Taking Over "volume" Business - Possible to Profit on $100 Dealer Jobs?

As I prepare to launch a `high end` detail studio in a medium-sized city, the other big shop in town informs me that they`re wanting to focus on resprays and get out of cleaning/detailing. They`re willing to (for a price) transfer all of the detailing contracts/jobs to me over the next few months, and they`re the go-to shop for a majority of the dealership cars in town that don`t get detailed in-house. They do 60-100 cars a month. Sounds too good to be true? It might be.



They use all carbrite products, and cut corners like crazy, and they have 2-3 hires getting 3-5 cars done a day, and they charge dealerships $100 per car, regardless of size or condition. I hear on these forums that volume is the key to making good money, but on such slim margins, that`s a massive amount of work to do a mediocre job for very slim margins. I have no interest in doing crappy work on crappy cars 24/7 to make minimum wage.



I`d be curious your suggestions on whether I should just start organically and target the individual customer (I`m proficient with multimedia production, web design, and social media so marketing to todays` marketplace is a strength), or if there`s a way to take over those dealership relationships and adjust the operations to become significantly more profitable. I wouldn`t imagine taking over and then going to the dealerships and saying "okay, increasing prices 50%" would go over well - or perhaps it would work just fine?



It will be me and one other guy who is trustworthy, intelligent, and hard-working.



I truly appreciate and value your opinions, wisdom, and insights! Thank you in advance!

The argument could be made that if they are no longer offering the service that you can offer, you go and earn that business and not pay anyone for it.

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Originally Posted by Jean-Claude

The argument could be made that if they are no longer offering the service that you can offer, you go and earn that business and not pay anyone for it.

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I`m wondering even if he gave the business to me for free, whether it`s worth trying to make that reasonably profitable. At $100 a car, if I got it down to 4 man-hours per car, after rent/utilities, I`m still netting minimum wage to work on dealership cars. I know I have to be missing something if the money truly is in `volume`.

The other problem is becoming reliant on those dealerships for business. There will come a day when someone undercuts your and the dealerships go there. Will you still have enough business to stay profitable? You would have to find a way to make it profitable enough per vehicle. Great opportunity, but don`t put all your eggs in one basket.

60-100 cars per month is great fill in work and you can still focus on high end work too. The volume work is what puts food on the table and pays the bills. The high end stuff...well, it`s not quite as profitable. :)



Dealer work can grow into something huge! It can attract other dealers, other departments within the same dealership (body shop/new cars) and can also plant you firmly in the event you`re attempting to launch another business to dealers such as coatings, lot washing, photography of used cars & even PDR/Interior repair.

Even if you do 100 cars every month, that`s only $10K. If you`re operating a fixed location that likely won`t even cover your fixed costs. That is a lot of hustling for maybe not turning a profit. It certainly helps if you have a dealership for keeping you busy, but you will need a few employees to take care of that many cars, manage your invoices, and take care of retail customers.

How the heck is a 2-3 bay/person shop accumulating $10K in fixed costs per month? Assuming that you`re not considering labor as a fixed cost?



Here`s a stab on the high side:



Rent - $1500-2000

GL Insurance - $200

Car Ins - $150

Utilities - $400-$500

Chemicals - $500-$700

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Originally Posted by David Fermani

How the heck is a 2-3 bay/person shop accumulating $10K in fixed costs per month? Assuming that you`re not considering labor as a fixed cost?



Here`s a stab on the high side:



Rent - $1500-2000

GL Insurance - $200

Car Ins - $150

Utilities - $400-$500

Chemicals - $500-$700

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You forgot labor.

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Originally Posted by Ahheck01

As I prepare to launch a `high end` detail studio in a medium-sized city, the other big shop in town informs me that they`re wanting to focus on resprays and get out of cleaning/detailing. They`re willing to (for a price) transfer all of the detailing contracts/jobs to me over the next few months, and they`re the go-to shop for a majority of the dealership cars in town that don`t get detailed in-house. They do 60-100 cars a month. Sounds too good to be true? It might be.



