Auto Repair Service Business Plan
1.0 Executive Summary
Quick and Dirty Auto Repair (QDAR) is a start-up organization that offers a complete domestic and foreign care repair service as well as a full-featured retail parts store. QDAR will serve the Portland, OR market with three convenient locations. QDAR will grow into a business with $13.3 million in sales by year three.
The Concept
The auto repair market has a lot of competition, however, almost all only offer service. QDAR will differentiate themselves by not only offering a hassle-free repair service, but a fully stocked parts store. Not only will this serve a wide range of customers for both service and parts, but the parts department will support the service department by allowing the service department to turnaround jobs far faster than the competition with generally all of the needed parts in stock and on location.
QDAR also differentiates themselves by having 10 bays at every location. This offers incredible value to customers who need their cars fixed right away. Waits for service and parts are ideas not entertained by QDAR. Lastly, QDAR offers unlimited shuttle service for repair customers making the entire service experience as painless and convenient as possible.
QDAR will attract and maintain a loyal customer base through their customer-oriented focus on business. All employees are trained and held responsible for providing superior service, developing a long lasting trust bond with customers. This is very important, especially in the auto repair industry where trust and honesty are not the image of repair facilities.
The Management Team
QDAR has a strong management team that will allow them to execute on this exciting idea. QDAR has four partners, Jake Braques, Blair Horne, Hyugo Ford, and Gaz Môder. Jake has a background of sales, 12 years at the nation's second largest Ford dealership. He will be overseeing the sales and marketing for the organization. Blair's background is in management from Siemen's automobile division where he was a Vice President overseeing a department of 565 people. Hyugo is also a product of the auto industry, specifically the auto repair and parts sales industry. Hyugo spent six years at NAPA Auto Parts and then seven years at Repair-It, Oregon's largest independent auto repair facility. At both organizations Hyugo had multiple roles within the organization allowing him to bring to QDAR a broad skill set. Lastly, Gaz brings QDAR 10 years of finance and administration experience. Gaz was trained at GM and later in his career took a position at Delco Parts. The incredible breadth of skill sets and knowledge that the management team possesses will allow QDAR to accomplish their lofty goals of over $11 million in sales.
QDAR is an exciting business opportunity that addresses the unmet need of having a full service auto repair facility that also has a complete retail parts center. These distinct but complimentary services will have benchmarked customer service, something that the industry is not known for having. QDAR will be led by a seasoned management team of four, all of whom have extensive industry experience. QDAR has forecasted sales of $9.1 million for year one, $11.3 million for year two, and $13.3 million for year three.
Highlights
1.1 Mission
Dirty Auto Repair aims to offer high-quality auto repair services and a full range of auto parts. QDAR focuses on personalized service to its customers by offering convenience and rapid service. Additionally, QDAR is technologically savvy with computerized monitoring of all parts inventory, to ensure that parts are always in stock, while keeping a balanced level of inventory to maximize inventory turnover. Finally, QDAR has strong vendor relationships with the most service conscious vendors who are capable of shipping major parts rapidly (on an overnight timeline in most cases).
1.2 Keys To SuccessQDAR's keys to success will include:
- Expedient and convenient auto repair services.
- Growing and maintaining a referral network of local towing service companies.
- A wide range of auto parts inventory that is (nearly) never out of stock.
- Rapid order and delivery of major auto parts items.
2.0 Company Summary
Quick and Dirty Auto Repair is a new start-up incorporated business managed by four partners. Three of the four partners represent sales/management, and one focuses on the finance/administration section of the business.
The economic growth of the last several years has resulted in increased disposable income. Many people have chosen to spend part of their increased income on their automobiles. As a result, the need for reliable and convenient auto services has substantially risen as well. QDAR will position itself to capitalize on the growing need of the middle and upper class market for quality auto service in the Portland metropolitan area. The company will be privately owned by four co-owners, with most of the additional funding coming from a ten year SBA loan.
