Need advice/info from those who make a living in garage

[katit]

Folks, here is some of my background..

I've been around cars since 8yo and I was racing go karts since 10. Maintenance, tuning, etc is something I really enjoy. I finished school for mechanical engineering/IT.

Here in US I work in IT (programmer) but I do like cars/tools so I had my garage finished, got lift, tools, etc. I drive and maintain my BMW's and help all my friends.

Now...

I was laid off in January and while looking for job in IT I placed ad in craigslist that I work on BMW's. And boom! I got lot of customers. I asked for $50/hr and people seem to be happy. I already got a job and I don't advertise any more but it seems that somebody always knows somebody and I get referrals.

I understand where my strong points is. I do have clean organized environment. I don't charge as much as shops do. I'm honest about what I can and what I can't do. I don't make any $$ on parts and I help people locate cheaper parts.

Currently I take only 1 car at a time and always keep it in garage. Sometime I have to wait a week for parts to come in. Sometime I have to spend mu lunch break to go to dealer to get parts.

How do you organize parts buying? What you tell customer? I was shocked when dealer price for 2002 M5 brake parts was over 1200. I feel guilty suggesting this to customer. At the same time I had another customer with broken radiator and I told him that expansion tank will be next. They acted like I wanted to overcharge them or something.

Right now I take cash only. I do record all that for tax purpose.

Is there any potential issues that I can have because of the fact that I work out of my garage?

I don't give any written warranty. Should I? How do you deal with those? I changed oil to one guy and he had Check Engine next day due to catalytic. It's hard to explain that I got nothing to do with that. Luckily car was under 8yr/80k warranty...

I want to keep doing it for fun but I want to minimize "idle" time in garage and maximize my efficiency/time spent. Any helpful advices appreciated!

 

[goodfellow]

A respected "legal eagle" told me that once you start charging for services you become a single proprietorship. Wether it's an offical business of not. That means you leave yourself open for potential lawsuits, local governmental sanctions and insurance problems.

If you have a standard homeowner's policy on your house, I'd venture to guess that the carrier could have sufficient cause to void your existing policy if anything ever happend to your home, or someone was seriously injured on your property.

It's a very slippery slope. If you give a warranty to a "customer", then you are in fact acknowledgeing that you are running a business out of your house and the local zoning board will have a "field day" auditing you for violations. All it takes is one ticked off "customer" to call the local government. Once the zoning folks get involved, county business license violations will not be far behind. It won't take long for the insurance company and the EPA to get wind of the matter, and then all hell can break loose -- not the least of which could be the fact that your home owner's associating could sue you for endangering the neighborhood and violating your HOA agreements.

I've seen quite a few of these pseudo garage deals go south very quickly, and unless you live in an unrestricted suburban or rural area, then running an automotive repair operation from your primary residence is not a great idea. Eventually it will catch up with you.

 

[Stuart in MN]

I agree that if you're doing this out of your home garage you potentially face all kinds of zoning and liability issues.

As far as what you charge for parts and labor, a person who owns an M5 should be aware that the parts aren't necessarily going to be cheap, but if you're buying the parts at the dealer list price you should look elsewhere...there are a number of independent BMW parts suppliers who can do a lot better, or else you can see about getting a Worldpac account yourself and buying the parts direct. http://www.worldpac.com/

 

[hunt]

ahhh, nothing like making your own money, I say keep doing it. The problem nowadays, everybody seems to be trying to catch a case, so be carefull.

 

[katit]

Thanks for info. This is kind of stuff I was thinking about.
Ok, is there any way to keep myself from trouble? I don't want to make living out of it but I can take 1-2 cars per month just for fun.

Any tips on what can I do to avoid trouble? Cash only, no warranty? Working as a "favor" type of stuff? Dealing only with people I know from now on?

 

[twostory]

I second what Goodfellow said. Insurance, Local Law, etc are all facts that you need to check and stay legal. In my county, you can not run a car repair business out of your home. While I have a large garage, it is used for "hobby" purposes.

