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How to Start an Auto Repair Shop: A Step-by-Step Guide

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Free Auto Repair Shop Business Plan Template

March 06, 2024

11 Min Read

how to start an auto repair shop
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Have you ever passed by a busy auto repair shop and wondered what it would be like to own and operate your own? Does the idea of being your own boss and making money fixing cars appeal to you?

If so, you have come to the right place to start your journey.

The auto repair industry is booming in the United States. By 2024, it is estimated to be worth $188 billion and growing nearly 6% year-over-year, reaching over $250 billion by 2029.

That type of market potential makes opening an auto shop a promising business venture for aspiring entrepreneurs.

Whether you are a beginner or have years of experience, this guide covers step-by-step instructions on starting an auto repair shop. By the time you finish reading, you will know how to get your business up and running and set it on the road to success.

But before that, let us discover the benefits of starting a car repair shop.

Why Start an Auto Repair Business?

Let’s dig into the top three reasons this business idea makes so much sense:

Steady demand and reliable returns

Cars are always going to break down and need fixing. It’s inevitable with over 283.4 million vehicles on the road in the United States of America alone! Most are averaging 11 years old at this point too. That translates to tons of drivers who’ll end up as your potential customers down the line.

Since people need repairs in good economies and bad, demand stays steady for shops—making this a recession-resistant business. And industry growth projections look solid over the next few years as well!

Diverse revenue streams

Another major benefit is how versatile and resilient this business model is thanks to diverse revenue streams. You don’t have to limit yourself to oil changes and other basic maintenance work.

Expanding into more complex engine diagnostics, customizations, detailing packages, and specialty work increases your income potential. Catering to both routine and major car repair customers will increase your overall customer base.

Flexibility and room to grow

There’s also great flexibility here for entrepreneurs. You can start small-scale out of your home garage to test things out before investing in a larger brick-and-mortar location later. This gives you room to adapt and grow your car repair business at your own pace!

Whether you’re working with a limited startup budget or envision growing quickly into advanced services, the freedom is there.

Now that you know the benefits, let’s look at the key steps you need to take to get your own shop up and running.

1. Conduct market research

Conducting thoughtful market research is vital to starting a business. Start by analyzing the local repair industry landscape; how many other auto repair businesses exist in the area, whether independent shops or chains? What services do they provide? This reveals potential gaps where you could offer specialty services.

Narrow your focus by gathering on-the-ground data within your specific area. Be sure to research:

Direct competitors

The other independent general and specialty auto repair shops in your immediate area with whom you will compete directly for business. Examine their service offerings, pricing, and customer satisfaction levels to identify gaps that you could fill.

Indirect competitors

Larger chains like Midas or Jiffy Lube operate more broadly in the region and also attract local customer segments. Understand how they position themselves competitively on convenience, speed of service, and pricing.

Market Demand

Talk to local vehicle owners to better understand common repair and maintenance needs. Identify the most sought-after or frequent services that you could focus on providing effectively.

Competitive differentiation

Outline ways you could distinguish your shop in areas like price, quality, speed, expertise, customer service, or niches. These would strengthen your positioning.

Careful research provides a strong foundation by uncovering strategic opportunities to satisfy customer needs better than the competition.

2. Write a business plan

The next step is to compile all that great data into a solid auto repair business plan. Having this strategic blueprint mapped out ahead of time serves as an invaluable roadmap as you get your shop up and running.

Here are all the key sections your auto repair business plan needs to cover:

  • Executive summary
  • Company description
  • Market analysis
  • Business bank account
  • Service menu
  • Operations plan
  • Marketing strategy
  • Financial plan

Creating an effective car repair shop business plan takes time and dedication, so consider using business planning software to assist. However, having all key elements outlined provides enormous clarity as you begin and grow your business.

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3. Select a business location

Now that your business plan is ready, it’s time to find the ideal location for your repair shop. When evaluating potential locations, you’ll want to consider things like:

  • Proximity to Customers – Is it near your target area and demographic? Can potential customers easily swing by for repairs?
  • Visibility – How noticeable is the shop from the main roads? Good street visibility and signage help draw in tons of pass-by and referred customers over time.
  • Accessibility & Parking – Make sure that there is convenient access and enough parking spaces. You want customers to feel hassle-free to bring their cars in.

Higher-traffic commercial areas typically have higher rents, but make up for it with consistent business volume. Also, think through the required space.

You could buy an existing automotive repair shop but leasing retail space in a small industrial park also works. Or, if your budget is tight at first, consider starting a mobile mechanic business from home and then upgrading later as demand grows to support a commercial garage location in the long run.

4. Determine your service offerings

Now it’s time to decide exactly which auto repair services to offer customers. This is crucial to make sure you attract enough business without stretching yourself too thin skill-wise early on.

Though every shop differs, most successful ones thrive by providing a mix across these vital categories:

  • Routine Maintenance (31% industry revenue) – This includes oil changes, tire rotations, fluid flushes, and inspections. Quick and affordable for customers, these build loyalty and provide you steady cash flow. Position yourself as a trustworthy one-stop provider for scheduled upkeep.
  • Major Repairs (18.1%) – Requiring significant expertise, engine/transmission overhauls and drive axle jobs yield high profit margins. Specializing in certain makes/models helps you excel here.
  • Brakes (17.4%) – As essential safety components are replaced regularly, brake pad swaps offer simpler jobs versus transmission work. But both appeal to most car owners.
  • Suspension & Alignment (8.1%) – Fixing drifting wheels causing uneven tire wear. Regular adjustments save customers money over time and enhance safety.