2.1 Company OwnershipQDAR is incorporated in the state of Oregon. It is privately owned by Jake Braques, Blair Horne, Hyugo Ford and Gaz Môder. To attract additional financing, the owners may consider taking QDAR public several years down the road.
2.2 Company HistoryQDAR is a new start-up company. The company management team has strong industry experience and a clear vision of how QDAR will position itself in the local market.
3.0 Start-up Summary
Each of the four co-owners will invest $62,500. The remainder of the required financing will come from a ten year Small Business Administration (SBA) loan in the amount of $250,000 and a short-term loan in the amount of $55,000. Total loss at start-up is $5,000. The following chart and table show projected initial start-up costs for QDAR.
| Start-up | |
| Requirements | |
| Start-up Expenses | |
| Legal | $3,000 |
| Other | $2,000 |
| Total Start-up Expenses | $5,000 |
| Start-up Assets Needed | |
| Cash Balance on Starting Date | $100,000 |
| Start-up Inventory | $50,000 |
| Other Current Assets | $50,000 |
| Total Current Assets | $200,000 |
| Long-term Assets | $350,000 |
| Total Assets | $550,000 |
| Total Requirements | $555,000 |
| Funding | |
| Investment | |
| Jake Brakes | $62,500 |
| Blair Horn | $62,500 |
| Yugo Ford | $62,500 |
| Gaz Motor | $62,500 |
| Total Investment | $250,000 |
| Current Liabilities | |
| Accounts Payable | $0 |
| Current Borrowing | $55,000 |
| Other Current Liabilities | $0 |
| Current Liabilities | $55,000 |
| Long-term Liabilities | $250,000 |
| Total Liabilities | $305,000 |
| Loss at Start-up | ($5,000) |
| Total Capital | $245,000 |
| Total Capital and Liabilities | $550,000 |
Start-up
4.0 Products and Services
QDAR has the core competencies amongst its large crew to work on all makes and models of domestic and foreign vehicles. With ten service bays at each location, and all employees focused on superior customer service, quick turnaround is always the standard at QDAR. QDAR strives to be accurate and honest with customers in terms of quoting cost estimates and repair completion time estimates. QDAR employees focus on delivering what they promise. This focus on building strong customer relationships based on trust and integrity will be the catalyst in establishing a strong regular customer base.
QDAR utilizes the highest degree of technology in managing a full range of auto parts inventory. The goal is to never be out of a specific part, while maximizing inventory turnover. Strong vendor relationships have been established with the most reputable vendors in terms of shipping time of major parts.
5.0 Market Analysis
QDAR has a focus on meeting the demand of a regular local resident customer base, as well as towed vehicle drop-ins from local and freeway traffic traveling on nearby freeways. QDAR has established relationships with a few major local tow truck companies for referral business of stalled vehicles requiring a tow to an auto repair facility.
The company estimates that about 80% of revenues will come from the established local clientele and 20% from the tow-ins local and freeway traffic. The table below further estimates the total market potential of type of services rendered by QDAR in Portland metropolitan area.
Market Analysis (Pie)
| Market Analysis | |||||||
| Potential Customers | Growth | 2001 | 2002 | 2003 | 2004 | 2005 | CAGR |
| Local Residents | 15% | 50,000 | 57,500 | 66,125 | 76,044 | 87,451 | 15.00% |
| Freeway Traffic | 10% | 20,000 | 22,000 | 24,200 | 26,620 | 29,282 | 10.00% |
| Other | 0% | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Total | 13.64% | 70,000 | 79,500 | 90,325 | 102,664 | 116,733 | 13.64% |
The market of auto repair services and parts sales is very fragmented. The majority of auto shops usually offer either repair services or parts inventory. The niche where QDAR positions itself represents auto centers that offer both auto services and parts at one convenient location. Middle and upper class customers to whom QDAR will cater its services are less price sensitive as they value the convenience of quick turnaround (on any model/make of car) and high quality of services.
