What to know in opening your own hot rod shop?

After 40+ years (now retired) the only thing I can add to this is to hire a CPA as soon as you can afford it. A good CPA doesn't cost, he pays, the best business partner you'll ever have. When the time comes ask around for a GOOD one. You'll usually find them in the local service clubs (Lions, Rotary etc.).

 

May be a tough go in this current economy.

A 5 year plan
cash
location, location, location
cash
insurance for everything
cash
safe reliable work (hate to have a car or worse the occupant on a car you did crash due to something your shop missed)
cash
medical insurance for you and your workers. a retirement plan
cash
lots of good paying customers
cash

you get the idea

oh yeah and cash!

 

All good advice. Read post #50. Set your rate & don't negotiate, you will lose customers fast when a friend runs his mouth about getting a break. Past customers will feel cheated and future ones will only except the lower rate !!

 

One bit of advice I've seen pop up a couple times is about advanced payments. Might be me alone but it's a jinx in my book. The worse things I've had to cope with in and out of the shop have always been after a big drop of advance $$$$$. I'll take a materials deposit, a deposit on labor of few days, but the rest? As hard ass and disrespectful as it sounds, "...yo fucker, I got your car/parts...". I sold a 56 Belair HT because the guy refused to pay. "Fuck you man I don't have to pay you and I'll get a lawyer!" " Please do..." Then the fuck vaporized. No phone number, email, nothin. 9mo later I got a lawyer, made all legal notice, had an auction, owned the car.

Now this part is for everyone doing this "on the side". I was running a shop and doing this at home. My home shop, no state or local business "paper", just an agreement of "this for...". If you think you have no rights, guess again. You're considered an ARTISAN and have more rights than you know to collect. Check your local and state laws to verify, but for MI at least, even with an out-of-state client, YOU HAVE A RIGHT TO DEMAND PAYMENT FOR SERVICE(S) RENDERED. Those rights are as traditional as the cars we love.

 

So much for how to run a shop,now,

HOW TO LOSE CUSTOMERS.

Don't charge enough, there are a lot of shoppers out there and even if your work is the best, they will go to someone cheaper. Customer lost!

Promise the customer everything to get the job. Your good work won't impress them when they are mad. Customer lost!

Do shoddy work. they won't be back. Customer lost!

Let your shop be a hangout for friends. materials evaporate, BS time increases, customers have to wait for a friends quickly. Customer lost

Do excellent work and don't charge enough. You will go out of business. Customers lost!

Do cheap work to get over hard times. Good paying customers notice your work and demand to pay less. Good customers lost!

Give the customer credit to pay the balance another day. Sure fire way to never see him again. Customer Lost

 

This is a great thread.
One thing not mentioned in the Kustom and hot rod world is time to find parts. On some of my builds I have spent almost half of my time chasing parts, mostly on the internet.
This time has to be worked out of the project costs and detailed on the invoice.
Spend 5 hours to locate a $25.00 part is not cost effective. Have a person in the office that can handle this part of the project. x2,, LLC, CPA and permits, be legal, have donuts and coffee for the stop-ins, have a window so they can watch the work and not "participate" in slowing your work progress. Digital camera set on a timer, or use a live feed to show an out-of-state customer the work progress.

thanks,
Now to get the start-up money together......

 

Someone has recommended you setup as SubChapterS legal entiry(1120S). There are benefits to setting up a corporation but the IRS paperwork requirements are a nightmare and therefore the CPA fees can become quite expensive. My son is a CPA and I have some accounting and financial management experience and I still budgeted 100 hours of nights and weekends to handle all the state and fed filings from year end thru the spring tax filing deadlines. And if you misinterpret a deadline the IRS will hit you with a daily fine. I threw in the towel after 3 years of dealing with the BS and 24x7 "on the job" mentality.
Then the IRS decided to fine me for not filing the shutdown paperwork in the proper order even though I followed their help line advice. Basically you (or your CPA) need to keep perfect records of all interactions with the government and get names and agent identities because most of the regulations are 8 colors of grey instead of black and white.

I don't know if LLC is any easier from a paperwork standpoint.

 

It is.

 

I am in business not car related, but the info Don has given you here is SPOT on,,, also check on your liability coverage and shop coverage prior to jumping in,Liability can be pricey and is a cost you tend not to think about

 

Do you have a wife and kids??....If so keep your job!! And do small stuff on the side. It is not for everyone, Unless you like doing without things you really enjoy. And eating alot of bolony sandwiches.....In The last five years I have about realized it is not for me....LOL. Also, in todays world of building hot rods for others, You had better have some skills and some good equipment. (Meaning if you can not do the kind of work "Brian Bass" can do, Then keep your job) Not trying to discourge you, but you ask for real input.

 

All of this is good advice. The knowledge base on the HAMB is the some of the best. Thank you guys for your time.