Now I would like to add more important info.

You need to set up a Limited Liability Corp (LLC), this way the LLC will be at fault if the customer wrecks his car and sues you in court saying the brake job you did caused the accident. You also need business insurance to cover this type of liability. You need to keep your personal assets completely seperate from the LLC.

The purpose of the LLC is to own nothing. If the LLC is sued, the other party can only bankrupt the LLC. Since the LLC has very few assets, the lawyers do not have as much interest in persuing a law suit, as there is not much to collect.

Here is a method to have a shop and tools, but the LLC does not own them. You personally own the tools, equipment, shop, etc. Then you lease them to the LLC. You may not have much money left over to pay yourself a salary each month, but you personally have "rental income" from the LLC. You still pay taxes on this "rental income", but this help get the money out of the LLC and into your "personal asset" catagory. The goal every month is for the LLC to not make any money. The LLC pays all the revenue to you as rent, salary, etc.

This is just a start, but research starting a LLC.

 

[katit]

if you're buying the parts at the dealer list price you should look elsewhere...there are a number of independent BMW parts suppliers who can do a lot better, or else you can see about getting a Worldpac account yourself and buying the parts direct. http://www.worldpac.com/

I don't think I'm "big" enough to have account with somebody. Dealer charges me BMW club member prices, autohausaz.com was just slightly less for that same M5. Roackauto was real cheap ($500 ) but they have noname ****..

 

[katit]

You need to set up a Limited Liability Corp (LLC).

My wife is CPA so that's all not a problem to get done (free) but! All this doesn't make any sense because I can't do this out of my garage to begin with.. Will I have any protection or advantage if I do that against zoning but having LLC? I think not..

 

[rcleaver]

You seem to be asking the best way to cheat. If so, don't.

You have some built-in advantages over any competition: your wife and your permanent job.

Find a commercial shop to rent and take in more business. You can still do it part time if you establish and manage your customers expectations.

Set up a LLC as described above and get the insurance you need. If you get enough business, you may even want to hire one full time guy. if you get a good rep, with low prices, you will have more business than you can handle. Specializing is good but then you need all the special tools (or easy access to them when and if needed).

 

[katit]

You have some built-in advantages over any competition: your wife and your permanent job.

Will be hard because I will have to work certain amount of time just to pay for rent/etc.

Find a commercial shop to rent and take in more business. You can still do it part time if you establish and manage your customers expectations.

Will think about it hard.. I have following issues:
1. I don't want to turn hobby into job
2. I'm not sure I can do better with a shop then what I can working for somebody in IT.
3. I have 2 small kids right now and just can't devote whole lot of time.
4. I don't have experience in industry. Don't know what mechanics make, what I need, etc...

But I do:
1. Like automotive industry
2. Want my OWN business.

Specializing is good but then you need all the special tools (or easy access to them when and if needed).

I think it's the only way. Even right now there is no way somebody will bring Honda to me for $50/hr

Special tools is OK. I think if price is right and professionalism is good - specializing will be just fine. Doesn't mean that doing regular service to all cars will be a problem.

 

[Joe Reed]

If you're illegally operating a business out of a residence you're asking for all sorts of problems. All it's going to take is one call by a pissed off neighbor to shut you down - and probably cost you more in fines than you've earned (zoning violations, no business license, etc.). I would think you wife, as a CPA, would be concerned about those details.

What happens if you house catches fire with a customer's car in the garage waiting for repairs? Your homeowners insurance won't cover it....so you'll be paying for the loss out of pocket. Is it worth the risk?

 

[katit]

Folks, keep it coming... I already found nice 2 bay shop with office for rent in convinient location. $800

I personally hated fact that I can't get out of work to take my car for service. Business model of "night shop" sounds cool. Or will I have issues being open to public 5-8pm ? Doing work after 8pm?

