Hey everybody, Chris Cotton, AutoFix Auto Shop Coaching here. I just wanted to hop on here mainly at the direction of my marketing crew.
I do a lot of business plans and business planning for banks, people that are starting new in the industry and moving forward, also people that are already in the industry, looking to get a bank loan, looking to do some other things. And during one of our meetings, we were talking about, “Hey Chris, what do you have going on?” And I was, “I have several business plans that I’m working on now.” And then somebody was like, “Hey, do you know that December is national business plan writing month?” And I was like, “No, I did not know that.” And they’re like, “Hey, it’d be awesome to have a video from you, talking about how to write a business plan, maybe how you do it, what tools you use.” So, in just a second, I’m going to switch over here so that I can share my screen with you. So, if you’re used to watching me talk, you get to actually watch me work a little bit and see what I’m seeing.
So, we’re going to pop this in, share the screen, and put you over here.
So, hopefully, if everything worked out correctly, the first thing you’re going to be able to see here is my demo auto repair shop capability calculator. That’s a lot of wording but basically what I do is we start with the goal in mind. And before can do that, we have to come up with the labor rate for the shop. If most of you are familiar with the Oreo method, I highly recommend that you stop using that. And the Oreo method is that you call 10 shops around you and you take the highest and the lowest average amount, and then, boom, you’re in the middle. That’s the Oreo. That’s the part of the Oreo you’re in. There’s a little bit of science to it but first of all, we have to make sure that we’re covering the cost of our technicians.
If you want to get into effective labor rate, things such as that, you can. But what we’re going to do is we start out with our technician costs. And AutoFix Auto Shop Coaching, we believe we should be in that 71-75% labor margin range in order to have a good productive shop that meets the shop’s needs, the employee’s needs, the customer’s needs, everything like that. So, our labor rate for this shop, we’ve determined it’s going to be 129.88. If you’re interested in learning how, or learning what your labor rate should be, you can give me an email, give me a call, and I’m more than happy to talk to you about that and do a labor rate evaluation.
But what we’ve done is we’ve started with our labor rate, our labor rate is $129.88, and we’ve looked at the number of bays we have – in this case, it’s four – and the number of days open – five days a week – and the hours that the technicians are going to be available, so it’s eight per day. And when you put all that in there, it comes up with this number: $41561.60.
So, if everything was jamming right on, you’re able to get your parts, technicians were all there, and none of them are sick, COVID, vacations, or anything.
Our shop, at full capacity, is capable of doing $41,561.60 a week, plus or minus a little bit. But also gives us a yearly capacity of $2,000,078. So, when we’re planning to start a shop or the one that this came from, we’re starting from scratch. Somebody left the building where it’s at, the building’s sitting there completely empty, and we’re going to go in and put a shop in there. So, what we did is we came in and just said, “Okay, if we open, what do we think we can do capability-wise?” So, in this one, we figured at least be 50% productive. And at that, it gives us our weekly sales at the current rate, which is $20,780.80. And that gives us a yearly sales projection of just a little over $1 million. And so, we do all that to get to the bottom, okay?
We can also put the current average repair order in there, and I’ve got tools that’ll tell us, “Okay, cars needed to generate 100% capacity and/or 50% capacity. And it tells us the number of employees that we need to fill those roles. Or, excuse me, fill those roles based on my experience in the industry with 30 years of experience, okay?
The big thing I want you to see is down here at the bottom, we’ve got projected sales at 50% or $1,039,000. These can be moved around a little bit but a lot of it is just base salary, right?
And then we’ve got a certain amount of profit that we’re trying to hold and everything else in there. So, once we get this projected sales number, we can kind of figure out, as a percentage of sales, what our technician cost should be, what our parts cost should be, what our operating expenses should be, and our service advisor. In the area, what should we be paying them? How much profit do we want to hold out of the business to have cash flow?
And if you’re not familiar with the AutoFix Auto Shop Coaching Auto Shop Profits & CashFlow program, you might look that up or listen for it. It’s available on our YouTube channel. Or if you want to shoot me an email at email@example.com. Feel free to do that and we can go into that.
Also, at the bottom, we’ve got debt repayment.