 

Just a little rant, to round things out on the advice column:

If you do start a shop, and business picks up, you are not ready to hire-on, until you are ready to pay real wages. This is a skill-trade, not summer job for a teenager.

Get the statistics on what the average wage is where you have your shop. If you are not prepared to pay no less than that, for permanent help, with experience, then you are not ready to hire someone. This is not a kid-job. Building custom cars, for many of us is a career. Jobs pay job wages, careers pay career wages.

You may not have a business unless you have customers, but if you have customers, and don't have the staff, who can deliver, to back up you promises, you can't make those promises. Good employees make you money. Mediocre, or bad employees COST you money.

There are plenty of shops out here who pay their employees 14-17% of the bill-rate in pay. Their work sucks, and they have huge turnover.

If you want quality help, PAY FOR IT!

And seriously, to that guy who thought that he'd hire me away, with my 25+ years of experience, for the princely sum of $15/hr., part-time (32h), in the San Francisco Bay Area, you need to have your head examined. After taxes, that won't even cover rent here.

 

Gimpy's correct. The single reason I'm not going big right now. You need to keep like 3-4 weeks of payroll in reserve for all the right and wrong reasons. With 2-3 guys at a fair wage for their talent, that's about 10gs including payroll taxes. Add 17% to the wage you pay for the employer contribution amt in payroll taxes, $10K pays 3 guys over $22/hr for 3 weeks. Something in the low to mid 20s is pretty standard around here, but adding a semi annual bonus or incentive plan could save operating costs and drive up quality. It may go well toward getting your staff to "own their job".

I freely admit my angst and attitude toward that part of the business. There's an awesome building just minutes from home that's cheap. I have everything I need for a full on operation except a lift and actual spray booth. The hiring/firing cycle can get VERY expensive and sometimes seems like overnight a house of cards fell. Someone does a shit job that you/your shop pays for and holy butt munch does it add up fast. I have no will to baby sit or check shirt sizes any longer. I have 1 guy, a dear friend, and he helps me here 2 nights a week. If I had just 2 like him I'd be posting a grand opening topic.

 

Been there done that,so if I was young again and knew better,I 'd have a place with as little over head as pos. as much room as pos and one helper only,that may point to were things didn't go as well as they could of,but always made it work,just saying it could of been EZer.
One more thing,if your selling a hobby,be open when those that are doing the hobby can get to you,not when there working and can't. think of this way,I try to buy RC airplan kit but the hobby shop is close after my work and not open on weekends,so can't go by hobby shop when I'm off work=no sale.
My shop hr. were 1pm to 10 pm ,closed sunday

 

I started a custom bike shop after I got layed off from my regular job to support my family. I loved working on harleys been doing it in the side for 20 yrs and made some good coin, made some good friends. After opening shop my FRIENDS expected me to still work on their bikes at the same price that I was charging when working at home. Didn't care that now I had overhead. Lost my FRIENDS, plus they would talk $hit about me, F*** them. All customers know more than you do, will tell you how to do your work, F*** them. You can't trust your employes to do the quailty work that you do, plus borrowing things like oil, nuts,bolts, my biggest cost and loss was rags and hardware. Everything needs to be charged to the customer and They don't like. I went from loving a hobby that turned into a job that I hated. To this day I still don't want anything to do with motorcycles. There are sooo many things that you never think of. GOOD LUCK

 

Saddest thing about the $15/hr. dude, was that he honestly thought he was giving me "the opportunity of a lifetime", and that what he was offering was a "good deal". Don't be that guy.

 

Lots of replies, some good and some just dreaming. The guys talking about low wages when working for someone just don't get it. How do you think they make their way, their fortunes ?

Business owners for the most part make it on the backs of their workers.

That's the way it is when you work for someone else.

An important thing to remember, If you have 2 million and you want to turn it into 1 million or less, open a hot rod shop.

 

I have never paid any of my employees under 40% of the bill rate.

Edit: A little extra info, for perspective on pay, for those who may think that I am dreaming.

Where I am, a 19-year-old, here, with a license and a clean driving record, can expect to start, as a valet parking attendant, before tips, at $18/hr.

I good friend of mine is a service manager, at a muscle/classic car shop in the Midwest, where, incidentally, the cost-of-living is just 44% of where I sit, starts his entry-level welder/fabricators at $38/hr.

$15/hr. is what I got paid, to weld frames, for a well-known builder, in the Northeast, in 1990, when I was 20.

 

Be prepared to work 7 days a week. separate yourself financially from the shop in case shop goes broke... Hide as much money as u can from taxes.. Did i mention cash is king and hide as much as u can from the tax man?

