Looking to buy aouto body shop
I am looking at an auto body and paint shop to buy. I have no experience in autos or auto body shops. It appears to be a good deal so far, but am I barking up the wrong tree believing I can step in as a new owner and running a successful shop?
Thanks for any feedback......
its a great business to get into if you can get the client el. I firmly believe anyone looking to run a body shop should have some hands on experience though.
Reason i say that is if you dont...how are you going to know if your workers are doing the right thing?
Alot of these guys in the industry are butchers and they just want to get the job done as soon as possible...and they will sacrifice the finished product.. and if your not familiar with how the job should be correctly done...how are you going to know?
Just my .02.
I know guys who have had gigantic shops and were extremely successful...but they hired a manager who did have hands on experience.
Just something to consider...there are alot of other businesses to get into that are a hell of alot easier on your body and less stressful. Such as a pizza shop...bagel shop..coffe shop..etc. Running a bodyshop isnt so easy, but it can be very rewarding if you know what your doing.
What kind of experience do you have? Management? Repairer?
Originally Posted by AutoBodyNewbie
Is it a successful shop? DRP? Specialized?
Do any techs come with the facility?
Is it in a business location or is there private residences nearby?
Will the income keep up with the overhead?
Do all the tools and equipment come with the shop or do you need to bring everything with you?
It has 3 full time employees. I have not be able to look at the deal completely yet but it has been around in the same location for 20 years on a very busy street in San Diego. Without looking at the numbers yet the broker told me they have been very consistant generating total revenues of about $500k a year. Here is a quick breakdown:
Owners Cash Flow: $147,000
FF&E: $91,000 (included in the asking price)
Inventory: $40,000 (included in the asking price)
Year Established: 1986
Employees: 3 f/t
Facilities: Leased location of 4,600 sq ft with a total rent of $4,900. Seller is active in the business with 3 F/T employees. $15,000 Leasehold Improvements.
The owner lost his BAR certificate as they did an audit over the past 3 years and found 5 violations. He has had to close the shop to the public and wants to sell quickly. Its been closed for 2 days. I was told that he used the previous owner license who had done shoddy work but because he used the former owner license that the trouble followed the new owner. I've been told all I have to do is apply for a new license to open the doors. It appears everything is included in the sale.
I've run successful businesses in the past but at first glance the deal looks very interesting as I do not have to put up much money and the owner will carry most of the financing.
Without any experience is there a possiblity for success here?
Thank you for all your feedback.
Originally Posted by Len
I'll preface my comments by saying that I don't own a body shop. But I did leave a prosperous career in health care management to buy an auto repair and towing business without any prior experience in those fields. I'm a decent R&R mechanic, but I don't have the diagnostic skills to run a shop by myself. I actually hired the previous owner to work as my mechanic for three years. With an experienced mechanic on board, managing the business wasn't very difficult (it was much easier than managing a physician practice). After three years, the previous owner wanted to completely retire. I closed the auto repair portion of the business in favor of doing vintage Mustang restorations, which is what I've always wanted to do.
There are a lot of ways to structure a business purchase. They are asking $219k in goodwill (sale price above the cost of the assets). When I bought my business, I bought the assets outright and worked a deal to pay the owner, for 5 years, a percentage of monthly revenue above a predetermined amount in lieu of a fixed price for goodwill. If that amount was met on an average monthly basis, he would receive his asking price. If it exceeds that amount, he actually has upside potential. But most importantly, if it doesn't continue to generate the monthly threshold, then you don't go under trying to pay for blue sky. In my case, it was a strong motivator for the previous owner to accept an employment arrangement, which was very beneficial in continuing the business' success after the sale. See if you can get the owner to stay on board for 6-12 months.
In the last year or so, I have started doing my own paint and body work on the cars I restore. Efficient auto body technicians also have a lot of experience. Note that I used the word efficient, which is what I consider to be an optimal combination of good results and fast work. As I get better with the paint and body work, I have been very pleased with my results. However, I'm still way too slow to be able to make a living in a production shop. I only take on one car at a time, and I charge my customers by the job with the understanding that the work will take longer than if they took it to a production shop (the last car I finished took 2 years). If you are resourceful, learning the correct way to do things will not be too difficult. Remember, though, knowing the right way and being able to do the work are worlds apart, so make sure you can retain the services of key existing employees.
I'm not sure I believe that the owner is taking home 29% of his gross revenues (I would have to see audited books and income tax returns), so I believe I would lower my income expectations. However, from an operational standpoint, if you have good business management skills, this is doable in my opinion .