And so, after you get started up in your doors, obviously, we can shift the profit around, the debt around, operating expenses. If we can come in under this, then that’s better.
And then the technician costs, if we can go in, and obviously we want to pay our people as much as we can afford to still have an open running viable business.
So, this is just one of the tools that we start with and the other thing is just to show you real quick how it changes. If we change our number of bays to eight bays, everything else auto-populates.
If we’re only going to be open three days a week for whatever, then we can change that, and then we can make the labor rate to $149.55 if we want to. to $149.55 if we want to. So, all of that is changeable. We can even change what we think our current average repair order is going to be, and it will affect all of those numbers.
Now, also, we should have a… Once we develop our labor rate, then that will also tell us what our average repair order goal and everything else is. And we can use these tools to put these in there, okay?
So, once we get all of that done, we can go ahead and start to fill out the business plan, which would be the Word document that we put in there. And then we have another big sheet that keeps us organized and everything.
And so, I’m looking at this from the standpoint of somebody called me up, “We’re starting a new shop from scratch.” If you’re not starting a new shop from scratch and you need equipment, obviously, some of this stuff is going to change. So, what I’ll do is I’ll show you the spreadsheet. And so, I flipped this over. The name of the business is Demo Auto Repair & Tires. And your bank is going to want to see by month And your bank is going to want to see by month what your expenditures and everything are. And because we did the pre-work on the front side of it, we know, okay, if we’re at $1 million a year, that’s $83,333 a month. And if we have that in income or our total revenue, then our cost of goods should be this, our officers, service advisors, rent, everything should be in here. And then we can move all those numbers around and show this to the bank.
So, this is actually the one-year plan, and I’m going to go through here on the bottom and show you. But then, also, we can go ahead and project a second-year plan.
So, for the second year on this one, we show, okay, we want to advance that from $1 million to $1,500,000. That’s $125,000 a month. And then we’ll go through here with the expenses and everything. So, sometimes when you grow the business, all your expenses go up. And then sometimes, because of just economy of scale, some of the expenses actually stay the same or go cheaper, so it could be a little bit different in here just depending. Oops, I see a mistake in here. This should say “Year 2.” We’re going to correct that. I’m not sure how that happened. Just to take you through it, here at the bottom. If you see these tabs across the bottom here, we’ve got actions.
So, this is all of the action items that we’re working on this sheet moving through. Who we need to call, what we need to do, what needs to be completed. Kind of a list. Right here, the tab is we’ve talked to some banks and we know what the loan requirements are. What do we need to do? How do we need to go forward? And just to make sure that you stay in sequence, here’s the Year 1 Plan, the Year 2 Plan.
We’ve got a tab down here that says Auto Repair Start-ups. So, this is all of the stuff that we’ve got. We’ve got financing in progress. Logo, it’s actually done. We just completed that this week for a shop, so I’m going to put that in there. And then we’ve got technicians. We’re hiring technicians, the computer system, the point of sale system, everything. So, we’ve got this laid out for you.
It’s not going to be 100% for every shop but it’ll get you pretty close.
So, moving further along, we’ve got Marketing/Social Media. What do we want to do? What do we want to do in the area? Yelp, Google, website, direct mail campaign, things like that. All of those things can go in there.
Recruiting, we take that a little step further from our action plan. We have a recruiting tabs. We can go in here and put questions in here that we want to ask customers, and everything else, where we’re looking, what we’re doing. Candidates, we’ve got people that we want to interview and the follow-up and everything there.
Vendors and distributors, we’ve got, okay, we want to talk to these parts vendors, these old distributors, these tire distributors, anybody else, WORLDPAC, anybody else that you want to put on there.
Got Equipment Lease Information for stuff that we’re leasing versus things that we’re buying. Contact Info for different people.
If we have any market research, the market research is the other shops around us. We’ve got listed out, okay, who else is in our area? If we know, how many bays do they have? What do we know about them? What do we know about their reputation?
And we’re going to take all of these items and we’re going to build that into the actual written business plan. If you don’t know how many bays a shop has, go up on Sunday and look in the window, Look and see. Figure it out. This is all part of the research and everything.
Banks, you got your list of banks and everybody you’re working with and any notes and anything from there, okay?