 

Wow man, well put

 

Some really GREAT posts on this thread, and I'm gonna jump in here again, and add one last thought. I had a policy at my shop, and it served me well for 20+ years. Everyone was told this, including insurance companies that were paying for repair work:

I don't charge for any work that I don't perform, and I don't perform any work that I don't charge for. PERIOD. In other words, charge for what you do, and only what you do. I had an old guy tell me, "You can work hard 12 hours a day, 7 days a week and not make any money, or you can go fishing and not make any money, it's up to you..."

I had a small shop, 1200sqft, and just me and an apprentice. I did good quality work that I'm proud of, never advertised, got jobs based on reputation and I was always booked 6 months - 1 year in advance...If my body didn't give up on me, I'd probably still be doing it!

EW

 

Well here is the first and formost thing you should know about opening your own shop:

Being unemployed is not reason to believe you should own a hot rod shop, nor is it a qualification for owning one.

Pros you are your own boss (sort of) con your boss is an asshole.

Pro you can make a good living in a hot rod shop con you may not have enough money to own a hot rod shop.

Pro nothing like the look on someone's face when they leave your shop in their new rod con people are assholes. Hmmmn just like your boss.

Pro you get to do something that you love for a living, con you just changed something you love doing into a job.

Pro you never ever again have to pay union dues, con you never again have benefits.

Pro you get to work on hot rods every day con none of them are yours.


I could do this all day.

 

Not trying to shoot your dreams down but my take on this is, if you have to go to your friends or the internet for answers, you aren't ready yet. Once a trend starts where many people (even those with experience) are going to you instead for answers, then you may have a shot at opening up.

 

A few things to think about.

What is your entry level product?

Making some t bucket frame kits with a $1200 band saw and selling them for $150 with $70 in steel invested. Opens up future sales and is just cheap enough for those who would never finish one to buy one anyway.

Get good with CNC!

a plasma table is a $7000 investment that will allow you to offer your own brackets and cut plate parts on demand "no stocking pre made parts". It will also allow you to offer this service to other markets of DIY.

Local welding shop?

Picking up a shielding gas contract and selling consumables is a great way to add some steady income without diluting your core image. You can even pick up some hobby grade welders "everlast" and offer layaway to bring in those hobbyist on a budget. Only carry one welder of each model you think you can sell. Also, carrying cast iron mig wire will make you very popular with all the DIY crowds.

Fasteners!

If your open late and weekends when the hardware store is not...
if you carry a good selection of Allen cap and hex in stainless and metric...
If you advertise this in all your ads "including the sign out front".
You are just as likely to get a guy with a lawnmower as you are a hot rodder and you open them up to your products and services at the same time. Ditto on the welding! .

What can't you stock?

Anything over $100 you can buy online and cannot make in house.
Don't stock oils, plugs, wipers, widgets, or the like. That's what parts stores are for. Stay in your niche and use wide base consumer services to make money outside of labor. Make sure you have a huge selection of catalogs from all the oddball vendors and keep up with their status and promotions. Nothing more embarrassing than taking an order for something you cannot get anymore. This does not apply to welders as even those who will look at yours and buy online will still be exposed to your other offerings.

What do you do?

If you paint... paint
if you fabricate... Fabricate
If you do upholstery... Sew
If you wire... Wire
if you wrench...wrench


if you do it all pick 2 and find some reliable sub contractors to do the rest. I recommend you do not mix paint and fabrication or wrenching. The cross contamination headaches are a nightmare.

Buy insurance!
Hire two employees to run the retail aspect.


Good luck.

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Paint does not mix with anything, unless you have a separable facility. Same goes for upholstery, mostly. Get in good with a painter, or two.

 

It can work, but man... the opportunity for error is frequent and for small shops... fatal.

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I worked in Hot Rod shops for ten years. The fun was a ten. the pay was iffy. The only benefit was working on cars. When I started I had a hobby I didn't have a job, when I left I didn't have a hobby just a job. I would not trade those years for anything. Don't love my current gig as much, but I am just about ready to work on my own hotrod again! with benefits and some holiday pay. Two years after...

 

http://mikeyspinstriping.com/hot_rod_book_details
I may not be able to teach it all to you in my book, but I will give you the incentive to at least try.

 

Here's a question for people.

Say I've got the disposable income to buy an existing repair shop that's currently running and generating income from general car repairs, and my intention is to maintain that business while I add in vintage and hot rod work. The plan being to slowly specialize in repairing the classics and doing the occasional resto, but mostly fixing up old cars to flip them. Part repair shop, part classic car dealer.

I have a day job and I'd be having someone else run the day to day business, and staff to handle the repairs, restos and flips. From my perspective it would be a self-sustaining business that allows a steady stream of cool cars to run through it that I might get to drive a bit then send on their way, but that also has a steady stream of regular customers for the winter months or when the classics are a bit thin.

Is anyone doing something like that?

 

There's not much disposable income to be had out there so my suggestion is build and sell as a hobby and don't quit your day job.