Setting up a new workshop can be a daunting process. Dewald Ranft, Chairman of the Motor Industry Workshop Association (MIWA), an affiliate association of the RMI, offers the following advice.
Starting a workshop
- As with any start-up business you need to have a business plan in place which outlines exactly what kind of business you will be running, how it will be financed and insured, and what is required to get started in terms of staff and equipment.
- Do your homework when it comes to location. Check what is currently available in the area where you are considering setting up your workshop. While competition is good, you don’t want to start in an area that is saturated with workshops. Looking around may also help you decide whether it makes sense to buy an existing business or start from scratch.
- Rely on your experience and contacts. When starting out it makes sense to play to your strengths. Start with work you feel comfortable with, whether that be specialising or doing general repairs. You can always expand as business picks up. Speak to your contacts, ask for referrals, and negotiate good prices for parts, etc.
- Starting a business is a big investment. Make sure you are properly insured. Remember to factor this in when drawing up budgets.
- Join an association in the RMI. MIWA members, for example, enjoy many benefits, some of which include dispute resolution, info on the latest advancements, access to training relating to human resources, skills, etc., and more. It also offers a network of workshops that are selling equipment second-hand, which may just be what you need to get started.
What is required to run an efficient and profitable workshop
- An involved owner is very important, as are reliable, skilled, and dedicated staff.
- Going the extra mile for your customers may seem clichéd, but makes all the difference in this industry. Word of mouth is definitely the biggest marketing tool, and customers will refer you to friends and family when they have had a good experience, trust has been built, and the cost is fair.
- It’s important that all staff understand and respect the cost implications of wastage. If you want to run an efficient and profitable business, you need to keep wastage to a minimum.
- Investing in your staff and their development is also key. Many successful workshops treat all staff like family.
- Keep your administration and finances in order. If this is not your strength as a business owner, then make sure you hire the right person to keep all the numbers in order.
Remember ‘Look after the pennys and the pounds will look after themselves’
Things to take into consideration
- The setup cost for a small workshop, including branding, customer seating, etc., comes to about R250 000. For a bigger setup it amounts to closer to R 1 millon, and that’s excluding the building.
- But the biggest cost is the cost to keep it running in the first year, while you don’t have many customers yet and are not making a profit. Budget having a neutral cash flow after 12 months. That means half a year’s cost is gone. In the calculation you have to include your own salary (even if you are not paying yourself yet), other staff expenses, rent, electricity, insurance, etc .
- If you give a good customer service the customer will be back, but probably in 6-12 months. That’s why it takes a lot longer to make a workshop profitable than, for instance, a coffee shop where a happy customer might return the next day.
- Most owners fail because finance and admin are not managed correctly, not because they are missing technical expertise. Theft, wastage, customers that don’t pay or don’t collect cars are the biggest challenges when starting out.
- Another common reason for failure is because contracts (rental, insurance, etc.,) are signed without being properly understood or checked. Unfortunately, in South Africa there is no protection for small businesses, like the CPA for consumers. When you have signed a contract you are bound by it. It doesn’t matter if you have read or understood what you have signed.
- Don’t be afraid of competition. Work with your colleagues and you can learn a lot from them.
Essential start-up garage items
Ranft offers this list of essential start-up equipment and items for a workshop:
- Air compressor
- Two-post lift
- Diagnostic equipment – the bottom of the range is fine when you are starting out. You can always buy more sophisticated equipment as you go along.
- Invoicing system or workshop management system
- Occupational Health and Safety requirements – this will include the necessary signage and demarcations in the workshop.
- A decent reception area, so budget for some chairs and a counter or table
- In terms of tools, the standard requirements (toolbox) that a mechanic would need will be fine initially.
- HaynesPro software data package – this product contains all the essential information any workshop needs to complete repairs. MIWA has secured a deal with HaynesPro for members, making it affordable for a start-up business.