Going from a hobby to a business...need help - Page 2 - PeachParts Mercedes-Benz Forum

95s420 · #16 08-12-2003, 02:44 PM

My entire family are entrepreneurs. Thoroughly researching and putting together a solid business plan is simply good business.

All business have their own set of unique "issues" that may or may not make the business attractive. If it turns out that in order to provide the level of service that I have described the venture becomes prohibitively expensive than the project will either have to be scaled back or dumped entirely.

There are alot of uncertainties but each of the issues you desribe are easily quantified from the start.

Issues such as finding the "right" location and hiring the "right" people are not so easy to quantify and therfore present much more of a risk.

Thanks again for the input....

Brian

#17 08-12-2003, 03:10 PM

My comments about knowing the business is related more to how a shop is run, than knowing every technical detail. What raised the flag with me was that you did not seem to know the pros and cons of paying the techs commission or a salary.

I meant no disrespect or anything like that. My fear would be that if you had not been around a shop and understood the techs issues AND the customers issues and have experience handling both, my fear was your getting "eaten alive."

I think you have some great thoughts and since you're willing to ask and discuss, will get it sorted out. I am envious. This is something that I would like to do and have actually considered it.

If I were in a better location for such a venture I might pursue it. The problem for me is that I want my cake and be able to eat it too. I really enjoy living in the boondocks, but it would be somewhere between impossible and extremely difficult to pull off something like this where people make very little money.

Keep up the good thoughts.

Have a great day,

95s420 · #18 08-12-2003, 03:19 PM

I did not take your comments as disrespectful at all. I appreciate you taking the time to respond.

I understand the pro's and cons of the different compensation plans but just wasn't sure if one was more "acceptable" than the other. This is the case where I know what I have seen in the past but I am always looking for a better way

Part of this venture is really getting to understand the business. You guys are a great asset in that respect. Anytime I am even slightly out of my element I like to get as much information as possible. This will easily be a $1M deal and I want to make absolutely sure that it is realistic. If executed correctly I think that the shop could be a real success.

Thanks again guys!
Brian

afmcorp · #19 08-12-2003, 03:21 PM

i'm sorry i hit the wrong tab. i didn't mean to send.

i don't mean this to be negative but... all the responses to your inquiry dealt with only the customer aspect. frankly IMHO "if you build it they will come" is a fair statement. the business as you've described is wonderful. i know i would prefer walking in to a dealer like this one.

there is so much to consider. the real key as i see it is "DEBT". there can be so many surprises on any given day that while you think you have enough cash that day comes along and whappp! something major and your empty.

think about your building (place of business). i don't know where you are but you wouldn't put in skid row or an economically challenged area right. so you know you will need an up scale location. remember that 250k building i mentioned. well i know places that the dirt costs that much. the building you speak of won't be a pole barn either. the mechanical for this building, shop air supply, sprinklers, potable water, sewer & backflow prevention. OUCH!!!

one other word of advice is buy more dirt than you think you'll need. remember you may want to expand. if you're land locked you'll be facing a move.

well that's enough sour puss. i wish you all the best of luck. if you try hard you'll succeed.

craig

stevebfl · #20 08-12-2003, 03:40 PM

After you have a million in the ground and a half million in equpment and do all those things one should to one's employees (including health insurance for a family) you will be considered a thief by better than half the people on this board when you charge what it takes to support such a concept, probably including yourself.

I'd pick a different trade! In a few years no one with money will be paying to have their car repaired and the ones without money sure don't care about mahogany.

suginami · #21 08-12-2003, 06:25 PM

I have had my car serviced at three separate high-end "European" service and repair facilities, and all three of the places are leased by the owner. They do not own the land or the building.

I suppose in the long run it would be better to buy the land and the building, but I can see how it could be prohibitively expensive starting out.

I suggest that you take a look at the shop that the owners of this website own called MB Autowerks. I visited this shop when I was on a buiness trip to Atlanta, and I think it is one of the nicest, thoughtfully-laid-out independent shops I have ever visited. There is a link to the shop on the homepage.

