Headaches of starting your own business!

Any pointers? Words of wisdom?

I have been saving for a long while and finally gathered up enough dough to open up my own shop, primarily to recon and resell cars and some some auto detailing. I have been in the car business about 15 years, running a service desk, doing mech and paint work, etc. I got in with a good friend who already has his own repair garage and collision shop about 15 minutes away - so this will be an expansion of his business as well.

We found a great building - an old gas station, and in a super high traffic intersection. The lease is cheap, but we're responsible for the building. I have been going through the paperwork for the sales and dealer licenses.... We got the water turned on - am trying to get the electric turned on but ended up needing an occupancy permit - no big deal - it needs some repairs. THEN I find out we need a Highway Occupancy Permit, which could cost up maybe $30,000! I guess I know why the place was vacant. Anyone familiar with it?


You gotta love how they make it so difficult.

 

I've had 4 shops in 2 states in the last 20 years. It's a tuff time to open anything but I wish you good luck!

Everything I've learned being self employed in that time no longer seems to work in this economy. The only thing I can tell you is keep a sharp eye on the cash flow, don't go nuts. Oh yea, the state will always try to nickel and dime you out of business before you can even open the doors. The city and state are not your friends!

 

My biggest piece of advice is don't buy work. What I mean by this is don't underprice the compe***ion. If you do you'll be busy as hell but won't make any money. I learned this from two men I admired, my dad who was probably one of the best mechanics I've known and an old friend who ran a body shop for years. Both of these men I considered the best at what they did but they were always afraid of not having enough work and hurting people feelings.

My dad always priced himself at about 2/3 the price of the guys down the street and worked 50-60 hours a week trying to keep up on his work but never made any money. The body shop guy was the same. They both worked twice as hard to make half as much. They would have been better off jacking their prices up 50% and working 40 hour weeks.

They also worried too much about the feelings and economics of their customers. They'd fall for every sad story someone would tell them about needing their cars to get to work or to doctors appointments. They give everyone a break on price and allow them to postpone payments. My dad got burned many times from long time customers who didn't have the money when the job was done but promised to pay in 2-3 weeks when they had the money. Quite a few never paid, again, these were long time customers my dad knew for years. If someone can't pay when the job is done they can fine alternative transportation until they have the money.

If you're good you shouldn't have to buy work. You can charge the going price. I run my own non-auto related business and I never buy work, I might give a break to really good customer for a job or two but I make sure I don't get hurt. I've had a lot of new potential customers ask for quotes and then whine I'm 10-20% hirer than the next guy. Usually they get quotes from 4-5 other places and I'm always right up there with 3-4 with one low balling. I never chase these jobs even if I'm slow in the shop. I'd rather play on the computer than do a job too cheap.

 

Don"t see where the highway occupancy permit could cost you $30,000,hell you ain"t opening a bar or liquor store. If its costs that much look for another location or expand your buddies shop if possible. I quess PA. has some greedy *** gov. regulations. Unless you know for sure you can sell these reconditioned cars,now is a bad time in the market to jump in and lose your saved up money.

 

I just thought of something, no matter how I planned I always ran into; What ever you think it's going to cost to set up a shop, double it.

You said your resposible for the building, does that include major stuff like a roof if it leeks or if the city inspector finds lead paint or asbestus or a leeking under ground tank? Not that you couldent get out of the lease, but you don't want to sink money into fixing it up only to have to walk away after it set up how you want it. I don't want to bust your bubble, and I know how fun it is to open a shop but, it is things I have seen happen, and being an old gas station (which is very cool) there can be all kinds of stuff going on.

 

Please listen to Bobj49f2. He speaks the truth!

 

Have all expenses for atleast 1 year in the bank before you start...

 

Get really good, REALLY GOOD insurance. Not the minimum shopkeepers stuff, but something that will actually cover you completely when **** goes bad. It may not, for a long time, but it will at some point go very bad. May be an employee accident, maybe brakes will fail on a car you sell or repair, who knows. Cover yourself and your co-workers. Making the payments ****s, but ask any business owner if GOOD insurance was worth it after they needed it and had it.

After that, Bobj49f2 nailed it.

Good luck.

