A Quick Overview of the Auto Parts Business
To be successful in an auto parts business, you need to be able to provide quality parts to dealers and customers. With this type of business, you have a wide assortment of parts in the market for all the different vehicles available.
Unless you have a franchise, you may want to specialize in a niche — for example, you could cut down the variety by only dealing in imports. You may even minimize the type by only offering parts for a manufacturer or two. If you are in the European market, you may choose Mercedes and BMW.
This will allow you to carry more stock and ensure you have most of the parts when needed. Another issue is for parts that you don’t keep in stock — you need to find parts manufacturers that can do overnight shipping.
Your success depends on getting the right parts to your customers as soon as possible.
Skill Set and Traits:
- Vast knowledge of automotive parts.
- Knowledge of common automotive problems is a plus.
- Common business skills
Hours of Operation:
Usually, the hours of a parts store are 9-5, but there may be more exceptions if service shops in the area have longer hours. This depends on the service shops.
- POS system
- Inventory system
Monthly Expenses and Operating Costs To Consider:
In addition to our list of common business expenses, your auto parts store will require a budget for maintaining your inventory.
- Offer something like “delivered in a half hour or it’s free.” When a garage is waiting on parts, it’s costing them downtime — because the vehicle is usually on the hoist — that they could be using to finish another job.
- You could offer a “test it” price. For example, often, mechanics install a new part, but that doesn’t solve the problem. So, instead of charging the customer, they could return the original part and only pay a restocking fee, and you could sell the part less the restocking fee.
- You could keep stock numbers for your customers to keep track of each warranty for your repair shops. Often, the mechanic doesn’t have accurate records, and the customer doesn’t either.
Pros and Cons:
See Our List of the Latest Business IdeasThanks for dropping by. Before you leave be sure to have a look at our list of the newest business ideas to spark your creativity.
- If you’re an auto enthusiast, this is a clean way to stay connected in the industry.
- Auto parts are like food — people need to buy them in any economy.
- There are hundreds of thousands of different parts.
- Keeping sufficient stock can be challenging and expensive.
- With a vast amount of parts, your product knowledge can be challenging.
Profitability and Revenue:
Your profit and revenue depend on your location, your marketing, and your service. If you make 100% profit and have no sales, then that’s not a good business model.
If you get a loan for $500,000, in addition to monthly expenses, you also have high loan payments, which can make your profitability even tougher.
To have a profitable auto parts business, consider the following:
- Make sure you have a suitable location.
- Have excellent cash flow.
- Keep your costs to a minimum.
- Good marketing practices.
- Provide excellent customer service.
- Have the popular repair parts in stock
- Provide overnight delivery for parts that are not hot sellers.
Start-up Cost Considerations:
Your start-up cost for an auto parts store depends on many factors. It depends on the following.
Your store location:
Leasing or buying a storefront in a high-traffic area will cost a lot more compared to a less than prime area. This being said, you can locate in a less than prime area if you offer delivery services to local repair shops. But, you will miss out on walk-in traffic.
The amount of stock you keep:
Imagine having thousands of parts in stock and paying an average of $50 per part. You would be talking about thousands and thousands of dollars sitting on your shelves.
Your inventory will be one of your highest start-up costs to consider. On the other hand, if you keep your parts on consignment, your profit margin may be lower, but your start-up cost will be significantly reduced.
The Number of Employees You Hire:
If you are going to do all the work yourself versus hiring employees, it will make a big difference in your weekly expenses. Consider at least one person to make deliveries and one to be in the store at all times.
Full-Time or Part-Time Business:
This type of business needs to be full-time.
This type of business is not suited to a home-based business.
Starting an Auto Parts Business
Some of the steps you’ll need to address include the following:
- Researching Your Business Idea
- Writing a Business Plan
- Funding Your Business
- Choose a Location
- Choose a Business Name
- Define the Type of Company You Will Form
- Get Your Tax ID
- Get Special Permits
- Hiring Employees
- Marketing Your Business
For all the details to the above sections and more, see The Essential Steps To Start a Business for all the details you’ll need.