5.2 Market SegmentationQDAR focuses on the middle and upper income markets. This market looks for high quality, rapid service with as much convenience as possible. Most individuals in this market segment are willing to pay an extra premium within the pricing of auto repair services to avoid the common inconveniences of having a vehicle tied up in a repair shop.
Local residents regular customer baseQDAR wants to establish a significantly large regular customer base. This will establish a healthy, consistent revenue base to ensure stability of the business.
Emergency towing local and freeway trafficEmergency towing of local and freeway traffic comprises approximately 20% of revenues. Convenience, regular referrals from tow truck companies, and high quality, rapid service are critical to capture this segment of the market.
5.3 Target Market Segment StrategyQDAR will focus on its target market, the middle and upper class market, and establish a reputable image from that target market's perspective, by offering convenience, expedient auto repair services, customer service excellence, and by working with local towing companies.
5.4 Market NeedsBetween having a high level of commuting traffic, and an equally high level of tourism traffic on local highways, there is a constant significant demand for auto repair services and auto parts. Convenience is a must for most middle and upper class consumers and travelers.
5.5 Competition and Buying PatternsQDAR faces over 400 auto repair and auto parts competitors in the local area. Only a quarter of these competitors offer both auto repair services and auto parts inventories. Among these, only a few are major national chains. The remainder are small privately-owned establishments. QDAR will compete well by focusing on convenience and offering a high level of customer service. Additionally, its honest reputation will be a major factor in repeat business and building a large base of regular, loyal customers.
Primary competitors are engaged principally in the retail sale of automotive parts, tires and accessories, automotive maintenance and service and the installation of parts. Larger competitors have adopted the "supercenter" store model, a freestanding, "one-stop" shopping automotive warehouse that features state-of-the-art service bays. These "supercenters" carry thousands of stock-keeping units and serve the automotive aftermarket needs of the "do-it-yourself," the "do-it-for-me" (automotive service), tire and "buy-for-resale" customer sectors.
Large competitors' stores typically carry the same basic product line, with variations based on the number and type of cars registered in the different markets. A full complement of inventory at a typical supercenter includes an average of approximately 25,000 items.
Automotive product lines usually include:
- Tires.
- Batteries.
- New and remanufactured parts for domestic and imported cars, including:
- Suspension parts.
- Ignition parts.
- Exhaust systems.
- Engines and engine parts.
- Oil and air filters, belts, hoses, and air conditioning parts.
- Lighting.
- Wiper blades.
- brake parts.
- Chemicals, including oil, antifreeze, polishes, additives, cleansers and paints.
- Mobile electronics, including sound systems, alarms, and remote vehicle starters.
- Car accessories, including seat covers, floor mats, and exterior accessories.
- Hand tools, including sockets, wrenches, ratchets, paint and body tools, jacks and lift equipment, automotive specialty tools and test gauges.
- A selection of truck, van, and sport utility vehicle accessories.
Many competitors have adopted point-of-sale systems in their stores, which gathers sales and gross profit data by a stock-keeping unit from each store on a daily basis. This information is then used to help formulate pricing, marketing and merchandising strategies. Electronic parts catalogs are available in many competitor stores along electronic commercial invoicing systems that offer commercial parts delivery.
Additionally, a number of competitors have electronic work order systems available amongst their various service centers. This type of system creates a service history for each vehicle, provides customers with a comprehensive sales document, and enables the service center to maintain a service customer database.
6.0 Strategy and Implementation
QDAR will succeed by offering its customers high-quality, rapid, and convenient auto repair service. Additionally, QDAR will succeed by ensuring a full range of auto parts inventory and rapid shipping capability of major auto parts.
6.1 Competitive EdgeQDAR's competitive edge is the heavy focus on customer convenience by offering unlimited shuttle service, rapid turnaround on auto repair jobs, and a referral network of a few local major tow truck companies.