They use all carbrite products, and cut corners like crazy, and they have 2-3 hires getting 3-5 cars done a day, and they charge dealerships $100 per car, regardless of size or condition. I hear on these forums that volume is the key to making good money, but on such slim margins, that`s a massive amount of work to do a mediocre job for very slim margins. I have no interest in doing crappy work on crappy cars 24/7 to make minimum wage.



I`d be curious your suggestions on whether I should just start organically and target the individual customer (I`m proficient with multimedia production, web design, and social media so marketing to todays` marketplace is a strength), or if there`s a way to take over those dealership relationships and adjust the operations to become significantly more profitable. I wouldn`t imagine taking over and then going to the dealerships and saying "okay, increasing prices 50%" would go over well - or perhaps it would work just fine?



It will be me and one other guy who is trustworthy, intelligent, and hard-working.



I truly appreciate and value your opinions, wisdom, and insights! Thank you in advance!

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? $100.00 per car from dealership what services are being done (steps) as far as detailing?

I dont do much dealer work (other than cars for my own dealership), but when I do have dealers send me work I gladly take it. As David said, its great filler work if the dealers are somewhat flexible on turnaround time. If you have hourly employees generating $25 per hour doing the dealer work while you focus on growing the high end side it could be good business.



Are these dealers only willing to pay $100 because the quality of work is only worth $100? Perhaps they would pay more for a higher quality/more thorough detail job? The opportunity to sell additional services is also something to consider...DrivePur, interior repair, paint touch up, windshield chip repair...

I used to get alot of work from one dealer and a little from a couple others when I had my shop. I charged $100 for cars, $125 for SUV`s, it`s all my market would allow. Was a one-step, no correction, shampoo interior, etc, nothing too fancy, but did top notch work and had alot of value into what I did. If they wanted other work, they paid more. The one dealer that sent me alot was the next business over in the same building, so very convenient. Eventually him and the others quickly dropped my services for some hacks down the street that opened up doing **** work for a few bucks less per car. Being mobile now, I don`t do dealer work anymore except maybe here and there when I have downtime with the retail work. As far as profits go, if you do your homework on the numbers, source good high volume chemicals at a good price, have good help, etc, you can do very well, but you have to work hard at it and treat it very differently than the non-wholesale retail work. My shop was low rent, fairly low overhead so it worked out pretty well for a while, but if you`ve got a high overhead location, def do some homework before you take the work.

Quote:

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Originally Posted by David Fermani

How the heck is a 2-3 bay/person shop accumulating $10K in fixed costs per month? Assuming that you`re not considering labor as a fixed cost?



Here`s a stab on the high side:



Rent - $1500-2000

GL Insurance - $200

Car Ins - $150

Utilities - $400-$500

Chemicals - $500-$700

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Not to mention taxes, bookkeeping costs, advertising, uniforms, equipment repairs/purchase, etc. I would think utilities would be a lot more than $400-500, and insurance a lot more than $350 per month. At least in my area!

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Originally Posted by Jean-Claude

You forgot labor.

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Labor is a variable expense. I`d suggest keeping labor below 35%

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Originally Posted by JohnKleven

Not to mention taxes, bookkeeping costs, advertising, uniforms, equipment repairs/purchase, etc. I would think utilities would be a lot more than $400-500, and insurance a lot more than $350 per month. At least in my area!

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Remember, this is a 2-3 person operation doing 100 cars per month. The fixed (and variable) costs associated to run this level of business is totally different than something of your magnitude. Especially when it’s core clients are dealers. I`ll touch on the additionals that you mentioned.



*Taxes – none, unless you own the building

*Bookeeping - $300 per year for an account to prepare your taxes

*Advertising – none needed in a dealer environment

*Uniforms – (variable ) A box of T-shirts - $450 per year with each person getting a total of 10 shirts per year

*Equipment Repairs – (variable) not much equipment needed so I’d imagine costs to maintain them is very low.

*Utilities – depending on the location, you’re biggest expense would be heating your building which is 6 months per year. And keep in mind that this space can’t be that large for 3 work stations and wash bay.

*Insurance – For a business such as this, I think $2000 is plenty for a $1,000,000 GL policy that most dealers require. I would totally agree that a business of your nature would have a lot more exposure and be quite a bit more.