 

[jtillery]

I am in the process of opening a motorcycle repair shop, and have had hours of consultation with attornies, insurance agents have been doing my own research in the last couple months. All of the information pertains specifically to Ohio, but the liklihood is it is similar through the US.

Everyone is on the right track. The 3 issues are liability, tax implications and zoning restrictions.

Liability is the main thing. The way you are operating now all your personal assets are at risk. You literally could lose your house, cars, and bank accounts with 1 faulty brake job. About 1 year ago my insurance company found out about a minor accident I was in due to my brakes going out on my car. The first thing they asked is when the last time the brakes were serviced and who did the work. They are looking for the responsible party to to try to recover any money that they have to pay out.

You should definitely setup an LLC. In Ohio, it is a $125 fee, 1 form and 2-3 weeks wait and it is done. The LLC must carry some assets (in line with the type of work you are doing), or it can be argued in court that it is under capitilized and really is just a shell company to shield liability. If that argument is won, the liability is back on the you personally.

Insurance is next. You will need a commercial garage policy to be protected properly. My policy is $1600/yr it has 2 million in liability coverage, $300,000 in building coverage, $100,000 in vehicle coverage, $25,000 for shop equipment/inventory and will cover driving the customer's vehicle. The majority of homeowner's policies do not provide coverage for parts of the home/property that are used for business purposes.

There are several tax implications, however in alot of cases they will be beneficial. Since your wife is an accountant, it should be easy. A single member LLC is treated as a disregarded entity for tax purposes (essentially it does not exist). You will need to file a Schedule C, along with your 1040, just as you would for your current setup. The Schedule C will show business income/expenses. One of the main reason I am setting up a shop is for tax benefits. Any tools/equipment/shop expenses are now a deductible business expense. It also helps to get approval from the wife - "Honey, I need this 2 post lift for the business, it isn't for my personal use"

I haven't done any research on the zoning, since my shop is zoned industrial/commercial. If you continue to just work out of your garage and don't fill up the driveway/yard with customer cars, I doubtt you would have any problems.

 

[twostory]

. The LLC must carry some assets (in line with the type of work you are doing), or it can be argued in court that it is under capitilized and really is just a shell company to shield liability. If that argument is won, the liability is back on the you personally.

Since he is a "service company" how much assets does the LLC need?

My airplane mechanic is an LLC, he operates out of his truck. Minimum amount of tools, etc. I would guess his LLC asset value is only a few $1000, at most.

 

[rcleaver]

The rules about deducting expenses changed a few years ago. Now you can only deduct expenses to the extent of your income. So that tax shelter has been closed.

If you operate as an LLC, you have to pay the employer's share of FICA and workmen's comp insurance. If you operate as a subchapter S corp., then you can avoid paying FICA at all by taking the profit from the corp. as a distribution. The downside is that your social security retirement income may be reduced.

 

[jtillery]

Since he is a "service company" how much assets does the LLC need?

My airplane mechanic is an LLC, he operates out of his truck. Minimum amount of tools, etc. I would guess his LLC asset value is only a few $1000, at most.

The value of the assets will vary greatly depending on the business type. The key is being able to establish the LLC is a legitimate business, regardless of profitability/revenue. The LLC should have a bank account and insurance policy for the particuliar line of work. It is also best to have the LLC own any tools/equipment that are needed to operate.

If you are operating a LLC that has limited assets compared to the risk exposure an insurance policy for you line of work is the best protection to establish a legitimate business.

 

[jtillery]

The rules about deducting expenses changed a few years ago. Now you can only deduct expenses to the extent of your income. So that tax shelter has been closed.

That statement is not correct in this context. Loss limitations only apply to passive income (usually real estate rental). Operating a repair garage is not passive activity. I can expand on this further if you would like, but I won't at this point since it isn't on the topic of the original post.

If you operate as an LLC, you have to pay the employer's share of FICA and workmen's comp insurance. If you operate as a subchapter S corp., then you can avoid paying FICA at all by taking the profit from the corp. as a distribution. The downside is that your social security retirement income may be reduced.