The shop floor itself is huge, the walls are painted white, it is bright and airy. There is a glass partition separating the customer waiting area from the shop so that customers can look in and see the work being performed.

There are refreshments available, e.g. water, coffee, etc. There is a waiting area with sofa's, chairs, a coffee table, end tables, etc., and a TV.

They also have cubicles so that a business person can get some work done, make phone calls, hook up the lap top, etc.

Regarding pay, I have noticed that the independent shops that I've visited pay their employees either by the hour or a flat salary per month.

Last, the mechanic that I frequented that fixed my Japanese / American cars injured his back on the job and decided to sell his business because he could no longer do the work. He ended up moving to Las Vegas and opening a used car lot.

I believe he sold his business for around $150,000. Of course, the buyer took over the lease of the building and the name of the building. I suppose the buyer also inherited the hoists and other "fixed equipment" in the shop, e.g. lights, air compressors (anchored into the ground with hoses snaked overhead), etc. I'm sure the new buyer had to provide some tools of his own.

I also believe the mechanics that are hired are responsible for their own tools.

Jackd · #22 08-12-2003, 06:55 PM

As a business consultant, helping businesses to stay and grow in business and helping new businesses to start, I allow myself to give you a few hints.
Why do you want to start a business: To satisfy customers?? To show your competence and good work?? Because you like cars?? To fill a local need?? NO.**** TO MAKE MONEY. If you have any other reason but to generate profits, you must be either very rich to absorb the looses or simply a masochist.
First thing you need to do: Set up your profit objectives (be realistic). Then, from this number, work your way up/down a P&L.
How much sales you need to achieve, profit margin, and meet the expected (and unexpected) expenses, Be very pessimistic on sales and profits, and do not forget a single expense. (worst case scenario). You should make several passes with your P&L looking at different scenarios.
Then you ask yourself what is required in terms of capital investment to meet the profit objectives. (that's where the wood/leather come into play). How will you recruit your customers? What are your fixed expenses vs. variable expenses (which will give you the minimum sales/profit necessary to stay afloat). what is your fall back position (if sales/profits are not there and expenses are higher than anticipated)
Starting a business is a numbers game and should never be for the fulfillment of a dream (That OK if the numbers agree)
Most people starting new businesses spend a lot of time, efforts and thoughts on what they will do (wood-leather, loaners, appearance, service level etc.) and not enough time on sales planning, sales programs, profits generation, expenses control and all aspects of business management. You are not in business to repair cars. You must be in business to make profits. Fixing cars is the ''HOW'', as are employees, facility, tools and equipment.
I could write a book about ''the wrong way to plan for a new business'' and an other book reporting failures I have seen because of not focusing on the key elements (sales, margin, expenses) These elements must be the BASIC of any business plan.
jackD

95s420 · #23 08-13-2003, 08:05 AM

You guys are thinking exactly what I am. Initially, I will lease the facilities unless there is a large probability of appreciation then I might have to reevaluate.

Jackd....What you said is the bottom line truth. A business is in business to make money. THAT is my area of expertise. I have an undergraduate degree in Finance from a top three school and a Master's degree in Finace/capital management. I know the P&L like the back of my hand and can put togther a realistic business plan that can be sold to a group of investors or a bank. I know the in's and outs of running a small business and although I may not be an expert at running a shop I believe I could be within the first year.

I believe that the employees should be accountable for their work. If it is shoddy, I will know because customers will complain. I plan to send out customer survey cards and personally contact each customer that rates our service less than "excellent". I believe that customer feedback loop is broken in most companies and that by paying attention to the customer you can learn a great deal about your own operation.

I have got a meeting with a shop owner in Houston who has implemented this model at his own place (domestic auto's) and has done extremely well. I hope to glean a few valuable insights on my visit.

I have alot of confidence in this approach and I appreciate all the input that you guys are giving.

Keep the good ideas coming!

Thanks guys,
Brian

stevebfl · #24 08-13-2003, 08:25 AM

I'm not a finacial genious or I wouldn't have invested as much money in auto repair. But I have found over time that buying ones building is much cheaper and in the long run about all one will take from the business.