 

Know all of your costs, I keep detailed cost ledgers and go over them every month.
Small things can nickle and dime you to death.
I don't like partners.
Your customers pay your salary and keep your business going, be prepared to eat more **** than you normally would. I try not to blow up when I really, really want to, I made a pledge to myself I will always wait 24 hours and re-access the situation.
I set a nominal salary for myself to live on, when there is some left over , the rest goes into reserve or back into the business.
Your in PA & if you incorporate the right way, PA does tax your salary but does not tax dividends, get a good accountant, he will explain this to you.
I try to keep to keep enough cash reserve on hand for the expenses for a month of operations, if everything totally went to ****.
Plan on never getting a 5 day in a row vacation.
Plan on the business being on your mind every minute, no matter what you are doing.
Plan on the "Oh **** I'm out of money" moments.
Stay away from "Bank lines of credit." too easy to get money & you'll regret it later.
Been at it for 16 years, don't regret it at all.
Good luck, if you love what your doing, you will do well.

 

I would suggest you go to your local community college and take some fundamentals of business courses; accounting, marketing, management, law, etc. The more you arm yourself, the better.
I went to MATC, Milwaukee Area Technical College and took some business courses. I was surprised to see some business owners in the cl***. They told me they learned a lot and could of used what they know now, when they started.

 

Ran my own business for 8 yrs. (not car related). Just when you think you've thought of everything, you haven't, something else comes along. Hope you have Deep Pockets or a good credit line/relationship with a bank/er. And, be prepared to work longer hours than you ever imagined. The longer you do it, the more invested you become, both monetarily & emotionally. If it doesn't work out, you need to be able to know when to throw in the towel and walk away. But as long as you have a p***ion for what you want to do and can get it off the ground, give it a try. You'll never know unless you try it. Mine didn't work out, but I'd do it all over again if I had the opportunity. It was a great experience and taught me many leasons in life. GOOD LUCK!

 

Two tips:
1-If you want to make a little money in the old car business, you'd better start with a lot.
2-The headaches of opening a new business are not nearly as bad as the headaches once you are in business!

 

After I ran my own resto parts store out of my garage until it got to the point where I was staying up until midnight every night filling orders for customers, THEN I looked into renting a store on a busy road in town. Fortunately/Unfortunately I got laid off from my full time job and the decision was made for me. Maybe do it on the side until you're too busy and tired to go to your full time job? I ran my place for 18 months before I was offered to manage a much bigger operation.

Also, to save you a few minutes a day... When you do go for your business license, sounds weird, but DON'T give them the real business telephone number. Our town sells the list of new businesses and telephone numbers to insurance companies, office supply companies, copier rental companies, alarm companies... And your phone will be tied up with people trying to sell YOU stuff instead of customers wishing to buy stuff FROM you.

Finally, even though you are potentially going to be on a busy road - ADVERTISE, ADVERTISE, ADVERTISE. I'm A-freaking-MAZED at the numbers of businesses that the first time that I recall seeing them in print, it is for their big "going-out-of-business sale".

That being said though, you will also be inundated with "sponsorship" solicitations from little league teams, bowling teams, advertising spots in the high school graduation program, etc. The use of your advertising dollar is your decision, but if they buy something from you, then maybe throw a little back their way. Used to drive me nuts getting solicited for funds / sponsorship by people who had NO idea what we sold and would likely NEVER buy anything from us. I mean, it should be just a little "give & take".

I'd also be inundated with people walking up & down the (mainly commercial) road going door to door selling everything from knock-off perfume to cleaning products to imitation watches. As soon as they'd walk in and start their spiel, I'd ask them if they had any intention of buying something from me now or in the future. Most of them would look around and get a weird look on their face and admit that they had NO idea what it was that we were even selling, so I would politely point to the door and ask them to leave. TIME is a valuable commodity in a small business, don't waste it!!!

 

ftp://ftp.dot.state.pa.us/public/Bureaus/BOMO/MC/Publication282.pdf

A friend was going to move his shop to another building that they were leasing for storage, then he discovered he'd be responsible for bringing the access road up to code....he gave up.

 

That's the kind of stupid stuff that makes you want to locate your business in other states or even other countries......

I looked into buying some property in a blighted area (former strip mall) and learned that in order to tear down the old stuff to build new I would essentially have to bring the property back to a pristine environmental condition first, potentially costing more than I had for the whole project. Screw that. I ended up building further out on virgin land. And people wonder why businesses abandon cities and move on......

 

I've been in the car business for over 35 years and just recently retired, I'ts as hard right now as I've ever seen it in those 35 years. The number one problem is getting cars that you can recondition and sell for a profit. If you're talking about average everyday used cars, ( $4000.00 to $10,000.00) there are very few around. I used to go to auctions 10 years ago and there would be 600 dealers there for a list of 3 to 4,000 cars. Last week I went with a guy and there were 718 bidder badges issued and a list of 238 cars, very very tough market. Proceed very carefully, you can lose alot of money in a hurry. Best of luck, I hope you beat the odds.

