Honest opinions please

[HadiK]

Hello all

Having become increasingly disenchanted with the IT industry, I'm considering a complete change of tack to follow my lifelong love of cars, more specifically Volvos.

I would love to set up a garage specialising in Volvo from the restoration of PVs, Amazons etc to the servicing and performance upgrade of modern Volvos.

I'd like to think I would be able to employ ex Volvo technicians and charge something like £30/hr labour with discounts on parts to club members, that sort of thing.

I know similar specialists have been pretty successful with Subaru Imprezas (I own a Turbo at the moment) and I'd like people's thoughts on an equivalent Volvo enterprise.

The garage would be based in the Derby area by the way.

Thanks in advance for any feedback

Regards

Hadi Kanan

[enrm6]

I think one of the biggest stresses over and above actually buying the car is finding a reputable place to get work done, servicing etc.

If you can add to the list of reputable places for Volvo work this can only be a good thing. If you are also a forum regular then this also adds to the appeal of your business because people feel they have another line of come-back. Take Don and the Kalmar-Union as an example.

Good luck to you and if you do decide to do this you might get some business from me (Loughborough).

[sheerwater]

Hi Hadi,
Honest opinion? Advice is dead easy to give but darn hard to accept!!!! Number one. I am not in the car industry but we run 2 businesses full time and a smaller one as a sideline. I have had one business fold in the past due to over zelous officials and this resulted in 7 people claiming dole instead of pating tax and NI. Advice...here goes....
1/ Do your market research into the product you are selling/offering.
2/ Check the 45000 million regulations you will have to abide by and these now include oil disposal, spray booth extractions etc.
3/ Dont forget (as I did initially) that staff do not work for a whole year. Compute your costs for sick pay, National insurance, holidays etc.etc with great care. If you take bank holidays,sick leave and weekends out of the equation the working year is well under the 250 working days. My staff to earnings ratio was 3 to 1. ie staff had to take at least 3 times their wages just to survive. On your equation of £30 an hour your staff cost must not be more than £10 per hour (including N.I.sick pay hols etc) Figures for bigger companies are often well above this and I have seen takings to pay ratios of 10:1 upwards. (what is your local franchise dealer paying staff and what does he charge per hour?)
4/ Suss out the competition. Franchise dealers etc. What are they offering etc. Courtesy car? Pick up and drop off from your work etc. Remember on newer cars half the drivers are probably women who want a clean reception area and a safe location for your premises. Will you do breakdown/recovery MOT etc.
5/What sort of premises are you considering? Do full running costs including rent/rates/insurance etc. Some things like rates can come as a shock. Remember established businesses may already own the premises and therefore dont have to find the rent each month in the same desperation as you so can undercut. If you buy then you pay the typical 7% ish for interest and this is another expense.
6/ Check the current cost of employers liability insurance etc. This has risen to alarming levels lately with many small businesses teetering under 4 to 10 times last years premiums being imposed.
7/ Every business is different. Dont assume that because business A is thriving that another business can survive as well. There are to many variables. My brother lost a major contract because the buyer didnt like one of his staff working in a kitchen out of a staff of 20!!!!
8/ As said suss your market. You have not got a reputation yet and this needs building up. This costs. At one point in my business things were so slack both myself and my staff were sticking leaflets through doors, on car windscreens etc. just to get the business to pay their wages. Yep it worked with a take up of about 1 per 100 leaflets.
9/ Everyone loves a freebie or a bargain. On the other side they dont like you to be cheap!!! Pricing must be fair. How many of us have had a bill higher than we expected just because the company found something else wrong and we ended up questioning it and walking away slightly miffed. Quote and stick to your price. Some you win,some you lose.
10/ Derby is fairly central in the UK. How many main dealers nearby. What is your competion in a travelling radius of say 20 miles. Some manufacturers are now spreading their franchises further and further apart which means that people (like me) look at other models from other manufacturers as the franchise is nearer.
11/ Watch the way the car market is going. Hyundai have set the trend on the 5 year warranty and most others are 3 years. This theoretically ties the car owner to the franchise. You are therefore likely to be getting older cars in for repair. (as you already envisage) Older cars are now becoming fairly worthless and therefore repair costs must be realistic or Miss X will dump the car and buy a new ***** with no deposit, free insurance and a 3 year warranty for £199 per month.
12/ With older cars people tend to do a lot of the work themselves. This is caused by lack of cash, overpriced garages and the desire to repair the car and get it through the next MOT without to much hassle.
Repair costs charged must be reasonable or people end up dumping the cars at the side of the road as they do in our area!!!.
13/ Be prepared to take home much less than any of your employees for a very long time. Then when you do become a success be prepared for you to be called a lucky rich *+!!!.
14/ Do understand that if employing people much of your own time will be spent not earning money and sitting doing paperwork. Sell the TV!!!
Make sure you have a good cash buffer. Make sure your mortgage/home rent is paid for at least six months in advance at all times. If things go ##### up this will give you breathing space. Due to inexperience my first 3 weeks trading took £186 and my wage/tax/NI bill was £2500!!! Panic set in but gradually things got better and profit came in after 6 months. Dont borrow money. The banks will always survive on the extra interest you will pay and ultimately you will only be working for the bank.