You have this backwords. In an LLC the members (owners) are not employees. For IRS purposes an LLC is a disregarded entity which means all the income of the LLC is treated as personal income of the members. Any money the members take out of the LLC is a "draw" and taxes are not withheld. You are required to make estimated quarterly income tax payments to avoid penalties for underpayment.

In an S-Corp, the owners are actually employees. The business is taxed on its income. Any money withdrawn form the S-Corp has to be taken as income, which is where the double taxation comes in.

As far as the FICA and workman's comp, that only applies to employees. Unless they LLC has employees (anyone other than members), this doesn't apply.

In most circumstances where the owner is actively involved in the business and LLC is the optimum structure. It gives protection from liability, but also has tax benefits.

 

[rcleaver]

That statement is not correct in this context. Loss limitations only apply to passive income (usually real estate rental). Operating a repair garage is not passive activity. I can expand on this further if you would like, but I won't at this point since it isn't on the topic of the original post.

Yes, please do -- I don't believe that's correct.

You have this backwords. In an LLC the members (owners) are not employees. For IRS purposes an LLC is a disregarded entity which means all the income of the LLC is treated as personal income of the members. Any money the members take out of the LLC is a "draw" and taxes are not withheld. You are required to make estimated quarterly income tax payments to avoid penalties for underpayment.

In an S-Corp, the owners are actually employees. The business is taxed on its income. Any money withdrawn form the S-Corp has to be taken as income, which is where the double taxation comes in.

Not true. I operated a subchapter S without paying any FICA. I also got an opinion about it from a CPA and an IRS rep, both of whom said it is OK. My brother is doing this today -- he didn't even know I used to do it and it was recommended to him by a CPA. The income is a distributiion, not earned income.

As far as the FICA and workman's comp, that only applies to employees. Unless they LLC has employees (anyone other than members), this doesn't apply.

In most circumstances where the owner is actively involved in the business and LLC is the optimum structure. It gives protection from liability, but also has tax benefits.

My response is in bold above.

 

[sasquach]

Just keep doing it . I wouldn't rent a building for a hobby . What happens when you are signed into that lease and you are getting no work . Scdew it do it at home be good to your neighbors and keep the noise down and you should have no problem.

 

[JohnK007]

Damn, this is an interesting thread!!

 

[katit]

Just keep doing it . I wouldn't rent a building for a hobby . What happens when you are signed into that lease and you are getting no work . Scdew it do it at home be good to your neighbors and keep the noise down and you should have no problem.

I can see renting shop space after hours if somebody let me do that. Or maybe find similar thinking person and do it together.

What I'm really doing is not making living out of it. It's just hobby/fun. It will be VERY bad if I get nailed for "good times". I understand this is very unlikely but I do have assets that I'm not willing to risk over it.

 

[rcleaver]

Since you stared this thread, you can't very well "just keep doing it." If you got nailed and anyone found out about this, it indicates consciousness of guilt.

In other words, either stop doing it or do it right. Any other approach is just short-sighted besides being illegal in most places.

If you don't think it should be illegal, then get involved in the law making process to see if you can change it, rather than just ignoring it.

 

[katit]

If you don't think it should be illegal, then get involved in the law making process to see if you can change it, rather than just ignoring it.

Well. Law is law. It's just not completely fair that you either "all in" with shop, etc. or you can't do that as a business part time.

 

[slicktoptt]

That statement is not correct in this context. Loss limitations only apply to passive income (usually real estate rental). Operating a repair garage is not passive activity. I can expand on this further if you would like, but I won't at this point since it isn't on the topic of the original post.

This is correct. To expand some. If you continue to take losses in a single member LLC the IRS is likely to disallow those losses as hobby losses. The assumption is that you are in business to turn a profit. You have to show profit in at least 3 of last 5 consecutive years (unless it's horse breeding)

You have this backwords. In an LLC the members (owners) are not employees. For IRS purposes an LLC is a disregarded entity which means all the income of the LLC is treated as personal income of the members. Any money the members take out of the LLC is a "draw" and taxes are not withheld. You are required to make estimated quarterly income tax payments to avoid penalties for underpayment.