 

My $.02 From having started and grown two successful Auto-related businesses...One is a BMW Repair and Performance Shop (which my partner now runs), the other is a Diesel Pickup Performance and Repair shop.
1. Advertising--Be Careful spending money here. Get a website, get someone to set up SEO for you so it shows on Google. I have never done any real advertising and have grown both businesses to over $1m in revenue each in under two years. Word of mouth is key, referrals are key. This also tells you if you are doing a good job.
2. People- Get the right people. This is invaluable. Find enthusiasts if possible. All my techs race cars or trucks, sled pull, whatever. In my experience these guys give a **** and are more loyal.
3. Price- Like a previous poster said, you don't have to buy business. Do it right and build a reputation, charge as much as you can fairly get away with. Both my shops are on the high side for independents, but are 20% less than the dealerships. You want to price out the bargain hunters. They are always a pain in the *** and there are tons of them that will eat your time and your margins. We have a 99% retention rate with our customers, they are all repeats and they refer. Best business you can have.
4. GET A GOOD BOOKEEPER AND A CPA. Bookkeepers are cheap and can handle the data input, day-to-day stuff. Use the CPA for tax filing and issues. Worth every penny!

 

Your friends, the gov't at work. "We work hard to keep Mom 'n Pop working at Walmart".

Then they'll go after Wal Mart

 

insurance , insurance, cheap is not always best. GOOD LUCK.

 

Way too many headaches to think about before getting started. If you knew in advance what was in store for you there is a good chance you wouldnt do it. Take care of the big obvious issues as mentioned above. Be aware that there is going to be issues that will pop up daily, you just need to take care them as you go. Then just Jump in and start swimming with the sharks. Kinda scary at first but kinda fun at the same time. Its ultra hard work with ultra long hours. If you are honest and provide a good product or service at a fair price you will do just fine! Good Luck and just jump. LOL

 

I vividly remember sitting in a "Micky Ds" after I got my lunch which consisted of a cheese burger and a small coke less than 2 bucks because that was all I had... literally. I remember thinking someday I'll look back and remember this day. I never forgot it. Fortunately the customer showed up with cash that day for his car. I could get coffee in the morning.

 

My son and I have a small side business that restores old gas pumps. We had a nice size paint booth for our jobs. My insurance guy stops by and says they have to increase my insurance by a 145% a year. Because of our paint booth! Yup! ****, thats about how much we bill for the year. I said I'll look for another insurance company. Two days later a guy from the EPA agency shows up, inspects our shop and red tags us. Long story short, we no longer do our own spraying, $2,750.00 in fines and a new insurance company. Check out all the state, city regs. They love taking your hard earned money. As everyone has said, do your homework and ask a ton of questions.

 

This is a great post on "bill Paying day"!

1. My number one bit of advice is rely on those with experience.
There are usually small local business clubs or organizations within your community that have weekly or monthly meetings. These guys and gals have usually been through everything that you are going through, and should have great advice on how to solve any problems like the one you mentioned. They may also have contacts and friends that have an "in" with government and will probably work with you on getting permits and such. Remember that the local Government is made of people. And people usually like to think they are in a position of power. So if you can let them think they are making "the decision" than it's a win win. You most likely will get what you want, or at least get a better deal on most of the things you will need to start your business.

2. Another tip. Try not to buy anything "new". I have saved a bunch of cash that I needed to use for bills at the end of the month by buying equipment off of criagslist, or ebay.

3. Learn to love cup o noodles, Peanut ****er and jelly sandwiches, and 99 cent cheeseburgers at Micky Dees.

4. Never give up. It's o.k. to go to bed with tears in your eyes because you don't have the money to pay the bills that are due tomorrow. I have done that numerous times. Not so much tears for me, but for my kids and how I am going to feed and cloth them. Miracles happen, and it seems when you have said all the prayers that you can say and it looks like you are closing shop for good, someone walks in and gives you an order that will get you through the next month.
It's not easy, and not everyone can do it. But the satisfaction at the end of the day is pretty nice.


That's my 2 cents. Others my have a different opinion. But this has worked for me.

EdiRoy

 

Excellent business model & advice!!

 

I've never owned my own business, but have played second banana behind lots of very successful business owners and learned a lot from them over the years. I enjoy picking peoples minds and getting whatever I can from their experience.

One common thread I found a**** most of the CEO's/ Presidents/Owners that I found is that they are not afraid to act when they have to do so. Not saying they are not nice guys, but they would not hesitate to fire their own Mother if they thought she was not pulling her own weight. The business comes first and they never lost sight of that fact, regardless of who are what they were dealing with.