So, we do step one. Actually, we do one like a little pre-step and then we go into the build-out of the capability calculator. We build this document out.
Okay, what all needs to be done?
And then we go into this final document that we’re going to present to the bank along with some other items. And we’re going to have Demo Auto Repair & Tire Business Plan, in December 2021.
So, I’m not going to read this out to you word for word So, I’m not going to read this out to you word for word but I’m going to read this out to you. The first part is the executive summary. And we’ve set it up… Again, this is just Demo Auto Repair & Tire Business Plan.
And then because our corporate office is in Wichita Falls, Texas, we just put which Wichita Falls, Texas.
So, I’m going to read a little bit of this to you and hopefully you get the idea, and then we’ll move on.
So, first thing is the executive summary. Demo Auto Repair & Tire is a new business in Wichita Falls, Texas. DART will provide general automotive repair, maintenance, and tires to the people of Wichita Falls and surrounding areas.
DART will capitalize on the market demand created by Your No Good Auto Repair leaving the area, poor auto repair quality locally, any delay in the auto repair availability currently ongoing in Wichita Falls, and the potential retirement of other mechanics in town in the next two to three years.
In addition to meeting the clear market demands of quality and volume for automotive work in Wichita Falls, DART will differ from any other auto repair shop in town. Run by a professional management team with a business strategy of excellence, aggressive growth, and a long-term outlook to include expansion, the business will provide a level of quality not yet seen in Wichita Falls and the surrounding area.
This will include streamlined processes and procedures to ensure maximum productivity, a clean and organized shop, professional reception, and exceptional customer care.
DART will hire and invest in the development of only the best people the automotive industry has to offer and will implement a long-term hiring process to ensure continual access to available Your No Good Auto Repair.
It will offer opportunities to all employees for growth and career development to ensure long-term retention of personnel.
And after that, we go into the company description. DART is the first small business being established as part of a new local enterprise.
The vision of Demo Auto Repair & Tire is to provide growth opportunities for local people and enhance and culture and community of Wichita Falls by obtaining real estate and small businesses. Demo Auto Repair & Tire seeks to not only bring in more revenue and financial opportunities to Wichita Falls but to create an atmosphere of excitement, expectation, and community by investing in its employees and running businesses in a way that has not been done before in Wichita Falls.
So, we’re going to go on to talk about the management team, how we’re going to be profitable, things like that.
We’re going to go through, finish the company description. We’re going to talk about products and services, what we’re going to provide to the community.
We’re going to pull our marketing research from the other document and add it into here. I’ll read it real quick. So, some of the things that we kind of figured out.
Currently, Wichita Falls has nine auto repair shops, with a total of 33 auto repair bays. Your No Good Auto Repair, whose space DART intends to replace, makes up four of those auto repair bays. Five of the nine auto repair shops in Wichita Falls are run by business owners aged 65 or older, near retirement age. This makes 52% of the number of auto repair bays in town.
The current potential market in Wichita Falls is a revenue of approximately $12 million annually at $30,000 per bay per month. Excuse me. So, then we’re going to put in barriers to entry, threats, and opportunities, which is big. Product/service features and benefits. How we’re going to market ourselves.
We’re going to talk about key competitors and target customers as well. Pricing, what our margin strategy is going to be.
We’re going to set to attain a 55% margin on parts and a 70+% plus margin on labor in order to attain an overall gross profit of 65% or better.
We’re going to throw our two-year sales forecast in here. So, that’s where the second of those two sheets comes in, so that we can not only tell them how great we are going to do year 1, how great we’re going to do year 2.
Also, we have the operational plan. And this is just some information to tell you how to provide that.
We’re going to talk about production, quality control, the location, any legal stuff, personnel. And in it, we’re going to answer these questions that a bank probably will know. So, like here on inventory, if your business requires inventory, explain what kind of inventory will you keep on hand. Raw materials, supplies, finished products for us. It would be a minimal amount of oil filters, cabin air filters, air filters, tires, some things that we need in case of a quick need to move those. in case of a quick need to move those. They’re going to want to know what the average value your inventory is going to be. How many turnovers a year you’re going to do? Just like how many times you’re going to sell that inventory out.
