Lots of diesel technicians wonder how to start a repair shop of their own. Starting a business is a massive undertaking requiring a lot of time and energy – probably more than you realize. With that said, if you can pull it off, it will transform your life for the better.
If you’re set on opening a diesel repair shop, here are a few questions to ask yourself beforehand.
What Kind of Shop Do I Want?
Location: Service Truck or Shop
Are you going to have an actual shop location, or do you plan to operate as a service truck? What you end up doing will depend on local regulations and the needs of your customers, but you may be able to start without a physical building. A service truck with the right equipment might be the only thing you need to get your business off the ground. This is especially true when you are taking care of customer fleets and doing the work right in their yard. Even the simple mobile oil change option will save customers valuable time, especially if you’re willing to perform that essential PM after hours. That minimizes downtime as much as possible for the customer, increasing the convenience quotient of your shop in their eyes. Plus, customers will appreciate tire changes and other roadside assistance for more extensive issues, if you can offer those right out of the gate.
If you opt for a building, remember: location, location, location. If you plan to rely on walk-in work, make sure your shop is in a high-traffic area. Easy freeway access is a must. As your customer base expands, though, you may end up turning away walk-in work. If you get too busy, you may need to consider a less visible (and hey, probably less expensive) location.
Make sure any space you lease or purchase is properly zoned and has the necessary infrastructure, including commercial electrical service, waste oil recovery, and ventilation. Consider whether you’ll crank on the heat in the winter or turn up the AC in the summer, as climate control can be pretty important to technicians.
Even if you have a physical location, you may decide to offer a mobile service. What will your service truck need? Tools, fluids, and parts…as well as a compressor, generator, welder, floodlights, and even a crane. We can’t stress this enough: If you’re going strictly mobile at first, you need a well-equipped service truck.
Customers: Businesses or Consumers?
A key difference between light and heavy-duty shops is the customer. If you’re running a heavy-duty shop, you’ll likely be dealing with other businesses; light-duty shops typically handle individual consumers. Does it make a difference? Yep!
Because businesses typically make money with their trucks, they are highly incentivized to keep them up and running. Maintenance and repair on business vehicles is a mission-critical activity – and as a result, businesses aren’t as price-sensitive as consumers. Businesses also typically have a budget for repairs, and the people making the decisions are dealing with the business’s money, not their own. This means there is much less emotion involved in the repairs – after all, it’s not their own money they’re forking over.
Focusing on business customers doesn’t mean you’re ruling out light-duty work. Many businesses have light-duty fleets and the maintenance and repair budgets to go with them. Even if you choose to focus on heavy-duty, you may need to accept some light-duty work. Some customers will have both!
Keep in mind though that heavy-duty trucks and equipment will generate more revenue. There are several reasons for this. Chief among them are the following:
- The skill set required to maintain and repair heavy-duty trucks is harder to come by
- Parts are more expensive
- Because they’re often part of a business, these trucks tend to make money
Heavy-duty units also take a beating – they’re constantly tearing themselves apart.
Employees: Go Solo or Build a Team
Are you a competent technician? You’re in rare company.
It may come as a surprise that a lot of shop owners didn’t start out as diesel technicians. They pull it off because they are good businesspeople, but they must constantly rely on the expertise of someone else. It’s a tough row to hoe.
If you are a competent technician you automatically have a big advantage. You can review the quality of work before it goes out the door, and can pitch in until you’ve grown the business enough to spend most of your time working in the back office.
Why a “competent” technician, and not just a technician? If your quality of work is low, comebacks will quickly kill your business. It goes without saying that your work product must be high-quality.
If you are a technician yourself, then you’ve already got your shop. As the business grows, you will want to hire another technician, then another. At least, you’ll try to – hiring qualified mechanics is difficult. Start building your network of diesel technicians now, so you’ll have contacts ready to go once you start your search. Consider doing an apprenticeship program where you take new technical school graduates and train them to be full technicians.
80% of independent shops are run by couples working together. If you’re leaning toward this route, figure out whether you each have the expertise needed. Running the office side includes preparing customer invoices, collecting payment, preparing and paying regular payroll tax filings, accounts payable, cash management, and generally keeping the lights on in the shop. If you’re going to be the one out on the shop floor all day, does your spouse have the skill set to handle all the administrative work?
Consider the opportunity cost: Are you making more working together in the shop than if one of you worked for another company? If you do it right, the answer is probably yes, because a well-run shop can be highly profitable.
How Much Do I Want to Start a Diesel Repair Shop?
Do you have integrity?
Are you honest, even if it costs you money? Do you own up to your mistakes? If not, you won’t last long in the diesel repair business.
Your shop will rely on repeat customers and the strength of your reputation.
In short, you can’t afford to burn people.
You must act with complete integrity. It may cost you here and there, but in the end it is the right thing to do – and it will pay handsome dividends.
Do you have your CDL?
To test-drive commercial vehicles you will need a commercial license. As you build out your staff, encourage your techs to get their CDLs, too. It helps the jobs go faster and increases overall efficiency.
How will you promote your business?
If you want to grow your business, you’re going to need to do some selling. If you start with side work, ask for referrals and try to grow by word of mouth. But reaching out to potential customers requires basic sales skills and marketing savvy. We’re talking about things like:
- Figure out your ideal customer: Are you servicing over-the-road drivers or local fleets?
- Determine your competition: Who else is looking after trucks in your area? Is it a crowded neighborhood, or is there space for one more?
