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Are Oil Change Businesses Profitable?

November 29, 2020 295 views

How Profitable Can An Oil Change Business Be?

If you’re interested in an oil change business’s profitability, this post will offer some insights into the topic.

The main concept about profitability is you have to look at it from two perspectives.

One is your profit per sale, and the other is your overall business profitability.

Profit Per Sale:

Your profit per sale can be determined by the average rate.

Looking at information posted on MTD, the average profit of an oil change is around 35%.

Looking at the data from the Viocfranchise website, according to their numbers, you can average 40 oil changes per day.

At an average of $70 per customer, it gives you a revenue of $2,800 per day. You take $2,800 and multiply that by 35%, which would give you an average daily profit of $980.

Keep in mind 40 oil changes a day results in 5 an hour, which means you would need to be in a relatively busy area.

You have to keep in mind that’s based on the data available and optimal situations. Your business profitability is defined by a lot of other factors. Let’s go over a few of the scenarios.

Overall Business Profitability:

Factors Affecting Oil Change Business Profits

Your Debt:

The debt you carry for your business will cut into your profits. For example, if you owe $300,000 at 3.5% interest, your interest payments alone are $875 per month. The more debt you carry, the less profit you’ll have.

Sales:

Your sales are a big factor in your profitability. If you’re making 100 percent profit from every sale and only have one sale a day, your overall business profit will be in the red. High profits without sales won’t do you any good. The volume of sales is an important part of your overall profit.

Your sales will also depend on many factors. These factors include; your customer service, people skills, pricing, location, marketing, and demand for your service.

Crew Size:

The number of employees on your payroll has a large effect on your profits. Imagine a two-bay oil change operation running 8 hours, and you have 4 techs on staff and a business manager. Most of your profits would go towards payroll. Whenever hiring an employee, you need to look at the big picture. For more on this topic see, How and When to Hire a New Employee

Size:

The size of your business plays a part in your profits. If you have a 10-bay garage and you only have enough business to keep 3-bays busy, then you have a lot of extra expense for nothing.

On the other hand, if you have a one-bay garage and a lot of business, then you have people lined up for their oil change, and you lose a lot of customers because they don’t want to wait.

In both the above scenarios, profits are lost. It’s important to plan the size of your shop accordingly.

Expenses:

Your monthly expenses are one of the most important factors affecting your overall profit margin: the higher your expenses, the lower your profits. High monthly expenses are one of the reasons a business fails.

Imagine bringing in $100,000 a month, and your expenses are $102,000 for the month. It’s not a profitable scenario.

One of your most important responsibilities is to keep your expenses to a minimum as a business owner. That applies if you’re just starting out or if you have been in business for a while.

For More How to Start an Oil Change Business Using These Resources