Estimating Costs and Revenue

[mark80z28]

I`m about to begin working with a SCORE advisor, and the first thing he wants me to do before we meet is to work up a list of startup costs and projected fixed costs, and projected revenue. I can come up with a list of supplies I`ll need and their cost easily enough. Deposit and rent payment at startup is easy enough, and I figure somewhere in vicinity of $500-$1000 for permits, registration, LLC formation, etc. I have some idea of the cost of insurance. What`s stumping me though, is- how do I figure what things like utilities will run, and how do I plan for revenue at this point, when I`m not sure how much work I`ll have right away? Assuming I was booked solid I have some idea how many cars I could do in a day, but how can I estimate revenue for those first few months, when I`m just trying to get the word out and build my clientele?

[JohnHenry]

You`re smart to go to SCORE for assistance... great organization.

I can give you a rough example revenue projection. You can change the number of cars per period as you wish. This will be very conservative. Increase your estimates depending upon your tolerance for risk.

Plan on doing a minimum of two cars per week for three months. You can beg, borrow or steal two customers per week by telling everyone you know and meet about your new business, former coworkers, family, church members, gym buddies, high end dealerships (not for their on-site work, but for their referrals), performance shops, kid`s friends` parents, car and bike clubs, etc.

If you can pull off two jobs per week, doing a good job, and making more contacts each week, word-of-mouth will increase your business to whatever level you can handle. You must keep marketing indefinitely.

The revenue, obviously, would be the gross receipts from the two weekly jobs. You must set prices (numerous threads on DC) for your various services. The SCORE volunteer can use the revenue number, combined with your expense and capital estimates, to complete your financial projection.

A couple of bits of advice, strictly personal opinion:

- Stay mobile for three months... no rent expense, no tenant renovation, no signage, less expensive insurance... no commitments. At the end of three months, if you feel that you can succeed, go for the fixed location if you`d like. You can avoid unnecessary start-up expense until you have a proven business model; however, in three short months you do not develop a strictly mobile clientele, that can be difficult to transition to a shop.

- Buy as little equipment and supplies as you can for three months. For example, you may receive advice to buy a good quality carpet extractor. Great idea... I`d love to have one. And, you may have access to an extra $750 for the machine. I`d advise waiting until you are somewhat established before making that kind of financial commitment. Worst case, Autogeek and others ship overnight when you need something for a specific job.

- I don`t know what your detailing experience is, so don`t be insulted by this if it doesn`t apply. Detail as many cars as you possibly can to gain experience... family, friends, neighbors. You will start to set the word-of-mouth machine in motion, and you`ll learn valuable lessons. However, cut off the charity program when it no longer serves your purpose. Remind your buddies that this is your business.

-This one will generate lots of debate: pick a product line and stick with it unless you have a reason to try something else. I`m a compound, polish, wax, pad, and buffer junkie like everyone else at DC. But that`s one of the traits that differentiates hobbyists from professionals in my opinion.

- Do not hire any employees for at least a year. Just don`t. I don`t have time right now to get into it, but you really have to have your act together to start managing staff, and trusting your clients` cars and your reputation to someone else.

- Again, I don`t know your personal situation, but don`t expect to live on the business for a good while. Talk to SCORE more about this. Living with your parents, for example, is a lot different than supporting a wife, kids and mortgage.

Best of luck, buddy! Let us know how you`re doing.

[mark80z28]

John Henry- thanks for your reply. This is why I`ve come to like this place so much- lots of pros who have been where I`m at and are willing to help out newbs like me!

-As far as my location, I`m hoping to start in my 2 car garage, at least in the very beginning, like you said, doing jobs for family and friends, and anyone else I can pick up. My neighborhood isn`t zoned commercial, so I know that I can`t work here for long. Besides, I need to be able to wash inside during Ohio`s unpredictable weather.

-I`d love to start out using an extractor from day one, but I don`t think that`s going to happen. My one splurge, though, is going to be a Flex 3401. I`ve read so many good things about it, I can`t see using anything less in a (hopefully, soon!) busy detail shop.