6.2 Sales StrategyQDAR will focus its sales strategy on effectively reaching the target customer segment of upper and middle class customers. For this purposes, the company will employ direct sales staff. At the same time, the company will further strengthen its relationships with the tow truck companies to capture auto repair needs of the local and highway traffic.
As the chart and table show, QDAR plans to deliver sales of about $9.5M in the first year, $11.3M in the second year, and $13.3M in the third year of the plan.
Sales by Year
| Sales Forecast | |||
| Unit Sales | 2001 | 2002 | 2003 |
| Auto Repair Jobs | 16,800 | 18,900 | 21,263 |
| Auto Parts | 75,000 | 84,375 | 94,922 |
| Other | 0 | 0 | 0 |
| Total Unit Sales | 91,800 | 103,275 | 116,184 |
| Unit Prices | 2001 | 2002 | 2003 |
| Auto Repair Jobs | $300.00 | $315.00 | $330.75 |
| Auto Parts | $60.00 | $63.00 | $66.15 |
| Other | $0.00 | $0.00 | $0.00 |
| Sales | |||
| Auto Repair Jobs | $5,040,000 | $5,953,500 | $7,032,572 |
| Auto Parts | $4,500,000 | $5,315,625 | $6,279,082 |
| Other | $0 | $0 | $0 |
| Total Sales | $9,540,000 | $11,269,125 | $13,311,654 |
| Direct Unit Costs | 2001 | 2002 | 2003 |
| Auto Repair Jobs | $100.00 | $105.00 | $110.25 |
| Auto Parts | $30.00 | $31.50 | $33.08 |
| Other | $0.00 | $0.00 | $0.00 |
| Direct Cost of Sales | 2001 | 2002 | 2003 |
| Auto Repair Jobs | $1,680,000 | $1,984,500 | $2,344,191 |
| Auto Parts | $2,250,000 | $2,657,813 | $3,139,541 |
| Other | $0 | $0 | $0 |
| Subtotal Direct Cost of Sales | $3,930,000 | $4,642,313 | $5,483,732 |
7.0 Management Summary
Jake Braques, Blair Horne, and Hyugo Ford have 40 years of combined experience in sales, marketing, and management within the auto repair and auto parts industries. Gaz Môder has ten years of experience in the arena of finance and administration, also within the auto repair and auto parts industries.
7.1 Personnel PlanAs the personnel plan shows, QDAR expects to make gradual investments in staffing as several new facilities are opened over the next ten years.
| Personnel Plan | |||
| 2001 | 2002 | 2003 | |
| Owners | $320,000 | $336,000 | $352,800 |
| Managers | $135,000 | $141,750 | $148,838 |
| Mechanics | $3,150,000 | $3,307,511 | $3,472,897 |
| Customer Service Associates | $270,000 | $283,503 | $297,681 |
| Sales & Administrative | $440,000 | $462,003 | $485,106 |
| Total People | 120 | 136 | 152 |
| Total Payroll | $4,315,000 | $4,530,767 | $4,757,322 |
8.0 Financial Plan
QDAR expects to raise $250,000 of its own capital, and to borrow $250,000 guaranteed by the SBA as a ten year loan. This provides the bulk of the current financing required.
8.1 Break-even AnalysisQDAR's break-even analysis is based on the averages of the first-year figures for total sales by units, and for operating expenses. These are presented as per-unit revenue, per-unit cost, and fixed costs. These conservative assumptions make for a more accurate estimate of real risk.
Break-even Analysis
| Break-even Analysis: | |
| Monthly Units Break-even | 6,969 |
| Monthly Revenue Break-even | $724,211 |
| Assumptions: | |
| Average Per-Unit Revenue | $103.92 |
| Average Per-Unit Variable Cost | $42.81 |
| Estimated Monthly Fixed Cost | $425,871 |
As the profit and loss table shows, QDAR expects to continue its steady growth in profitability over the next three years of operations.