An LLC is not a disregarded entity unless it only has one member.

In an S-Corp, the owners are actually employees. The business is taxed on its income. Any money withdrawn form the S-Corp has to be taken as income, which is where the double taxation comes in.

An S-Corp is not taxed on its income. The income passes through to its shareholders just like LLC members.

As far as the FICA and workman's comp, that only applies to employees. Unless they LLC has employees (anyone other than members), this doesn't apply.

You can run into self employment tax issues in an S-Corp if the owners try to take out distributions that are unreasonable and pay a minimal salary for their position. This is a clear attempt to avoid paying payroll taxes on the distributions.

In most circumstances where the owner is actively involved in the business and LLC is the optimum structure. It gives protection from liability, but also has tax benefits.

My Responses in Bold

 

[jtillery]

My response is in bold aboveNot true. I operated a subchapter S without paying any FICA. I also got an opinion about it from a CPA and an IRS rep, both of whom said it is OK. My brother is doing this today -- he didn't even know I used to do it and it was recommended to him by a CPA. The income is a distributiion, not earned income.

I am a degreed accountant and the controller for a LLC that does 3 million/year in sales. Admittedly I have the most knowledge on LLCs, but have had education on all structures. My brain is fried right now though since I have been working on our business taxes for several weeks After rereading the thread, I noticed you said an S-Corp (which I confirmed in my reply), but I was thinking C-Corp.

You are either mistaken how the FICA was handled for your S-Corp, or you violated the tax code. In an S-Corp, owner's do not pay FICA taxes on distributions/profits, those amount are treated as regular income. Owner's of S-corps however are required to pay FICA taxes on their wages. The IRS requires the wages paid to owner's are reasonable for their industry/position, if you claim little or no wages and get audited, they will adjust it and require you to pay FICA on the difference. FICA taxes are 15.3%, 1/2 is paid by the employee, 1/2 is paid by the corporation. This requires regular payroll tax filings.

The difference with an LLC is all the business income is treated as self employment income which carries a 15.3% tax as well (so you cannot avoid FICA/Medicare). If your business runs at a high profit margin that exceeds a typical salary, then your taxes will likely be lower with an S-Corp, versus an LLC, however an S-Corp requires alot more paperwork and tax filings then an LLC and profit sharing options limited.

 

[jtillery]

This is correct. To expand some. If you continue to take losses in a single member LLC the IRS is likely to disallow those losses as hobby losses. The assumption is that you are in business to turn a profit. You have to show profit in at least 3 of last 5 consecutive years (unless it's horse breeding)

I forgot about that, that is a good point. With SEC 179 deductions, depreciation, operating expenses, etc. You should be able to make a fair amount of "tax free" income in an environment like that. If I remember right you cannot carry forward hobby losses like you can passive losses.

An LLC is not a disregarded entity unless it only has one member.

I haven't researched this at all, but wouldn't it really function like a disregarded entity once you split the income/loss between the members?

An S-Corp is not taxed on its income. The income passes through to its shareholders just like LLC members.

You are correct, I was wrong on this since my brain is fried and I was thinking C-Corp On a side but related note, an LLC can also elect to be taxed as an S-Corp now, so you can get some of the tax advantages without the limitations on the profit sharing.

You can run into self employment tax issues in an S-Corp if the owners try to take out distributions that are unreasonable and pay a minimal salary for their position. This is a clear attempt to avoid paying payroll taxes on the distributions.

I haven't researched it enough to know if they make you pay self employment tax, or go back and pay the FICA. I would assume they would make you pay the FICA, not the self employement tax (which is the same amount anyway), but you seem to have knowledge on this, so I may be wrong.

 

[Tom2]

Who would have thought 80,000 pages of code would be complicated?