MY final piece of advice is one I read once which made me succesful.
Your clear profit is the icing on the cake. Take this example.
A £100 order leaves you with £10 clear profit. If you could have got £110 for the job you would in effect double your profit by only increasing prices by 10%. £120 then profits would triple with only a 20% increase. The reverse also happens. on the £100 order if you were to cut prices by 10% you would make no profit at all!!!!

Its a hard world out there and I am not sure if this was the type of advice you wanted. You need luck, entusiasm , 26 hour days etc etc and there are many guys who started out small who do very nicely. It took me 2 years to set up my business before I opened the doors, I did research on every aspect from every angle but I still got it wrong. I calculated a profit of £30,000 on the first year, actually made £13000
and after write downs etc etc. ended up with a salary that did not give me enough to pay National Insurance. This then prompted a full tax investigation, (more time,more expense). I survived because my wife works with another business but this did not stop the taxman asking how I managed to have 2 Volvos on the drive!!!!

All I can do is wish you all the best. As I said advice is dead easy to give but whether it is the right advice is debatable!!!!
Cheers Nigel

[HadiK]

Thanks so much chaps

I really appreciate the time and effort you've put into your replies.

I already have a rudimentary understanding of how a business works having run my limited IT company since 1998 but some of the specific motor industry points you made Nigel are really interesting and valuable... they've certainly made me stop to think!!

I'm just wondering whether any business can be as appalling as IT right now. We've got margins on IT equipment down as low as 3% !!
Contract rates for experienced IT staff (programmers, analysts etc) as low as £12/hr.

Cars have always been my greatest love (after wife and child of course ;-) ) and I think I'd rather try to make a living out of the motor industry than anything else. I will however take all of your advice on board and plan any venture meticulously.

Look out for me in the future (if it all turns out OK!)

Thanks again

Hadi

[Simon Linton]

Another thing to consider is to dip your toe in the water by taking on low-committment projects for Volvo-mad contacts, while keeping a "day job" to pay the mortgage, etc.

This will give you valuable experience in things that can go wrong, while building up supplier contacts should you wish to proceed full-time.

Many people want to combine enthusiasm and profit in a business, but few actually manage to make money at it.

Think on this - TME in the UK is run by a solicitor and Kalmar Union is also a spare-time business; so while both are properly supported by knowledgeable people, neither is the main source of income.

[sheerwater]

Good point about the main and second income Simon. Im in my early 50s as are lots of my friends. Those who are in the work that they originally trained and are fully qualified in are thin on the ground. To name some situations, an IT manager who now manages flooring systems on building sites, A teacher who runs a property letting company, a service manager of a huge car supermarket who now does property repairs, a chartered surveyor who is a journalist, a chemist who now runs a publishing company. And so on. Necessity forced the change and most dipped their fingers into the pie while retaining a second income. Look for example at how many businesses are beginning to sell through eBAY auctions and these must be siidelines to start with. Of course society has changed and in a lot of cases I know of the family swopped roles with the females becomming the breadwinner while business number two was set up. This situation certainly gave me the income buffer to jump the first hurdles. (my kid was 3 months old when I started the first business)
If however you have a dream go for it but keep your eyes wide open for any other opportunity on the way as markets change so rapidly.Look at the rise and fall of the mobile phone and home computer sellers .I was a teacher, went into childrens day nurseries, saw that there were opportunities iin property renovation,bought and sold houses like second hand cars and finally went into property rental. That said I love skiiing and I used to go to one small hotel hotel every year (plus lots of others as Im not that sad!!!) Friends began to join us, then their friends and so on until the figure approached 40 persons this year. From this point you suddenly wonder if its worth buying a chalet in the ski resort and running it commercially. (a possibility this year) Be flexible. As they say 7 out of every 10 jobs still has not been invented yet. I love skiing and so this area could easily be my next full time enterprise!!!! Best of luck!! Cheers Nigel

[davebslater(uk)]

Nice thread ,

Everything is true about not earning money and putting in hours , you should also be very well insured , not only for accidents but those accidents which put you out of work .

Even after all your market research into the area you are gonna move in after 3 yrs its only just started to take off a little bit for me .

Without seeming obvious you must have a cash cow that brings in money even if it is not your chosen line of work :- ReWhy i was making bmw , vw , fiat bodywork as subcontract work and that is priced very keenly .

I would advise you to keep the job and get it setup until it earns enough money for you to go full time .