a garage or a workshop, you'll need to pay rent. It will add to the cost of running your venture and may slow you down in opening your business because you need to find a suitable place first. For an auto repair shop, you'll want to make sure there is plenty of on-site and off-site parking and that it has easy access for clients.
If you're running a mobile mechanic business, you'll have lower startup costs because you don't need to pay rent. You'll also have a wider customer base and can attend to emergency car breakdowns, because you can travel to customers' locations. However, being a mobile mechanic means you will be spending more time on the road and will need to spend money on petrol, tolls and other transportation costs. There will also be services you cannot provide as a mobile mechanic if the problem requires more specialised equipment.
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