Unlike many other types of small businesses, an auto business isn’t usually one you can easily start in your living room. You’ll need to spend anywhere from $1,500 to $15,000 a month for a suitable car shop space, $5,000 to $10,000 for a diagnostic machine, $15,000 for a tool set, $3,700 for installing a lift and $4,000 annually for insurance, totaling approximately $50,000 according to the Houston Chronicle.
You also need to factor in expenses like employee salaries, auto parts inventory, computer electronics and software, and tenant improvement fees. If starting an auto business is something for you and your budget is tight, here are some ways to cut costs without impacting the quality of service you can deliver.
Hire Part-Time Employees
For a service-based business, employee expenses will be one of the largest monthly expenses. While you might want to have some full-time employees to help run your core business, full-timers generally require a benefits package. The cost of full-time benefits such as healthcare, retirement benefits, and vacation pay can add up fast.
As a small business startup, you don’t need to hire a full-time accountant or computer technician just yet, suggests The Balance Small Business. Depending on the size of your budget and customer base, you might find it worthwhile to hire some full-time mechanics and salespeople.
If you can handle enough of these tasks yourself, however, you might only need to pay specialists in these areas on a part-time basis until you get your business fully up to speed.
If you do decide to hire employees, make sure you take care of them. Studies show that companies who pay care for their employees will have less turnover. Empower your employees to succeed. This will help them stay motivated and also keep them engaged.
Investing In New Equipment Isn’t Always Necessary
While you might not want to repair vehicles with used parts or take chances on the accuracy of your diagnostic machine, you might be able to get a good deal on high-quality, previously owned equipment, like a professional-grade toolset.
You can also cut costs on your computer hardware and mobile devices. If you don’t have resources nearby for buying used equipment, Amazon and eBay can both serve as excellent online sources. In case you don’t trust used equipment, you can save money during your start-up phase by leasing rather than buying.
Buy Auto Parts In Bulk
Any business that isn’t dealing with goods that don’t expire should try to buy those goods in bulk, notes Entrepreneur.com. By buying auto parts direct and in bulk, you can get excellent discounts from vendors, enabling you to increase your profit margins.
Scale impacts price. Take o-rings, for example. Products such as these require a one-time nonrecurring engineering (NRE) charge. The more you purchase, the smaller the impact of the one-time fee. With so many different types of cars and parts, you want to be specific in what you need and how you will use them.
With professional automotive logistics packaging, you can reduce your costs and minimize freight damage. Streamline your fulfillment process and focus on what you do best; make cars or the parts that go on cars.
Working with your vendor or supplier can help ensure you minimize the costs. It may even make sense to team up with other auto shops in the area to get lower discounts by buying in bulk.
Don’t Purchase Software Licenses
Free or inexpensive PC software and mobile apps are now widely available in categories that include inventory and order management, customer relationship management, computer security, office suites and many more.
Many software applications come with free trial periods. You can try out software you are interested in to figure out whether you really need it. If there is a software program you need, look to see if there is a more affordable cloud-enabled, monthly subscription-based version.
Take Advantage of Free Mentoring and Training
Just about anyone starting any type of business can benefit from obtaining free advice from more experienced small business owners. Organizations that include Small Business Development Centers (SBDCs) and SCORE offer free consulting and training. Mentors at these organizations can provide you with custom, one-on-one advice on how to cut costs while growing your business.
Opening a new auto business can be a pricey. There are however, many methods for saving money. Consider hiring part-time or contract employees, buying auto parts in bulk, purchasing some previously owned equipment and leveraging free or low-cost business software. You can obtain personalized money-saving recommendations by taking advantage of free consulting and mentoring through your local SBDC or SCORE chapter.