I’d venture to say that the breakeven point of a business doing $10K per month with 3 employees is about $7000 in a modest location operating efficiently.

Quote:

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Originally Posted by David Fermani

Labor is a variable expense. I`d suggest keeping labor below 35%



Remember, this is a 2-3 person operation doing 100 cars per month.



I’d venture to say that the breakeven point of a business doing $10K per month with 3 employees is about $7000 in a modest location operating efficiently.

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It`s actually a 2 person operation doing about 60 cars a month to start off, so let`s start there. $6,000 gross if we go forward with this.



Known monthly expenses:

$1700 rent with utilities included for a 2600sq ft space (part of larger building)

$100 Insurance to cover up to a $150k customer car

$100 Gas to pick up 60 cars a month across town

~$500-800 on Chemicals etc.



So not including people or administrative expenses, that`s $2400-2700 a month off the top.



Starting out, $6k-$2.7k = $3300 per month, which has to cover two people. That`s a tough pill to swallow, especially since it takes so much time and energy away from growing the non-dealership business.



I`m not saying it can`t be done - if I believed that I wouldn`t be here discussing. I`m just trying to find the attraction of this opportunity, and how it can lead to a bigger net profit per hour of work. Right now I think the cost appears to be outweighing the benefit, so I`m just seeing what it would take to tip that scale.



Current Ideas:

1) Increase the prices - Dealerships tend to pay more attention to bottom-line than actual quality of work, so this may lose a significant portion of business, though if a decent amount of business remained, it would make the net hourly much more attractive, allowing us to make decent money with dealerships, but also have time to ramp up client cars.

2) Add-On`s or Up-Sells - I can see how this works with individuals - it`s their car getting the bonus, and they care about it, but where are the best up-sell opportunities with dealerships?

3) Dealership Referrals - If the dealerships like me, then they could possibly refer their customers to me.

4) Other ideas?





I would love to hear your thoughts suggestions and advice on the above. Thanks again for all the input.

Quote:

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Originally Posted by Ahheck01

It`s actually a 2 person operation doing about 60 cars a month to start off, so let`s start there. $6,000 gross if we go forward with this.



Known monthly expenses:

$1700 rent with utilities included for a 2600sq ft space (part of larger building)

$100 Insurance to cover up to a $150k customer car

$100 Gas to pick up 60 cars a month across town

~$500-800 on Chemicals etc.



So not including people or administrative expenses, that`s $2400-2700 a month off the top.



Starting out, $6k-$2.7k = $3300 per month, which has to cover two people. That`s a tough pill to swallow, especially since it takes so much time and energy away from growing the non-dealership business.



I`m not saying it can`t be done - if I believed that I wouldn`t be here discussing. I`m just trying to find the attraction of this opportunity, and how it can lead to a bigger net profit per hour of work. Right now I think the cost appears to be outweighing the benefit, so I`m just seeing what it would take to tip that scale.



Current Ideas:

1) Increase the prices - Dealerships tend to pay more attention to bottom-line than actual quality of work, so this may lose a significant portion of business, though if a decent amount of business remained, it would make the net hourly much more attractive, allowing us to make decent money with dealerships, but also have time to ramp up client cars.

2) Add-On`s or Up-Sells - I can see how this works with individuals - it`s their car getting the bonus, and they care about it, but where are the best up-sell opportunities with dealerships?

3) Dealership Referrals - If the dealerships like me, then they could possibly refer their customers to me.

4) Other ideas?





I would love to hear your thoughts suggestions and advice on the above. Thanks again for all the input.

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One observation from what I`ve seen and heard from dealers and other guys around Atlanta. While these were not the words out of their mouths, the gist of what I say is a collective expression.



The guys selling themselves on a cheap price are always hopping from dealership to dealership/account. This is because there will ALWAYS be someone cheaper. They come and go and are blown by the wind. The guys that sell themselves on quality are the ones that have stability and stay long-term.



I say do not sell yourself on the price. Make the focal point the quality and service while offering a great value. Value is very subjective...it`s your job to make it a glaring difference in what you do vs those other guys.