 

[jtillery]

What I'm really doing is not making living out of it. It's just hobby/fun. It will be VERY bad if I get nailed for "good times". I understand this is very unlikely but I do have assets that I'm not willing to risk over it.

If this is what you want to accomplish, you should not be charging for your services. If you are helping a friend work on his car for free, than the likelihood of a liability claim diminishes and if one does surface your homeowner's will likely cover you since there is no business use. Unfortunately in today's society, everyone is so eager to sue. We run our business in a very ethical manner, it is an employment agency so there is very limited "risk" exposure. We still get hit with a minimum of 1-2 frivalous lawsuits every year.

My good friend will be doing the majority of the mechanic work for my LLC. I will be running the sales and operations. He is one of the people I know that has been working out of his home garage for several years he may produce $5,000 in income a year from it. He does it all without insurance, I think he is crazy putting their 250k house, cars and life saving at risk to make 5k per year, when he could spend 2k per year and protect it all.

 

[-B-]

Running a side business is very expensive but it saves you from loosing everything. remember you are dealing with a significant purchase in someones life if something goes wrong they will go after you and all you own. I ran a wheel building business for over 10 years and had to carry 1m liability insurance , local fees and licenses were not bad. I was expensive but you got the best wheels I could produce that won many national , and international events. On the surface I made good money my labor and parts were secured via wholesale to be keystone to the customer. The price of doing it right was satisfying because of the protection it afforded. When I decided to dissolve the business I still had to carry the insurance for another 5 years to protect myself.

 

[katit]

Can somebody give me rough number?
4 bay decently busy shop. What owner expects to make? Please don't take it offensive, I'm just curious what $$ we talk about.

Working in IT, being professional, etc I can stay around 100k mark. Just trying to see if it's worth it.

 

[katit]

when he could spend 2k per year and protect it all.

But it's not possible unless I have a shop! Or can I just have entity/insurance and work from home? Insurance company probably won't do that...

Building is a main issue here.

 

[jtillery]

Can somebody give me rough number?
4 bay decently busy shop. What owner expects to make? Please don't take it offensive, I'm just curious what $$ we talk about.

Working in IT, being professional, etc I can stay around 100k mark. Just trying to see if it's worth it.

There is a 4 bay shop 500 feet from my house. The owner retired last year and is trying to sell the business/building. I was looking for a building to buy for a shop at the time so I stopped to talk to him. I looked at his books for the past 10 years, at their peak they grossed 225k with 4 full time techs (1 was the owner). For the past couple years they had 2 techs and they grossed 150k. I would be suprised if the owner actually took home 75k. I live in a densely populated suburb a few miles outside of Cleveland, OH. The shop always seemed busy for the 3 years I have lived there.

Cost of living is significantly lower than St Louis though, so I would expect you to make more out there. Honestly, unless you want a career change I would stick with the IT work (my bread and butter job is in the employment industry).

The reason I am started a shop is really to take the edge off the operating expenses of my 3200 sq ft shop and my tool buying obsession. While I think I can turn a profit of 25k/year or more in our niche market (and the shop being open for a limited time each week), I will always likely make alot more money in the employment business.

 

[jtillery]

But it's not possible unless I have a shop! Or can I just have entity/insurance and work from home? Insurance company probably won't do that...

Building is a main issue here.

Well, I haven't done research on residential zoning other than building size restrictions, so I don't really know for sure. Several of the posts in this thread make it sound like you are going to get fined heavily and/or sent to prison for running a business out of your home... While that may be true, I think it is highly unlikely, under the proper circumstances. With the prevalence of the internet there are a large number of people running businesses from home. If you can get shut down for automotive repair, then they would be going around shutting down all the eBay/internet business too. Now, if you put a sign up in your front yard, posted hours that you were open to the public etc, from a residential zoned property than you may have issues. I cannot imagine having problems with running a business by appointment through referrals or craigslist ads, etc.

