Growing Our Industry
This month, I am going to go out in another direction. We have operators and managers in this magazine, but how many people are reading this wondering how to get into this business and what are their steps. So let's take the next step and go over the basics. I wrote these down a long time ago from a story that I read:
Plan your business.
A clear plan is essential to be successful as a new entity. It will help you plan the path and the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are your costs going to be?
- Who are you targeting?
- How much can you charge?
- What are your costs going to be opening a quick lube?
To get started in the industry, your largest investment will be for the equipment in your garage bays. Expect to invest at least $250,000 for a two-car facility, initial training and initial inventory for your location. Multiple franchise opportunities can help you corner the local market and provide assistance for your initial growing pains.
The only thing that may be more expensive than this is if you decide to build your own location. If you are looking to get into this, I would suggest looking for a purpose-built location that you can lease. Use your capital for other known expenses that are going to be coming down the line.
What are the recurring expenses?
Remember that capital that I was discussing? Until you have a positive cash flow, you will need that for things like electricity, water and more.
On top of that, equipment in the location, such as lifts and pumps, must be maintained by a qualified service company. You will need to maintain your lubricant supplies, which means you have to get with a distributor. Filters, gaskets and filters must be kept in inventory as well. You have to pay labor. You are going to want to have higher trained and qualified people to manage your initial crew, which most likely include many entry level employees.
If you decide to get into the franchisee game, which may be your path to help get your customer base, you will have royalty fees, advertising expenses and more. Take these into account when you are making decisions on how much you need to have in the bank.
Who is the target market?
Everybody who drives a car is a future customer. They in the urban markets, as suburban families own more vehicles and will spend money on simple services. Rural, smaller markets have fewer potential businesses available, and some of those will want to change their own oil. Bigger cities with inner city areas are going to have issues surrounding higher costs, which will cost you more and leave less for potential customers in that area to spend with you.
How does a quick lube make money?
Your customers pay you a cost for you doing quick oil change or other services on their daily vehicle. Getting with local car rental agencies or delivery services to generate a larger base of repeat customers. These options are usually looking for a discounted price, so take into account your costs when agreeing to these car counts. Are you making money at all based on their pricing? As you gain better trained technicians and add new services, this increase your bottom line profits.
How much can you charge customers?
You will want to check out the established businesses in the area to make sure that you are competitive in your selected market. A simple oil change averages between $30 and $50 with increased costs associated with it in recent years. Most services at a quick oil change shop will cost under $100, but depending on how you price them, these are excellent ways to add to your profits. Wiper blades cost you $3 and you charge $15, for example. With cost of goods numbers hovering around 30 percent, this is a good add on to lower that number.
How much profit can quick lube actually make?
There are many factors that can come into play here—your leasing costs, inventory and more. Typically a franchise location does somewhere between $350,000 to $500,000 on average, starting out. An owner can look to make $50,000 to $70,000 off that investment if all things go right. That is a high number, honestly, as you are taking into account that YOU are running this location and not hiring a manager at the start.
So these are just basic steps that you should look into if you are looking to get into this business or take on a new role. Many businesses fail due to bad planning, management or expectations. If you want to be in the minority and continue to grow and be more profitable, then make sure that you sit down with a financial planner and put together a path to follow to success!