That's enough to make me walk away, running a bodyshop in Cali?????
Originally Posted by AutoBodyNewbie
I take it San Diego is a poor choice? Could you explain why? Thanks.........
Originally Posted by ZRX61
Not just San Diego, California in general. The amount of govt agencies you'l have to deal with just on enviromental issues alone would make Cali a bad choice.. & then add in the fact that some of the better paints etc that the rest of the country use are outlawed in this State.
Originally Posted by AutoBodyNewbie
It's so bad in this State that Baghdad would probably be an easier location to set up business.
San Diego is a nice place tho & there'd be no shortage of illegal aliens to do the prep work etc at $6/hour.
Originally Posted by ZRX61
SD or any SoCal location is a decent deal- IF everything is legit. Try openening a NEW shop in CA-it's almost impossible. Make sure ALL the licensing is in place & permitted. Yeah- you have more regs to deal with in CA, but you've got millions of potential customers to draw from. Like I said-trying to start a new shop in CA is a 3 year & $$$$ expensive proposition to delve into. Talk to the major paint jobbers in the area-they know where the bodies are buried, & ask lots of questions. Hire an attorney to review lease & zoning issues. Do your homework & keep your eyes open. Good luck.
I agree with Jimmy, buying that business without doing extensive research into the background of that particular business could be like walking out in a mine field. If the guy dumped refuse paint thinner out the back door into the ground and the EPA got wind of that (especially in California) it could end up costing you a fortune to decontaminate the ground. If business owes tax money to the IRS or the State Taxes then make sure that debt isn't transferable to you as the new business owner. Check with the country or township clerk and find out if there is Leins against the business. Check to make sure there are no ongoing lawsuits against the business. I've been in this business for many years and I have heard some real horror stories about taking over an existing business. Definately get a realestate attorney invovled if you are serious about running that business. I have seen in the past people run autobody/paint shops that had no prior experience in this business and did really well. In fact there are a LOT Of professional bodymen and painters who in no way could run a profitable auto body business, they just can't handle the paper work. Having a background in business and management gives you a real leg up in running a profitable shop. jYou would have to hire a bodyshop forman that could handle the normal day to day hands on running of the shop itself while you do all the paper work. Treat the bodymen well and they will be loyal to you (in most cases, hehehe). Some are thieves who will carry out the bodyshop materials out the back door as fast as you pay to have those materials brought in the front door. Sometimes running an autobody/paint shop is like being in a soap opera. anyway, if you do your homework as far as the legal background of the business you will probably do fine.
The bad is that if/when they outlaw enamels and go water based California will be the first. Basically any type of environmental regulation will hit Cali first...ie;ca emmision approved vs 50 state approved. I hope it works out for you. you should have someone you trust in there. Just the otherday some guys showed me a pull. I already did one in school but it was still
a good learning experience. Basically what they did was made a print out
of the damaged specs and then printed another after propping the targets to show that it was within 3 mil, which is in spec. They did the pull but did not do the pull with the targets on and giving a live reading.I think they only did the pull to make it look like it was straight in the engine bay, and to also straighten out the frame horn. I was really letdown by this.
Anyways, my point is that I'm not sure if the boss even knows about this. So I'd say you need a guy close that you can trust and help teach you the ropes as well as telling you everything that goes on in the shop area. The painter would be a good guy. Not only does the repair have to be good now, it has to be good down the road, and there are serious lawsuits that can arise from shoddy work.
Is where I work every day in all kinds of shops that are making money. We don't have anything like the regulation they deal with in Europe and believe it or not, the licence inspector can be your best friend. Those guys can tell you if the contractor you hired is doing the job the way it should be done or not. They can also act as advisers about how to set things so the shop works better since they're in shops every day. The problem might be having to wait for one. I've had some great conversations regarding water run off with some of the guys from the tougher area and dealing with it isn't going to be anything like as tough as people think - and BTW, I think it's past time we cleaned up that part of our act.
I'd rather see a shop in operation for a few weeks, just dropping in casually to see what the guys are doing and how they're doing it. The real asset in a business around here is the guys that are going to be doing the work. What kind of attitudes do they have, do they spend their time listening to the radio and talking on their cell phones or are they focused on the work? Do they keep the place clean or trash it? Do they walk around with intention or like they've gotten lost and just ended up in that shop?
Overall it doesn't sound like a business I'd be interested in, that one specifically, but body shops can and do make money and those that are managed right make good money.