What to Consider Before Buying an Auto Repair Shop

Starting your own auto repair business from scratch is not always the most cost-effective idea. Alternatively, by buying an already existing business or a franchise, you can skip several initial steps and get right to business. Sure, it costs you more but when you compare it to the risks that your business would undergo in its formative months (its most fragile period) the costs usually seem more than fair. You also get a starting customer base and a working business model. Still, this can be quite tricky if you don’t know what you’re looking for. Here’s what you need to look out for.

Related: Auto Repair Shops for Sale

1. Why are they selling?

The first and the most logical question that you need to ask is why are they selling a profitable business, to begin with? Don’t get us wrong, there are so many legitimate reasons. They may be sick and tired of the industry and plan to switch to something else. They may have some personal issues, which is why they no longer have the time needed to micro-manage their business. An auto repair shop is a location-based business and they might be moving. There’s always the risk that the area is oversaturated with the competition and that they can’t make a living. This is actually what you’re looking for.

2. What are your needs?

The next thing you need to ask is your specific needs. What kind of work do you expect to do in the business? Are you a mechanic yourself? If not, and are just looking for a place where to invest, this might not be the right industry for you. Do you want a specific location? Is there any type of work that you specialize in/prefer? If so, are there any businesses that follow these criteria? Most importantly, you need to ask what kind of income you are expecting from this business.

3. Local research

The next thing worth taking into consideration is the local market, competitiveness and the reputation of the business. For instance, you may be dead-set on buying renowned auto service in Melbourne. In that particular scenario, the location is the immovable factor, while the rest is negotiable. This would mean that you have to look for local franchising options and original businesses and see which of them brings you the greatest value. The comparative strength of business in a certain neighborhood is a far more important factor than may appear to you at the moment.

Video: Auto Shop for Sale vs. New Auto Repair Shop | General Steel Corporation

4. Help in taking over

Taking over a business, even a successful one is difficult. A change of management may mean a new set of rules. Some of the mechanics working at the shop may leave or have a hard time adjusting to the new situation. This is why you need to be as considerate as possible and ask the previous owner what kind of help can you expect when first taking over the business. If buying a franchise, you will probably inherit a business model and a number of contacts (like suppliers). If building a new team, you can probably even expect a couple of trainers to help you start out.

5. Previous experience

One of the most important things you need to take into consideration is your own previous experience. Did you ever run an auto repair shop of your own? Did you ever work in one? Now, working in an auto repair shop is not the same thing as running one but it may give you a general idea of day-to-day operations that take place there. Ideally, you would get in touch with someone with previous experience and inquire about the work that takes place here. If they’re not in the same part of town, they’re not even direct competitors.

6. Customer reviews

According to BrightLocal (2017) studies, we can say that 97% of clients use reviews to search for local services. Look for a place that has a good review and with a good amount of it you’re good to go. If not, you’re going to have a hard time fixing it and regaining the reputation you need. Doing this will speed up your growth and you will have a good customer base from start. Ask around in the location you want to buy and make sure the previous owner left a good name. You might need to change the name as well.

7. Location

As for the location you might want to check the following items:

  • Foot Traffic and Accessibility: For most retail businesses, foot traffic is extremely important. You don't want to be tucked away in a corner where shoppers are likely to bypass you, and even the best retail areas have dead spots. You might wonder why a repair shop needs foot traffic. Firstly, your shop must be seen by people, everyone must know a good repair shop exists where they usually walk, so when they are in need of your service, they can come to you.
  • Competition: Are your competitors nearby? Sometimes that's good! But if a nearby competitor is only going to make your marketing job tougher, look elsewhere.
  • Proximity to other businesses and services: Consider what other businesses and services are in your area from two perspectives. First, are you able to benefit from nearby businesses--by the customer traffic they absorb--because those companies and their employees could become your customers, or because it may be suitable and efficient for you to be their customer. Second, look at how they'll improve the quality of your company as a workplace.

In conclusion

At the end of the day, the role of a business is to a make profit. If you can make a profit, then the idea is viable from the perspective of a business. However, you also need to take other things into perspective. There are other ways to make money; other options to invest in. This is an industry that requires commitment and passion in order to maintain a certain level of quality of services. Being realistic about whether you possess them or not is the first requirement that you’ll have to satisfy.

Published by ExitAdviser


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