Other common needs are engine repair, HVAC, collision repair, exhaust work, and inspections. Don’t stray from your early strengths; concentrate on developing a solid reputation for fewer, higher-quality services. Then, thoughtfully expand offerings later as demand and expertise grow.

Finding the right balance of neighborhood preferences and specialties will set your shop up for success for years.

5. Business registration and legal paperwork

To own an auto repair shop, there’s some mandatory legal paperwork you’ve gotta handle first. It is crucial for legally and safely getting up and running your new business.

Here is a quick checklist:

First things first, you will need to choose a business structure and register your business name. Will you operate as a sole proprietorship, partnership, corporation, or LLC? Each has different legal and tax implications. A quick chat with an accountant can steer you towards the best fit.

Most states require a motor vehicle repairer’s license obtainable by applying along with proof of qualifications like ASE certifications or completion of training programs. This crucial license gives you legal permission to operate and lets customers know you meet industry standards.

Additionally, stay compliant with environmental, consumer protection, and workplace regulations for auto repair shops in your region. Register for necessary taxes too. Common examples are state sales tax, federal excise tax, and payroll tax to cover employees.

6. Get business insurance

Operating a car repair shop comes with substantial liability exposure! That’s why purchasing business insurance is an essential step before opening up. At a minimum, you’ll need:

  • Workers’ Compensation – Required in most states, this covers injuries, lost wages, and medical care if a mechanic gets hurt on the job.
  • Garage Keepers Insurance – This specialized policy protects customer vehicles while they’re in your shop’s care, custody, or control.
  • General Liability Insurance – This covers injuries if a customer gets hurt on your property. Also handles legal fees if you’re sued for property damage or personal injury.
  • Commercial Property Insurance – Protects your business assets like equipment, tools, and inventory from theft, accidents, or natural disasters.

Every state has specific auto shop insurance requirements. So double-check those and craft a customized policy that meets regulations while adequately covering potential risks. This shows customers you operate professionally and responsibly as well.

7. Purchase necessary equipment

To run the operations, you’ll need to purchase some of the essential tools and equipment. The equipment you need depends on your shop’s specialization. Start with essential, cost-effective tools and consider renting big-ticket items.

Here are some must-haves:

  • Diagnostic Machines – Used to interface with vehicle computers and assess issues. Figure $3K – $5K for good scanners.
  • Mechanics’ Tool Sets – This includes quality wrenches, pliers, sockets, jacks, and other car repair tools. Sets run $7,500 – $15,000 but last for years if you treat them well!
  • Lifts & Jacks – Two-post, four-post or scissor lifts to safely raise vehicles plus jack stands to support them. Consider renting lifts initially to conserve startup costs.
  • Specialty Tools – Stuff like tire changers, alignment machines, engine hoists, etc. for specific tasks.
  • Safety Equipment – Protect yourself and the team with masks, suits, gloves, goggles and more.

Carefully equip your car repair shop with essentials for your services without overspending initially. Quality tools and equipment will prove a sound long-term investment for your auto mechanic shop.

8. Hire employees

Your mechanics and employees will have a significant impact on customer satisfaction, repeat business, word-of-mouth referrals, and, ultimately, your shop’s success.

Instead of multiple veteran (and pricey) master technicians, consider hiring one experienced lead mechanic to manage 2-3 promising trainees. This cost-effective approach avoids high payroll overhead upfront while developing loyal employees invested in your new business.

Prioritize candidates that combine excellent technical capabilities with superb customer service skills. Seek out both an eagerness to learn and patience to explain repairs to clients.

Budget around $15-$30 per hour for mechanic salaries based on proficiency and specialization. Pay well to attract real talent but leave room to grant raises as team members gain expertise. Investing in your staff’s growth now will pay long-lasting dividends through their commitment, productivity, and expertise.

9. Marketing your auto repair shop

First priority – focus on word-of-mouth, as 77% of people trust repair recommendations from family and friends. Establish referral partnerships with complementary businesses like dealerships and tow truck companies.

Capture customer contact information so that you can send occasional promotions and maintain relationships. An incentive, such as 10% off their next visit, encourages email sign-ups.

Also, be sure to create a user-friendly website and claim social media profiles on Facebook, Instagram, etc. Respond promptly to online reviews – both good and bad!

Run local newspaper ads to increase community visibility. Attend town events to network face-to-face and pass out flyers and business cards to connections made. Also, inform everyone you know that you are starting your own business and request that they refer you to others.

With the right mix of grassroots and digital marketing, you’ll boost visibility and introduce neighborhood drivers to your shop’s services.


Well, there you have it – everything you need to start your own car repair shop empire successfully! Keep these essential steps in mind when you start your mechanic shop.

With proper dedication and strategic planning, you are on your way to a profitable business journey.

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About the Author


Upmetrics Team

Upmetrics is the #1 business planning software that helps entrepreneurs and business owners create investment-ready business plans using AI. We regularly share business planning insights on our blog. Check out the Upmetrics blog for such interesting reads. Read more


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