They’re also going to want to know lists of suppliers, credit policies. And I’m going to tell you right here, this is one thing I can tell you for every shop. The credit policy question is, if you plan to sell to customers on credit, explain. No, no way in hell. We’re not selling anything on credit. We’re not a bank. We do not offer credit to any customers, okay.
And then we’ve got instructions: management and organization. So, in here, you’re going to have a biography of the owner. If you know other key players, like service advisors, technicians, I would put all those biographies in there. For some of the shops that I work with, we’ve brought on a team like our bookkeeper, myself, plus them, plus the owner team. So, they have biographies for all of us in there and our contact information so they can talk to us.
They’re going to want to know how we fill in any gaps in any management and/or experience. Advisors.
So, this is where I would come in as a consultant.
Any board of directors, accountant, bookkeeper, attorneys, anybody like that that’s offering expert knowledge to these people.
The other thing is organization chart. How is your management going to be organized? How is your management going to be organized?
And then we’ve got a management worksheet. You can put in your bio’s, gaps in management, advisors. And then here’s a copy of the organization chart. So, try to make this as easy as we can for everybody, because there’s a lot of paperwork involved.
But, for some of the shops that we’re working with now, we’re looking at getting funding for anywhere from $500,000 to $1 million to put into the company.
So, here’s just some things. Instructions: startup expenses and capitalization. Opening day balance sheet, personal financial statement if you need one personally. And then part of the instructions. A lot of this is instructions and if we were to send the business plan over, it would have that information at the top of the sheet, and this is not going to go in there. This is just basically instructions on how to come up with a financial plan. And then, too, it’s great to have an appendix with all of your additional sheets.
So, for our worksheet that we have the year-1 plan and the year-2 plan, and we want to either print that out or attach it so that they can look at it. And anything else, we’re going to put all that in: blueprints, list of equipment, anything else we can add to the back of it.
And then you have like… Okay, there’s a couple of different ways. We could be raising money from a bank or we can be raising money from investors. So, there’s a couple of different ways.
And each of those segments like it to be done just a little bit differently. I have a service business in here. It talks about explain your prices and the methods you use to set them, what systems and processes will you use for ensuring consistent delivery of services, list specific brands you plan to carry, how you manage inventory, what kind of point of sale system you’re going to have, how are you going to track that. And that’s 13 pages.
That’s a lot of stuff to put in there, but the more of this stuff you have and you walk in and email it to the banker or say, “Hey, we have all of our ducks wrote up. This is what we’re about. This is what we’d like to do.”
If you have all this done before you even contact a bank, it would be great. But if you want to start on some of this and then work into it with the bank, you can. Some banks will require all of this. Some banks won’t. It’s up to the branch and everybody.
The other thing I would say is, if you’re taking over a location or you’re moving into a spot where there used to be somebody else, contact the bank that they did business with. They will know the track record of that business. I’m not saying that their track record is 100% great, but they will kind of know their track record for what that is, okay?
So, let me put this back down real quick. So, just to go in reverse order now.
So, we’ve got the final finished Demo Auto Repair & Tire Business Plan. We’ve got the worksheet that we use to keep us focused as we’re going through this whole process, depending on what we need. And originally, we start with our capability calculator. And before this, we needed to do a little bit of work to see what our labor rate needs to be.
And so, once we start with our technician cost and our labor rate, we can go into the rest of it and then walk into it. So, if you need help with your auto repair shop business plan and you didn’t know where to go, now you kind of do.
We help people with this all the time. You can just shoot me an email at firstname.lastname@example.org. You can also give me a phone call at 400-1008. I’m more than happy to help you out with this.
And if you want to engage long term and go through the whole process, the most recent one we just started the end of October, first of November. We’ve got everything ready. We’re starting to hire people. We’ll know from the bank what the loan is going to be shortly. So, you could have this done in a month. It can take three months. And then, too, we’re also available for ongoing coaching after that.
Again, my name is coach Chris Cotton AutoFix Auto Shop Coaching. I hope you’ve learned something about writing a business plan here for business plan development month. And if you have any questions again, feel free to reach out to me. Have a great day, everybody.