| Pro Forma Profit and Loss | |||
| 2001 | 2002 | 2003 | |
| Sales | $9,540,000 | $11,269,125 | $13,311,654 |
| Direct Costs of Goods | $3,930,000 | $4,642,313 | $5,483,732 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Cost of Goods Sold | $3,930,000 | $4,642,313 | $5,483,732 |
| Gross Margin | $5,610,000 | $6,626,813 | $7,827,922 |
| Gross Margin % | 58.81% | 58.81% | 58.81% |
| Expenses: | |||
| Payroll | $4,315,000 | $4,530,767 | $4,757,322 |
| Sales and Marketing and Other Expenses | $27,000 | $35,830 | $72,122 |
| Depreciation | $120,000 | $138,000 | $158,700 |
| Utilities | $1,200 | $1,260 | $1,323 |
| Payroll Taxes | $647,250 | $679,615 | $713,598 |
| Other | $0 | $0 | $0 |
| ------------ | ------------ | ------------ | |
| Total Operating Expenses | $5,110,450 | $5,385,472 | $5,703,065 |
| Profit Before Interest and Taxes | $499,550 | $1,241,341 | $2,124,858 |
| Interest Expense | $26,748 | $22,467 | $20,217 |
| Taxes Incurred | $120,157 | $304,719 | $534,930 |
| Net Profit | $352,645 | $914,156 | $1,569,711 |
| Net Profit/Sales | 3.70% | 8.11% | 11.79% |
The cash flow projection shows that provisions for ongoing expenses are adequate to meet QDAR's needs as the business generates cash flow sufficient to support operations.
The short-term $55,000 loan is expected to be paid out within one year, while a $250,000 SBA loan will be repaid in ten years.
Cash
| Pro Forma Cash Flow | |||
| 2001 | 2002 | 2003 | |
| Cash Received | |||
| Cash from Operations: | |||
| Cash Sales | $9,540,000 | $11,269,125 | $13,311,654 |
| Cash from Receivables | $0 | $0 | $0 |
| Subtotal Cash from Operations | $9,540,000 | $11,269,125 | $13,311,654 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| Subtotal Cash Received | $9,540,000 | $11,269,125 | $13,311,654 |
| Expenditures | 2001 | 2002 | 2003 |
| Expenditures from Operations: | |||
| Cash Spending | $492,065 | $572,595 | $694,367 |
| Payment of Accounts Payable | $8,516,341 | $9,648,672 | $10,875,732 |
| Subtotal Spent on Operations | $9,008,405 | $10,221,266 | $11,570,099 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $55,000 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $15,335 | $20,000 | $25,000 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $540,000 | $660,000 | $770,000 |
| Dividends | $0 | $0 | $0 |
| Subtotal Cash Spent | $9,618,740 | $10,901,266 | $12,365,099 |
| Net Cash Flow | ($78,740) | $367,859 | $946,555 |
| Cash Balance | $21,260 | $389,118 | $1,335,673 |
QDAR's projected company balance sheet follows.
| Pro Forma Balance Sheet | |||
| Assets | |||
| Current Assets | 2001 | 2002 | 2003 |
| Cash | $21,260 | $389,118 | $1,335,673 |
| Inventory | $327,500 | $386,859 | $456,978 |
| Other Current Assets | $50,000 | $50,000 | $50,000 |
| Total Current Assets | $398,760 | $825,978 | $1,842,651 |
| Long-term Assets | |||
| Long-term Assets | $890,000 | $1,550,000 | $2,320,000 |
| Accumulated Depreciation | $120,000 | $258,000 | $416,700 |
| Total Long-term Assets | $770,000 | $1,292,000 | $1,903,300 |
| Total Assets | $1,168,760 | $2,117,978 | $3,745,951 |
| Liabilities and Capital | |||
| Current Liabilities | 2001 | 2002 | 2003 |
| Accounts Payable | $336,450 | $391,512 | $474,774 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| Subtotal Current Liabilities | $336,450 | $391,512 | $474,774 |
| Long-term Liabilities | $234,665 | $214,665 | $189,665 |
| Total Liabilities | $571,115 | $606,177 | $664,439 |
| Paid-in Capital | $250,000 | $250,000 | $250,000 |
| Retained Earnings | ($5,000) | $347,645 | $1,261,800 |
| Earnings | $352,645 | $914,156 | $1,569,711 |
| Total Capital | $597,645 | $1,511,800 | $3,081,512 |
| Total Liabilities and Capital | $1,168,760 | $2,117,978 | $3,745,951 |
| Net Worth | $597,645 | $1,511,800 | $3,081,512 |
The following table outlines some of the more important business ratios for the auto repair industry, as described by the Standard Industry Classifications (SIC) Index code 7538, General Automotive Repair Shops.