- Put together a marketing plan: We actually have an ebook devoted to marketing your repair shop.
- Proposing and closing deals: You need to be able to explain to potential customers exactly what you can do for them – and get them to sign on the dotted line.
What Tools Will I Need?
Get the Right Tools for the Shop
Having the right tools for the job can mean the difference between an 8-hour day and a 14-hour day. As the shop grows, you’ll need to provide certain tools for your employees. Keep an eye out for good deals and only buy what you know you will need. There are certain tools you cannot do without, like diagnostic software, so don’t skimp on that. Nothing frustrates a technician more than not having the right tool for the job!
Get the Right Tools for the Office
Just like on the service side, having the right tools on the office side is critical to a successful shop. Naturally, we recommend Fullbay for shop management and QuickBooks Online for your accounting. This combination seamlessly bridges the gap between the shop and the office, and helps your shop run more efficiently.
You’re going to need to keep a record of the work you do, as well as produce accurate invoices. There are many software programs out there, but most are built for light-duty work. Find a program that takes into account the needs of heavy-duty repair, like maintaining fleets, tracking PMs, and handling customer purchase orders and authorization.
Server or Cloud?
Do you want to keep a server in your shop, or are you happy to let your data live in the cloud? We’re a fan of the cloud ourselves – we like anything that lets you access your data anywhere! Fullbay and QuickBooks Online are web-based and talk to each other in real-time, so you won’t have to be at the shop to finish your documentation or to run financial reports. You can do it from home, on the road, or from that hunting base camp that happens to have cell coverage.
How do I write a business plan?
Before you write a business plan, you must “plan your plan.” Take the advice from this Entrepreneur.com article and ask yourself these questions:
1. How determined am I to see this succeed?
2. Am I willing to invest my own money and work long hours for no pay, sacrificing personal time and lifestyle, maybe for years?
3. What’s going to happen to me if this venture doesn’t work out?
4. If it does succeed, how many employees will I eventually have?
5. What will be its annual revenues in a year? Five years?
6. Do I want to expand? How far?
7. Am I going to be a hands-on manager, or will I delegate a large proportion of tasks to others?
8. If I delegate, what sorts of tasks will I share? Sales? Technical? Others?
Keep your overhead low. Too many businesses start off with shiny new equipment and huge debt before they even have a customer. Successful businesses bootstrap early on, buy used where possible, and only purchase what is truly needed.
Cash is King
Cash flow and profit are not the same. I repeat, cash flow and profit are not the same. You may have a paper profit of $1,000 on a job, but what if you give the customer 30 days to pay? Your expenses don’t just stop existing until that check clears. In those 30 days, you’ll still have to:
- Pay your technician
- Pay for the parts
- Pay rent on your building
- Cover all your other expenses.
So until day 30 hits, even if you’re profitable you could be cash flow negative. You make up for this by getting 30-day terms with your parts supplier, keeping enough working capital (such cash) in the bank to hold you over, and being very careful not to extend credit to customers who won’t pay by day 30.
What labor rate will you charge?
Don’t go cheap, but make sure you are charging a competitive rate. Check with shops in the area and choose a rate within a reasonable range. Consider charging a better rate to customers who will pre-authorize you to do their preventive maintenance.
What will your parts markup be?
A good rule of thumb is to make sure your parts cost less than 25% of your total revenue. Parts are expensive, and they can become even more expensive if they’re sitting in your inventory. Mark up the parts at least enough to cover the cost of your parts room, the carrying cost of the inventory, and the cost of a parts manager. We see markups anywhere between 30% and 60%. Consider using a graduated scale, where the markup percentage goes down the more expensive a part is.
How much insurance will you need?
Check your federal, state, and local regulations on what insurance you will be required to carry. The liability on some of the jobs you do – let’s use brake jobs as an example – can be large. You’re better off over-insured than under-insured.
Focus on fleet work. Walk-ins are quick cash, and there is a real need for good shops to help over-the-road guys. But try to build up a base of customers with multiple units. As a wise technician once said, “He who controls the PMs controls the repairs.” Track the PMs of your customers and don’t let another shop steal them away. Over time you can help these customers lower the cost of maintaining their fleet as you find problems before they lead to downtime. It’s a true win/win.
Out-of-the-Box Ideas for Your Repair Shop
Established shop owners know that any extras you offer can turn occasional clients into repeat customers. When you’re starting out, adding those extras will help build your customer base fast.
A shuttle service is one unique option many top repair shops offer, but how about providing a way for customers to request work and keep tabs on jobs without having to call you? Fleet management software like Fullbay has a customer portal designed specifically for that task. It links customers to your shop and lets them see the status of current jobs as well as the history of all their vehicles. It even lets them schedule repairs and PMs, view estimates, and pay invoices – all from their computer, tablet, or smartphone.
It’s one thing to have a great idea, and even to have a great plan. Actually executing on that plan is a whole other ballgame.
So how do you pull the trigger? If it doesn’t violate the agreement with your current employer, start doing side work until you build up a large enough customer base to give you the confidence to venture out on your own.
If you have to bail from your current job to get going, make sure you’ve got some savings to make it through the first few months. Dave Ramsey has some great advice in this area.
If you can pull it off, starting a diesel repair shop could be the best move you’ve ever made. Good luck!
Disclaimer: Please note that this is general information only and not intended as legal advice or guidance. You should seek appropriate legal counsel before undertaking any new venture.