-For my product, I`m planning on using Meguiars stuff as much as possible. I`ve kind of taken a liking to their OTC products I`ve used over the years on my own cars, and I plan to advertise that I use Megs` professional products because I feel that they probably have better name recognition than some other high end stuff (Griots, Poorboys, etc.). Nothing against those other brands, as I haven`t really used them, but I just feel like more people will know the Meguiars name.

-I`m not planning on hiring any help until absolutely necessary. It`s an expense that I can`t justify, and I`d just rather not have to deal with it until my workload dictates that I need help.

-As far as living on my detailing, I`m currently unemployed, after losing my manufacturing job of 15 years, so I`m planning on finding something, at least part time, until my business picks up.

Again, thanks for all of your advice. Keep it coming, everyone!

[Pander5]

Wow JH, great information and it sounds like it comes from professional experience! That single post will help countless others here and I sincerely thank you for taking the time to put that up.

[JohnHenry]

-As far as living on my detailing, I`m currently unemployed, after losing my manufacturing job of 15 years, so I`m planning on finding something, at least part time, until my business picks up.

I can identify, Mark. I was laid off after 15 years with a company. Haven`t fully recovered financially yet, but I`m here to tell you that life goes on.

I think you`re really smart going full-bore into a new venture. Hopefully you can do the unemployment benefit thing, continue to look in your field and develop your new business as well.

When I lived in DC (the other one) I volunteered at an organization called "40 Plus", designed to coach mature job seekers. Not to be presumptuous, but I`ve taken the liberty of copying some advice I gave to another guy a while ago here at Detail City. Hope this helps:

I`ll spare you the details; however, suffice to say that I`m going through the same rough patch at twice your age. Since this is my second trip (laid off from corporate management jobs at 40 and 55) maybe I can give you some advice.

Number one, first, foremost and always... STAY POSITIVE. How`s that self help book title go... "You Can`t Afford the Luxury of a Single Negative Thought?" It`s true. Just when you`ve made a connection that will lead to your next job, you can`t afford to come across as dejected. You are the exact guy who will solve a huge problem for some NYC engineering frim. They just don`t know it yet.

Second... IMMEDIATELY GET A PROFESSIONALLY WRITTEN RESUME. Then network, network, network. Tell everyone you know what you can do and what you`re looking for. People want to help. Your detailing clientele... I assume they`re primarily high-end car owners... hand them a resume and let them help you. They own businesses. They know people who own businesses. Always have a good supply of resumes. Take them to the dry cleaners, the gym, church, the golf course... you get the idea.

Third... if you`re not already, get signed up on MONSTER, CAREERBUILDER and LADDERS. If there`s an engineering job board, find it. These are VERY effective. Work these sites for an hour or two every day. Tailor your resume and cover letters precisely to the job posting you`re applying for. You will first be screened by a computer scanning for keywords. The hiring company gives you a cheat sheet in the job description. Play the game. (Don`t fib... ain`t worth it.)

Fourth... go to the library and read everything written by MARTIN YATE... Knock `Em Dead Resumes, Knock `Em Dead Cover Letters, Hiring the Best, etc. I`m sure you`ll find lots of good advice on the same shelf.

We`re all in this together, guys. Strength in numbers. Hang tough!

[JohnHenry]

Wow JH, great information and it sounds like it comes from professional experience! That single post will help countless others here and I sincerely thank you for taking the time to put that up.

Thank you, my friend. Haven`t seen you in a long time. Going to DF?

[mark80z28]

I still need to get some idea how much my fixed costs are going to run. Can anyone with a inside shop location give some ideas as to what their water, electric, phone, supplies, advertising, and any other monthly expenses (not counting payroll, since I`ll be working on my own at first) are?

I found a GREAT location a few months back, but I wasn`t ready at the time, and I`m still not for that matter. But it gave me some idea what I can expect to pay for rent.

[sullysdetailing]

I would start off Mobile and find shops you can work out of.