| Ratio Analysis | ||||
| 2001 | 2002 | 2003 | Industry Profile | |
| Sales Growth | 0.00% | 18.13% | 18.13% | 7.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 0.00% | 0.00% | 0.00% | 8.80% |
| Inventory | 28.02% | 18.27% | 12.20% | 9.60% |
| Other Current Assets | 4.28% | 2.36% | 1.33% | 23.80% |
| Total Current Assets | 34.12% | 39.00% | 49.19% | 42.20% |
| Long-term Assets | 65.88% | 61.00% | 50.81% | 57.80% |
| Total Assets | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 28.79% | 18.49% | 12.67% | 34.80% |
| Long-term Liabilities | 20.08% | 10.14% | 5.06% | 24.70% |
| Total Liabilities | 48.87% | 28.62% | 17.74% | 59.50% |
| Net Worth | 51.13% | 71.38% | 82.26% | 40.50% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 58.81% | 58.81% | 58.81% | 0.00% |
| Selling, General & Administrative Expenses | 55.09% | 50.69% | 46.95% | 75.20% |
| Advertising Expenses | 0.03% | 0.09% | 0.34% | 1.30% |
| Profit Before Interest and Taxes | 5.24% | 11.02% | 15.96% | 1.70% |
| Main Ratios | ||||
| Current | 1.19 | 2.11 | 3.88 | 1.17 |
| Quick | 0.21 | 1.12 | 2.92 | 0.65 |
| Total Debt to Total Assets | 48.87% | 28.62% | 17.74% | 59.50% |
| Pre-tax Return on Net Worth | 79.11% | 80.62% | 68.30% | 1.80% |
| Pre-tax Return on Assets | 40.45% | 57.55% | 56.18% | 4.60% |
| Additional Ratios | 2001 | 2002 | 2003 | |
| Net Profit Margin | 3.70% | 8.11% | 11.79% | n.a |
| Return on Equity | 59.01% | 60.47% | 50.94% | n.a |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 0.00 | 0.00 | 0.00 | n.a |
| Collection Days | 0 | 0 | 0 | n.a |
| Inventory Turnover | 12.00 | 13.00 | 13.00 | n.a |
| Accounts Payable Turnover | 26.31 | 24.79 | 23.08 | n.a |
| Payment Days | 14 | 14 | 14 | n.a |
| Total Asset Turnover | 8.16 | 5.32 | 3.55 | n.a |
| Debt Ratios | ||||
| Debt to Net Worth | 0.96 | 0.40 | 0.22 | n.a |
| Current Liab. to Liab. | 0.59 | 0.65 | 0.71 | n.a |
| Liquidity Ratios | ||||
| Net Working Capital | $62,310 | $434,465 | $1,367,877 | n.a |
| Interest Coverage | 18.68 | 55.25 | 105.11 | n.a |
| Additional Ratios | ||||
| Assets to Sales | 0.12 | 0.19 | 0.28 | n.a |
| Current Debt/Total Assets | 29% | 18% | 13% | n.a |
| Acid Test | 0.21 | 1.12 | 2.92 | n.a |
| Sales/Net Worth | 15.96 | 7.45 | 4.32 | n.a |
| Dividend Payout | 0.00 | 0.00 | 0.00 | n.a |
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