How to start up a car repairing business

Car mechanic and customer stood next to car

Independent car repairers mostly work on older cars, with quite a lot of work being generated from vehicles that fail the MOT test. Get the essentials for starting up and running your own car repairing business in our practical guide.

Research your target market

Estimating demand

You'll want to make sure that there is enough local demand for your proposed car repair business. The sector is very competitive and car repair and servicing are available from many different sources such as:

  • other independent businesses and 'authorised repairers' (ranging from sole traders with no employees working in a small garage to businesses located in large industrial units)
  • franchised new and used motor dealers
  • secondhand car dealers
  • large quick-fit centres specialising in replacing tyres, exhausts, brakes and so on, and also competitively priced servicing and MOTs
  • auto-centres (superstores with services bays attached), such as Halfords
  • exclusively mobile businesses

Check out the competition in your area to identify how many other outlets are already providing car repairs and servicing locally.

It may be that you will only be competing directly against some of these outlets because you'll be targeting a particular area of the market or offering specialist services which are hard to find elsewhere. Look at the services offered by existing car repair businesses to establish:

  • whether they specialise in a particular type of repair (for example vehicle electrics, brakes or radiators)
  • whether they specialise in a particular make of car
  • if they offer MOT testing
  • what additional services they offer (for example fitting car alarms, stereos and so on)
  • what prices they charge
  • what their opening hours are
  • what type of customers they attract
  • how knowledgeable and helpful their staff are
  • whether the premises and fittings are modern and smart
  • what sort of local reputation they have

Try to find out if there is a gap in the market that your business can fill.

Find out what people want

As you are likely to face quite a lot of competition, it is important to find out what people want and whether there are any particular services you can offer which will attract customers. If you plan to carry out a local survey of potential customers, don't forget that they might include other businesses such as taxi firms and used car dealers. Setting up a Facebook profile might be a good way of gathering feedback from people in your area.

Why will people choose your business

You'll want to make sure that enough people will choose your business rather than taking their car elsewhere. Your market research might have revealed a gap in the market that you can fill. For example, perhaps no one in your area specialises in car electrics, clutch replacement or repair and servicing of Japanese imports.

Whether or not you decide to specialise in a particular type of work or a certain make of car, try to emphasise the quality of your services. A friendly and knowledgeable approach will inspire confidence in potential customers. People working in independent repair businesses often have a keen interest in cars and are happy to discuss matters with customers and to offer advice. Their in-depth knowledge of cars, engine fault diagnosis, repair techniques, modifications and so on is a great strength. This kind of expertise and personal service can be difficult for large motor dealers and quick fit centres to provide, so make the most of these strengths and make sure your customers are aware of what you can offer.

Research current trends, plus legal and tax issues

Establish your customer profiles

Your market

It is likely that your customers will be mainly members of the public who drive older cars. Repair and servicing of new and nearly new cars (up to three years old) is usually carried out by franchised dealers, although independent garages can in theory become 'authorised repairers' for vehicle manufacturers and carry out repairs on vehicles under warranty. If you decide to try and gain authorised repairer status bear in mind that the standards set by the manufacturers are very high and can be difficult - and costly - to achieve. (Changes made to EU regulations in 2010 are intended to give independent repairers better access to technical information and alternative spare parts and should in theory make it easier for them to compete with authorised repairers.)

You may also get work from driving schools, taxi and minicab firms and other local businesses. Organisations like universities, colleges, hospitals and local authorities often run a fleet of vehicles and might also be worth approaching if they don't have their own in-house repair workshop.

If you deal with repair work on accident-damaged cars, an insurance company may pay for the work. In this case an assessor will be sent to check that the appropriate work is being done and that the insurance company is not being overcharged. Some insurance companies will only use approved repairers, or may operate their own scheme. Although insurance repair work can be a good source of trade, the profits to be made may be limited as insurance companies seek to keep costs down - insurance companies are repeatedly accused by the trade of aggressive practices.

Special offers and discounts

You may decide to offer a standard discount as a matter of course to any trade customers. How much discount will depend on your pricing policy and the level of local competition.