We paid off our first building 13 years ago and are most of the way through our second. We rent the first to another shop who has wanted to buy but the cost of the mortage land taxes etc keep him paying rent. if he had bought 13 years ago he would have something now. As it stands his business is only a job.

tvpierce · #25 08-13-2003, 11:04 AM

As Steve Brotherton so clearly stated, you ain’t gonna get rich in this business – and he ought to know, he’s been doing it a while. So if your main reason for getting into this field is to make money, then perhaps you should search for a more lucrative investment vehicle.
According to Malcolm Forbes – a guy who knows a thing or two about making money -- "The biggest mistake people make in life is not trying to make a living at doing what they most enjoy."

Obviously, if the numbers don’t work then don’t do it.
Here’s a quick quiz. Which of the following businesses would you choose?

A) A septic tank pumping business. You drive the truck, pump the tanks, and you clear $200K per year profit.
B) 95s420’s aforementioned import auto facility – lets say he clears $100K per year.

For my money, it’s going to be option “B”. Am I a sucker because I’m giving up $100K per year? Maybe! But I’d be doing what I wanted to do, and could still provide a comfortable living for me and my family.

And keep in mind that if you need to do a high volume to make the margins acceptable, then you may want to reconsider. Because if you plan to spend 15 minutes with each customer “educating” them, and your shop has 40 customers per day, that’s 10 hours each day spent “hand-holding”. It’s good customer service, but is it realistic?

Just my 2 cents. (Arguably worth that!)

Jeff Pierce

JSlabotsky · #26 08-13-2003, 11:39 AM

I think I see where you're coming from with your concept. I'd like to offer my own take on the "theme", if you will.

We have two fairly upscale shops on the same street. One is an MB specialist, the other a Volvo specialist. The MB shop looks very expensive and is of very nice brick construction. The Volvo shop has clapboard siding and looks vaguely like what one might expect to find in Sweden.

The MB shop gives off a very stuffy, rich-guy-smoking-a-cigar vibe. It's very plush, to be certain. They have certified techs and have a good reputation. The atmosphere says "we're here to make you feel important."

The Volvo shop is neat and clean, the techs all wear coveralls. The lobby is nothing to get excited about - asphalt tile floor, decent chairs, and a smattering of Volvo-related art work. They also have a window looking out into the shop area. The whole atmosphere says "we're here to fix cars".

Which one is always packed? The Volvo shop.

My point? People will not percieve the "perks" as having value. They'll figure that if you didn't have to pay for all that leather and mahogany, you might not have to charge them $3,000 for a valve job. Rich people - and I get the impression that's who you're trying to attract - are often more attracted to a shop they percieve as "all business" because they know how expensive the leather and mahogany are. There aren't enough of those people who need to feel important to keep you in business. Besides, those tend to be the same people who will argue over prices for everything, blame you for stuff that isn't your fault, and generally annoy the crap out of you.

csnow · #27 08-13-2003, 12:49 PM

Certainly getting a lot of 'realistic' feedback, aren't you...

I'm not so certain the auto biz is really as bad as some folks say, though I'm sure regional factors vary dramatically.

In my region, demand is now way up, because supply is way down.

Pretty much every repair/filling station has now been converted into a 'quickie-mart'. Fewer hassles for their absentee owners, and good margins. 'Highest and best use' has commercial land getting converted into housing developments. Remaining commercial land is being turned into 'big box' stores and shopping malls. Zoning boards frown on repair shops as a use. Many established shops have closed simply because they got an offer on their land that they could not refuse.
The real estate cost barriers have raised the bar for those interested in entering the business.

At the same time, the number of people becoming auto mechanics has fallen dramatically, just like for most fields that require getting one's hands dirty.

So this sounds bad, right? But those shops that have survived are really booked, with seemingly little regard to 'quality of service' factors. Competition is not much of an incentive to provide good service in the current market. Folks still need their cars repaired. There are more people, and more cars per capita than ever. If one can overcome these high 'costs of entry' factors and build it, they will come, because supply is low, and demand is very high.