As far as insurance, I forgot to mention, my commercial garage policy lists my friend's house as an alternate business location (they know it is residential property and that the garage is attached to his house). So he is fully covered to work there, as long as the work is done under my LLC. I would assume you could get a commercial garage policy and only list your home as a location.

One aspect I think is important if you want to try to make a living is to have a commercial location with posted hours. While you can likely get a fair amount of customers working out of your house, they all would expect a deal since it is a side job. When you have a commercial shop, you can make it easily appear to be a legitimate business, just undercut the dealer pricing some, and offer prompt/ethical service and you will make decent money.

 

[jtillery]

.

You need to set up a Limited Liability Corp (LLC), this way the LLC will be at fault if the customer wrecks his car and sues you in court saying the brake job you did caused the accident. You also need business insurance to cover this type of liability. You need to keep your personal assets completely seperate from the LLC.

These statements are accurate.

The purpose of the LLC is to own nothing. If the LLC is sued, the other party can only bankrupt the LLC. Since the LLC has very few assets, the lawyers do not have as much interest in persuing a law suit, as there is not much to collect.

Here is a method to have a shop and tools, but the LLC does not own them. You personally own the tools, equipment, shop, etc. Then you lease them to the LLC. You may not have much money left over to pay yourself a salary each month, but you personally have "rental income" from the LLC. You still pay taxes on this "rental income", but this help get the money out of the LLC and into your "personal asset" catagory. The goal every month is for the LLC to not make any money. The LLC pays all the revenue to you as rent, salary, etc.

The purpose of an LLC is not to own nothing so you can bankrupt it, it is to shield liablity so your personal assets are not at risk. If you used this approach and got sued, the LLC protection could easily get thrown out in court, then the liability is back on you personally. The LLC needs to own all the assets used in the course of its normal business. If the LLC is renting or leasing assets it needs to be done from a company that is in the business of leasing equipment, not the owner of the LLC.

 

[Kona Cruisers]

one thing I notice (I also do the exact same thing you are doing but on the collision side of things.) is you dont mark up your parts, why?

I understand the guilt of charging people more then you pay, but you are useing your time to get the parts, you need to get paid. I use to not charge extra for the paint materials I bought, but then realized I was going through alot to get the parts. I.E. ; driving to the paint store, 45 min minimum at the store, paying for products then waiting to get paid for them, extra miles on the car (20 extra miles a week is a 1040 miles a year. at 20 mpg and 2$ a gal, thats 52 dollars there. ) I know it seems rough being that your not a shop, but don't chock it up to a business expense. you can always tell them exactly what to buy and leave it up to them. JMO.

 

[katit]

one thing I notice (I also do the exact same thing you are doing but on the collision side of things.) is you dont mark up your parts, why?

My understanding is that I would have to charge sales tax, etc which just makes things more complex. Dealership on my way home and I order some stuff online so time spent minimal and I make sure this time is in my labor.

I always give them option to get their parts.

 

[sam 8]

Katit;

You have had lots of darn good free advice here.
I have read most of it. I have read your replies, and can only offer the following for you to think about.
If you want to do this for real, it is going to have to become your passion.
You already have some seriously valuable pieces of the puzzle.

-A built in customer base that is already spreading the word about your honesty, your skill, and your desire to charge a fair price for services rendered.

-A wife who can handle the books for you, keep you square with the government, and not charge or rip you off in the process.

-An economic situation where people are repairing and maintaining their cars instead of buying new ones.

