How To Start An Auto Body Shop In 8 Steps

Opening an auto body shop can be an extremely lucrative venture. The automotive collision repair market brings in billions of dollars in revenue each year, and studies show that revenue will only continue to grow in the years ahead. Isn’t it time you got your share?

If you’re thinking about starting an auto body shop, this guide is for you. We’ll go through all of the steps of starting your own business, including reviewing potential costs, hiring employees, and other critical steps to building a successful business.

How To Start A Body Shop

With careful planning, you can simplify starting an auto body shop and improve your chances for a successful business. Start by following these simple steps.

Step 1: Create A Business Plan For Your Body Shop

Preparations for your auto body shop start before you even begin building your business with the creation of a detailed business plan.

A good business plan outlines how to get from your starting point (launching your business) to your goal. Every entrepreneur has a different goal, from creating a sustainable career to starting a chain of auto body shops. Regardless of how big or small your goal is, the most important thing is to set a concrete goal and create a map of how to get there.

Not only will a business plan keep you on the right track, but you must have a plan to present to investors or lenders when you’re seeking capital.

New to writing a one-page business plan? At a minimum, here’s what you should include:

• Executive Summary: A concise summary detailing each section of your business plan
• Overview: A description of your business, including the legal structure, location, and type of business
• Market Analysis: An overview of your market and a definition of your target market
• Competitive Analysis: Strengths and weaknesses of your competition
• Management Team: The members of your management team and their responsibilities within your organization
• Financial Projections: A forecast of the financial future of your business

Step 2: Find A Location For Your Auto Body Shop

As you plan your body shop, location is key, but there are a few other considerations to weigh before you put your name on a lease or mortgage:

• Choose the best location you can afford
  • The property should be convenient for your customers.
  • The property should be located in a high-traffic area or off a major road.
• Determine where you will buy an existing business or build a business
  • Create a business plan for both options, calculate costs, and determine which makes the most sense financially.
• Consider opening a franchise
  • While you’ll lose some flexibility in terms of branding, a franchise’s working business model takes the guesswork out of starting your business.

Step 3: Register Your Auto Body Business

Before you open your auto body shop to the public, you need to register your business. Not only will you be seen as a legitimate business by your customers, but registering is also required when you want to hire employees, protect your assets, or seek capital from investors.

To register your business, you need to first determine what form of business entity to establish. There are several business structures to choose from, including:

The type of structure you select for your business varies based on the number of owners that you have and the future plans for your business. In most cases, however, single owners of auto body shops lean toward LLCs, while businesses with more than one partner select the partnership business structure. Before choosing your business structure, talk to your accountant and/or lawyer to find out which makes the most sense for your business.

Once you’ve determined your business structure, you’ll need to select a name for your business. Choose a name that reflects your brand and the services you offer. You also want to choose something catchy and/or easy for customers to remember.

Your business will need to be registered with city, state, and federal governments. You’ll also need to sign up for an employer ID number through the Internal Revenue Service if you plan to hire employees. To learn about the specific business license and permit requirements in your area, contact your local Chamber of Commerce, Department of Revenue, or Small Business Administration office to learn more.

Step 4: Calculate The Startup Costs For Your Auto Body Shop

One of the first steps to starting your own business is to calculate your startup costs. To do that, begin by making a list of everything you need for your business.

One of the biggest expenses for your new business will be equipment and tools. While your list may look a little different, some of the most common equipment and tools in this industry include:

• Hydraulic lifts
• Hand tools
• Pneumatic tools (air tools)
• Air compressors
• Diagnostic machines
• Wheel balancers
• Paint guns

In addition to equipment and tools, other costs to consider include:

• Business licenses & certifications
• Business insurance
• Employee onboarding & payroll
• Monthly rent or mortgage payments

You should expect to spend at least $50,000 to get your shop up and running. However, as you make a list of your costs and research pricing, this number could potentially rise.

Before you seek funding for your business, a good rule of thumb is to always overestimate your costs by about 30 percent. For example, if you calculate that your expenses will be $200,000, plan to seek $260,000 in funding. In other words, always plan for the unexpected.

Step 5: Get Funding For Your Auto Shop

Most entrepreneurs don’t have the funds to cover startup costs out-of-pocket. Instead, they rely on loans or other types of funding to launch their businesses.

New businesses face challenges when trying to acquire a business loan. Most lenders want to work with established businesses with high revenues and solid business and personal credit histories. If you haven’t started your business, meeting these requirements is impossible.

Fortunately, there are options available for new businesses. While you may not be able to walk into a bank to get a business loan (yet), you may be able to benefit from these funding sources:

• Personal Savings: Use your own funds to avoid monthly payments, interest, and fees.
• Friends & Family: Borrow from friends and family using traditional debt financing (repay over time with interest and fees) or equity financing (offering ownership in your business in exchange for capital).
• Personal Loans For Business: Use your personal credit score and income to qualify for a personal loan for business to cover startup costs. Compare personal loans for business to find the best deal.
• Lines Of Credit: Draws from your line of credit can be made as needed to cover unexpected expenses, emergencies, or to fill revenue gaps. If you have a revolving line of credit, funds replenish and are available to use again after repaying borrowed funds (plus fees and interest). Read more about the best lines of credit for business.
• Business Credit Cards: You can use a business credit card as often as you wish provided you stay within your set credit limit. The best business credit cards can be used anywhere credit cards are accepted and be used for online or in-person purchases.
• Rollovers As Business Startups (ROBS): With rollovers as business startups, or ROBS, you can leverage your retirement funds without paying penalties and taxes for early withdrawal. A ROBS provider will get everything set up for you legally and ensure you maintain compliance in exchange for a one-time setup fee and monthly maintenance fee.

While some traditional loan options may be off the table in the early stages of your startup, there are ways to obtain the capital you need to get your auto body shop off the ground. Learn more about startup funding options available to launch your business.

Step 6: Choose Business Software For Your Auto Body Shop

Business software helps you more efficiently run your business, from keeping up with customers to tracking your finances for tax purposes.

Step 7: Hire Body Shop Employees

While you may start your collision center as a one-man operation, you’ll have to learn how to hire employees if you want to grow. These employees may include:

• Mechanics
• Auto body & glass repairer
• Managers
• Front-desk receptionists

Do some research on salaries in your area to get an idea of potential costs. There are additional expenses associated with hiring employees, including:

• Onboarding
• Employee training
• Background checks
• Drug testing
• Taxes
• Employee benefits

When you’re ready to hire employees, you can find quality candidates by asking for referrals from friends, family, colleagues, and industry connections. You can also post your jobs on online job boards. Learn more about how to find and recruit employees for your business.

Step 8: Promote Your Auto Body Shop

Before you even hold your grand opening, you need to start your marketing and advertising efforts. Start by getting your business online, then throw in a few old-school advertising tactics to spread the word about your new business.

The Bottom Line On Starting An Auto Body Shop

While you may be itching to get your auto body shop off the ground immediately, take the time to plan out your business to increase your chances for success.

The hard work doesn’t stop after your grand opening, either. You’ll need to continue working hard to bring in customers, increase your revenue, and become a successful entrepreneur. Make sure to check out our other resources to help you every step of the way, from finding the best equipment financing to upgrade your shop to purchasing garage liability insurance to protect your business.