Anyways, that is the situation in my region.
Better than the software biz right now...

95s420 · #28 08-13-2003, 01:08 PM

I should clarify that the entire "theme" of this business is not wood and leather. In fact, this is simply an additional modest investment upfront to improve the image of the shop. I intend to charge only on the high end of what other independents in the area charge and still nowhere near that of the dealer.

If you are unsure as to whether or not the "upscale" look will sell just take a look at any of the dealers. They have tons of non-warranty business because many owners are not willing to go to a greasy smoke filled shop that is inconvenient and does not cater to their needs.

My idea is to bridge the dealer and independent experience and charge somewhere in the middle. I can tell you that the % of women that take their vehicles to the dealer versus the independent is much much higher. Why is this?

I 100% agree that you can easily go overboard with customer service and "glitz". I am more interested in a clean and comfortable environment than marble bathrooms and oriental rugs. Tile floors, leather couches and a quiet waiting area are a minor invenstment that can only help.

We must remember that most everyone on this board is far more technically atune than your average joe. To that extent extra perks might not be worth much. However, to the executive that values conveniece and courtesy and is still pleased with the quality of the work he will be hooked.

Worst case, If the plan didnt work out what have you lost? You lose the glitz and concentrate on hiring the best techs possible and you are no worse off than before.

I appreciate the pointers because they help me anticipate questions relating to the business plan and allow me to address them early.

as always, kep the great input coming.

Brian

stevebfl · #29 08-13-2003, 01:44 PM

As I see it the monthly costs for repairing and maintaining an auto at a professional shop are approaching the monthly lease costs for medium priced luxury cars.

I'll give you todays example: An associate from the BMW Tech Group had a customer with a 95 540i in Orlando with no reverse gear. He has the car at the dealer and they want $7500 for a rebuilt unit ready to drive. My friend also would install a BMW rebuilt but list price is $4500. My friend tells his customer to call us as he knows that we rebuild transmissions.

The customer calls and the reverse failure in a 5HP30 is a pattern failure. A plastic check ball is ground down from whirling in a rough cast aluminum chamber. The car is trucked 100miles and we just finished with it. Seven hours labor- $476, $200 in special BMW fluid, $45 for the filter. The ball is part of a kit of balls and springs, who knows what it cost.

The point is that most shops won't touch this type of work. If I had replaced the trans for $4500 plus $400 labor I would have made more on my 20% on the parts than the whole ticket this time. And I would have saved him over 2 grand from the dealer price. He may wind up there anyway. When the ball blows through the check hole reverse and forward are applied up til second gear. He drove it through that point one time and then towed it and it has 140k on it, but it has worked great in the 30+ miles I have driven it.

Over all you have to be pretty good and pretty lucky to make a living doing it my way. More often the wise choice would be the dealer rebuild.

If this logic takes you to the dealer rebuild decision and if that kind of logic dominates your business choice you will be at that monthy cost point I was talking about to your customers. If you choose to fix, then you will really need the techs and really need to be equipted.

tvpierce · #30 08-13-2003, 05:22 PM

Brian,

At the risk of sounding sexist, I think the reason a disproportionate number of women take their cars to the dealer is that they have no idea about any aspect of their cars. (To be fair to women, I think most men are the same way.)
And they're convinced that the dealer "really knows" the car --after all they sold it to them!
So I think it requires more than a just a clean facility -- you have to educate them to the reality that they're being ripped off at the dealership.

And for the record, I think your idea is a sound one. You clearly have the business savvy to figure out if it's viable. Just don't overestimate your ability to draw customers -- no product ever "sells itself". And when it comes to getting and holding onto good techs: it's tough to match the pay rate of a dealership when you're undercutting their labor rate by $20/hour.

In case you haven't figured it out -- I've thought long and hard about a very similar concept. I hope you can pull it off. And I'd love to "pick your brain" if you do.

Good luck.

Jeff Pierce

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