Because the car repair and servicing sector is so competitive, it is commonplace to make special offers - for example offering cut-price MOT tests. Although the fee you receive for the test is reduced, you may get extra repair or replacement work if vehicles fail.

Many businesses also give discounts to employees, regular customers, family and friends. A reduced rate could be offered to groups such as pensioners or unemployed people. Check out the local opposition for ideas and keep a close eye on any special offers you do make to be sure that they are working for you. After all, these kinds of promotions might encourage extra business, but they will also affect the amount of profit you make on each job.

Decide what services to offer

Some car repairers specialise in a particular type of mechanical work, for example clutch replacement or engine tuning. Some specialise in accident repairs and welding work, while others focus on MOT testing (and the repairs arising out of failed tests) and general servicing.

Rather than specialise in a particular type of work, some businesses concentrate on a certain type or make of car, for example 4-wheel-drive vehicles, or unofficially imported Japanese sports cars. Others offer a complete range of repair and servicing work on whatever vehicles are brought in. In this case, some jobs that require specialist skills and equipment (such as respraying) might be subcontracted out to other firms.

Specialising in a particular area may be a good way to distinguish your business from other vehicle repairers and can help you to compete effectively. Your research may have identified a gap in the market that you can fill, but keep in mind the location of your business and your potential customer base. It's no use specialising in an unusual make if there aren't enough cars of that type around to keep you in work. Similarly, if you will be the only business for miles around, you may need to be prepared to undertake a wide range of general repair and servicing work.

You may decide to offer a mobile repair service, carrying out work on customers' vehicles at their homes or workplaces.

Additional services

As well as your main business of car servicing and repairs, you could also offer some or all of the following extra services:

  • fitting tow bars
  • installing electrical accessories such as alarms, immobilisers, hands-free phone kits, navigation systems or in-car entertainment
  • providing a breakdown recovery service, which might bring in extra work but would require a suitably equipped vehicle
  • providing a courtesy car for customers to use while their car is being repaired - this might encourage new customers to use your business

Seasonality

The amount and type of work you have to do may vary throughout the year. For example, more breakdowns occur in winter months, so this can be a busy period if you offer a recovery service. The first frosty nights of late autumn usually result in some cars not starting and so you might get a lot of requests for new batteries at this time of year. Also in winter, a car's electrical system is under more strain with lights, wipers, heater fans and so on being used frequently. Alternators often need replacing at this time, and you are likely to get extra work involving ignition system problems - especially on older cars.

Promoting your business

The right image

It is important that your premises project the right image. Independent garages can sometimes look rather old-fashioned, with a dirty, untidy and generally disorganised appearance. Try to keep your premises clean and tidy and if necessary, consider re-painting to brighten things up. Think about using signs to indicate what services you offer. If possible, have a separate reception area where you can talk to customers and they can sit if waiting for an MOT test to be completed, for example. You might consider installing a drinks machine and providing magazines and newspapers if you have a waiting area.

Even more important than the premises is the attitude shown to customers. Too often, people associate garages with poor service and a somewhat off-hand or condescending manner. This is gradually changing as the industry has been making efforts to improve customer relations. Treating customers in a friendly and helpful way will greatly enhance their opinion of your business. Deal with any questions or complaints promptly and politely and take care when making estimates.

If you operate a breakdown recovery service, bear in mind that the tow truck will be a highly visible advertisement for your business. It doesn't need to be new, but it's a good idea to keep it looking smart and well maintained. Make sure your logo and livery are clearly sign written on it.

Quality standards

High standards of service are essential to attract and retain customers. Various trade associations have quality assurance schemes and set strict standards for their members. These include:

  • The Independent Garage Association - a division of the Retail Motor Industry Federation (RMI). Independent Garage Association members may participate in the Trust My Garage scheme
  • The National Body Repair Association (NBRA), which represents the vehicle body repair industry and operates a quality assurance scheme for members
  • The accreditation scheme operated by the Institute of the Motor Industry (IMI)

Members of these associations may be required to undergo training and premises may have to reach set standards before the business earns the right to display the NBRA sign or become an IMI registered technician. Such status will demonstrate to potential customers the high level of service on offer. It will also help to raise the profile of your business - the RMI, the IMI and the NBRA all operate online directories, which enable potential customers to search for member businesses in their area. You can find out more on the associations' websites.