I also found that they concentrated on ONLY a very select market to sell their products or services. For example, I worked for a very successful body shop that the owner has run for the past 30 years. His philosophy was to do ONLY insurance wreck jobs. He would not take in a self pay job, or paint a car, or anything else. He dealt only with insurance companies because they never complained, paid the bill, and gave him no grief. Some businesses try to be all things to all people, and you can't do that.

Another company I worked for sold boats, but only NEW boats. As soon as a used trade in came in it was sold to a salvager to get it off the lot. The owner felt having a used boat around detracted from selling the new ones, and that was where his real profit came from. He also taught me that it doesn't matter how much you sell in a day, what really matters is how much you take home at the end of that day.............you have to watch expenses and profit margins.

I also worked for a man who started off when he came from Italy selling d****ries door to door on his back. At the time I worked for him he owned not only a chain of d****ry stores, but the factory where they produced them. At lunch one day he told me "You will never be rich." and when I asked why, he said, "You are too nice of a guy. To be successful you have to be a Son of a *****, and you aren't." I guess he was right ,because I'm still chasing that first million.

Don

 

Someone wiser than me told me, "you can work 12 hours a day, 7 days a week, and not make any money, or you can go fishing and not make any money, which will it be?"

The point being, make sure you get paid for what you do...As was mentioned earlier, you can undercut other shops just to get work, and be busy as hell, and it's tempting for the cash flow, but at the end of the day, you gotta turn a profit. In my shop, the policy was, we don't ever charge for anything we don't do, (some shops do-called cost shifting), and we don't do anything we don't charge for. Seems obvious, but some people don't get it...never work for free, it's not worth it!
The above posts pretty much cover everything else, all great advice! If you follow it, you'll do OK.
Good luck!

 

Lots of folks with skills go into business for themselves after thinking "I'm the guy "doing" all the stuff and the owner gets to make the profit off my labor. I'll work for myself and get to keep all "my" money." The thing that isn't evident until you actually do go into business for yourself is that now, instead of doing one job, you get to do three...for the same money or less. There is the guy who runs the business (ordering, bill paying, money collecting, hiring, firing, etc), the guy with the skill who does the "work" (car fixing, plumbing, electrician, whatever) and the guy who goes out and promotes the business and brings in customers. Be prepared to spend lots more hours doing all the stuff the folks above have mentioned and, at least for the short term, not really being "paid" to do it. Pay yourself a reasonable salary, cut back on your living expenses as much as possible and invest what is left in the business. The pay off can be both rewarding and profitable, but it will likely take time (years) to get there. Good luck!!

 

All great advice! Keep your eyes open! A very close friend of mine owns his own business with two partners, one being his step brother, well his step brother robbed them both! They had a very tough two years catching up but they did it and are back on their feet. Just watch out for everyone.

I run a small buisness out of my home garage building bikes, I dont do a ton of work but I make some nice play money, I kept my 9 to 5 though. Like people have said, dont buy work and also dont chase it! If you are good you dont have too. I had a potential customer who needed a ******** clutch job. I tried to save the guy a little by offering to pick up the bike. I left him a message on Wednesday on what time was good Friday, he then called back on Sunday and said he still wants to have the job done, this happened 3 weeks in a row, until the last message I got from him, on a Sunday again, was "Hey Nick, waiting on you, the bike is sitting here and its not going to fix itself". That was the end of that. They want work let them come to you, dont chase them.

And last but not least, if you want to do this, if its your dream then go for it! **** the nay sayers and live your life! Good luck! I litteraly just sent my quarterly statements to the accountant, I get to pay the government next week!

 

I just thougth of this too:

1. You are only as good as your last job! Sometimes you may have to eat a few bucks but dont half *** stuff, you will not be able to stand behind each job to explain that the customer didnt want to pay for this or that!

2. Do what you intend to do, dont start taking in stuff to get by, stick to your guns on what your plan is. I fell for this, started taking in service work, thats not what I wanted and for a while there my weekend mornings were full of brake and oil changes.

If I think of more I will keep posting.

 

I haven't had a shop but have had my own consulting firm since 1997 and do know a lot of shop owners, and I have some friends who are also small dealers...

Lot of great advice in here, I'd just add:
-My dealer friends have bank lines, so what you are going to do when you have a lot of money typed up in inventory? How will that work?
-Would the location support a detail/car wash? My friend's car wash at peak was doing 290 cars a month. Would be nice to have a few diverse sources of revenue.
-Are you going to be LLC or S corp?
-Maybe contact your local painless dent guy and have him ready to come out for jobs.

I'm not a big fan of you carrying a lot of auto inventory, that part of your biz might change a lot once you start doing it. What is the kind of car you want to sell (price point) and how do you know it will be successful?