Some of these pieces are priceless, and if you want to take advantge of them, open a business, then you have a better chance of succeeding than most others. Comparing this to working for someone else isn't really fair.
Understand that for the first few years you are going to be "buying" yourself a job while 'investing in the future of your business. Buying a job. Think about that. You'll have more tools to buy (never enough, new scan tools, etc.), insurance, rent, waste oil disposal fees, hazmat fees, etc, etc, etc.
You'll learn more about government hogwash than you can even imagine.
After time, you'll no doubt get discouraged. It'll probably come along right about the time when you are busier than heck, not taking enough time off, and riding a fine line between exhaustion and insanity. You will look at things and desperately want to hire some help. Then you'll realize that with help comes more insurance, workers comp for your employee, the wife will have to do the employee payroll, etc.
You will have to mark up your parts. Stocking, ordering, logging in and accounting on them will not be free to you, you need to recoup that investment. You can take your cost and mark up plus reasonable percentage, but not gouge folks. That is to be expected.
Now, all that being said, the world is always ready for a good, honest man in the auto reapir industry. Making a name for yourself is priceless. Having your name associated with good work in your town, the pride of doing the right thing by people and actually making a living at something you love is a gift not many can lay claim to.

So your options are:
Jump in with both feet and try to live the dream.
Make a living in IT andd enjoy the weekends wrenching on your own ride, or donating time and tools to a few good friends.

It also sounds like you have something to fall back on if your shop doesn't make it. A safety net, so to speak.
Is your wife behind you?
That is the only other real question.
She'll have to be. If she is, and all is as I am assuming, and your young enough to ride out some tough times, then buying yourself a job could turn into creating a future for you, and perhaps a few others.

Sam8

 

[katit]

Is your wife behind you?
That is the only other real question.
She'll have to be. If she is, and all is as I am assuming, and your young enough to ride out some tough times, then buying yourself a job could turn into creating a future for you, and perhaps a few others.

Thanks for great advice!
Wife is behind me but I also have 6yo and a baby. And we need to buy house in better school district... Right now it's all kind of free sailing with 2 professional incomes, etc. She won't be able to make payments by herself if we move.

That said... Honestly... If things won't go very well then overall family happyness will go down.

Also, I don't think I want to wrench all day, I want to be an owner, advisor, etc. I don't want to do brake jobs and oil changes. I'd rather write software. Right now it's fun because I mostly deal with new stuff.

So.. It will have to be a business with payroll, HR and so on...

 

[sam 8]

Well, ultimately that would be your goal.
I have a very close friend that owns a transmission shop in a local community of about 15,000. He has been in business for 30 years or more. He made his business on his name.
He is the "go to guy" for automatics and manuals in this area.
We've been friends since we were 17.
He would like to slow down, and has stepped back from the rebuild bench a bit. He has found that his son and another employee can handle the work, and he is starting to do more of what he did to build the business.
Talk to customers, help them understand what their problems are, and work with them.
The shop has his name on it.
His name matters to him.
I imagine your town is much like ours. There are probably a number of good techs out there who would jump at the chance to work for a shop where the quality of the work is more important than the number of hours the job book says it should take. Just like the rest of the world, people generally will be shopping for quality in the work, and that is what you want too. Come-backs cost you on both ends, you are still paying the hourly wage, and your reputaton suffers.
You won't be able to pay them the big bucks like they might have once experienced at a dealer when times were good, but then times ain't exactly good, are they?
Pick and choose your employees to reflect your style of doing business, and to reflect your long term business plan.

 

[katit]

I imagine your town is much like ours.

I'm immigrant, town is very general term. I get people coming over from all over St. Louis area. I think it's mostly due BMW specializing as they don't want to pay $250 for oil change (right!)

I don't have "customer base". I have only dozen or so of customers but I only found 3 - others were referrals. So, I think I do well in terms of self-presenting and of course I take pride in what I do.

There are probably a number of good techs out there who would jump at the chance to work for a shop where the quality of the work is more important than the number of hours the job book says it should take.

Is there such a model where all I do is to rent workspace and workers can bring their own clients or I can supply clients for fixed rate?

To me this seems like good way to find good people who want to be on their own but not quiet there with books and all otehr bureacracy stuff.

This way I can make bigger shop busy pretty quick and then eventually gain more of "own" business.

So, the idea is to have bigger shop and let other people pay rent, etc and work for myself. Then gradually offload work to others making money this way.