You might also think about becoming approved by the FOXY Lady Drivers Club which operates subscription-based networks of 'female friendly' garages and accident repair centres. You can find out more on the FOXY Choice website.

Advertising your business

Whatever services you decide to offer it is important that you promote your business so that potential customers know about you and the services you offer. There are a number of ways to promote your business:

  • use external signs to inform and attract passing trade
  • advertise in your local newspaper and any local directories (be sure to emphasise any unusual services offered, any special offers and mention any features that distinguish your business from the competition)
  • launch your own website to reach a wider market - particularly relevant if you specialise in unusual vehicles or services and repairs not easily found elsewhere
  • have leaflets printed, perhaps including tips on simple safety checks
  • contact local driving schools and taxi firms to let them know about your services and pricing structure
  • get in touch with local businesses using delivery vans - for example florists or bakers - with details of the services your business offers

Price your services

Getting the price right is very important. When considering your pricing policy, remember that you need to charge enough to be able to cover your costs, overheads and drawings.

Bills for car repair work are usually itemised, with the cost of replacement parts, oil and so on listed together with a separate charge for labour.

The charge made to a customer for parts is usually the cost price of the parts increased by a certain amount. (Many businesses add around 15% or 20%, although some don't add anything at all.)

Labour

The labour charge depends on how long it takes you to do the job and the set rate charged per hour. Hourly rates vary considerably - you could check out the local competition to see what rates are charged in your area. Alternatively you may decide on a set charge per job. Some of the quick-fit centres now use a menu pricing system and you could do likewise. For example, set a fixed price for an oil change or engine tune, more for a full service and a selection of charges for various routine jobs such as renewing brake pads.

Be careful if setting charges for more complicated jobs such as replacing a clutch. This might be straightforward on some cars, but much more complicated and time consuming on others. Manuals are available that provide time schedules for various routine servicing and repair jobs and you could use these as a basis when setting your prices.

Alternatively, you might decide to assess each job as it comes in, and agree a price with the customer beforehand. This might be the only practical approach if you are carrying out accident repairs, for example. Experience is necessary to estimate the extent of the work required and set a fair price. Make it clear to your customers that the prices you quote are estimates, which could increase to a certain extent if problems arise. Even so, be sure to get the customer's consent before starting any additional work not originally budgeted for.

MOT tests

If you are authorised to carry out MOT tests, you are free to charge as little as you like for the test, but you may not charge more than the set maximum fee. The fee is increased from time to time and details of the current fee are available on the Gov.uk website.

Charging a low rate may attract customers, but bear in mind that testing a vehicle is time consuming. There are rules that cover whether a fee can be charged for a retest depending on the things that the vehicle failed on and the timeframe in which the car is returned to you. You can find out more on the Gov.uk website.

Also consider how you'll cost any other services you provide (for example breakdown recovery), how often you will review your prices and whether you will offer discounts and special offers (for example free winter safety checks).

Buy an existing business

You might decide to buy an existing car repair business rather than start your own venture from scratch. Buying a going concern can mean that:

  • the premises, garage equipment, tools and fittings are already in place
  • there are established customers
  • the business can generate income immediately
  • suppliers have been identified and relationships established with them
  • the business has a track record, which can help if you are looking for finance
  • staff are already in place

However, look critically at any business that you're interested in buying to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - many business people are confident that they can turn a failing business around. The important thing is to have established the current position so that the price you pay for the business isn't too high.

Other matters to consider include:

  • the state of the premises, fittings and so on. Will you have to spend money refurbishing or replacing assets
  • the condition and value of any workshop equipment you are buying. Check this over carefully before agreeing a price
  • existing staff rights
  • how to retain key personnel once you've taken over
  • does the business owe money that you'll be responsible for
  • if you are paying for goodwill, to what extent does this depend on the skills and personality of the seller

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.

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