How to start a profitable automotive oil change business

How to start a profitable automotive oil change business

Welcome to the guide to starting one of the most profitable businesses out there – An oil change business. 

But, even before we start, you might have this slight doubt as to why we’ve confidently mentioned an oil change business as one of the most profitable businesses out there considering the ever-growing climate change concerns and increasing electric vehicle sales, right?

Well, the global oil change market is here to stay…at least till 2050 where the profits will only keep increasing. Good thing is that growth is so enormous in this business, that after 2050, you can easily pivot your business towards a different line relevant to the future and keep flourishing.

An oil change business is all about convenience. Changing oil is cumbersome and quite inconvenient. That’s where oil change businesses show up. Making life easier and making vehicles smoother to operate. 

Since this line of business is directly focused on making life convenient, the business is ever-green in terms of growth and profitability for a long time. Don’t worry, we’ll link you to various statistics and sources that prove why this business will keep flourishing. 

Even back in 2020, with many oil franchises bringing in nearly $250,000 a year, as the owner, it is possible to see a net profit of $75,000 to $80,000 a year.

Now, 

Every business or entrepreneurial venture requires a lot of prior research and dedication to become successful. That’s why this blog will lay before you all the data, precautions and steps to follow to successfully start your own oil change business.

To cover all the related topics, let’s first start from the beginning – 

What is an Automotive oil change business?

That’s quite simple!

As the name suggests, an Automotive oil change business essentially provides oil change and lubrication services to a variety of vehicles.

Not just that, but usually, these businesses also provide a variety of other services as well such as windshield wiper replacement, air conditioning recharging, sometimes tire replacement, and many other basic automotive maintenance services. 

What’s been noted is that businesses that specialize in oil change services alone, tend to provide this service for a much cheaper price compared to other similar non-specialized garages. Oil change, being a frequent requisite for vehicles, makes these specialized oil change businesses highly profitable. 

This is still up to you to decide which would work best for the location you’re setting up. Don’t worry, we’ll cover that part too.

Also, understand that the 

What you need to know about an Automotive oil change business?

Note that the Middle East alone holds a major share of about 48.1% of the global oil market and the market is unevenly distributed. (source- Statista.com )

While that’s still the case, the global profits are well evenly distributed and in 2019, saw a massive 8 Billion USD in revenue in the US alone. 

Employment rates keep skyrocketing each year with an average 3 % yearly growth rate (except for 2020 where pandemic-related lockdowns had brought the average down). 

Now, be keen to note that the growth in this industry is directly proportional to the number of vehicles on the road. More the number, more business. It’s a simple logic that needs to be kept in mind. 

Therefore, keeping track of the yearly vehicle purchase rates, especially around your location, can give you an easy prediction of your upcoming growth in a year. 

Now, to give some insights, experts came to a conclusion that globally, there were 1.32 billion cars, trucks and buses back in 2016. Leading industry analysts suggest that the number has already surpassed 1.4 billion in the last few years. 

Here’s a quick analysis – there were 342 million vehicles in 1976 and in 1996, grew to 670 million vehicles. So if the calculations are done right, then we can expect around 2.8 billion vehicles in 2036 running on our roads. ( source – carsguide.com )

What does this translate to? 

This means profit! Heavy profits! 

Also, the majority of these numbers will be oil-based vehicles and it’ll go more than 2050 for Electric vehicles to ascertain dominance. So, no problems there. 

Industry trend in the automotive oil change industry

Trends in the automotive oil change industry are directly in line with the trends in the general global automotive industry. 

What does that mean?

The current trend in the automotive industry is designing vehicles that are built to last. That’s great news as increasing the general longevity of vehicles means more oil change is required annually. That’s good news!

Secondly, the current pandemic automobile market has seen a reduction in people’s willingness to replace and get newer model vehicles. This means the general public wants to keep their current vehicles for a longer period of time. This is once again great news for automotive oil change businesses. 

The third important trend is the digitalization of vehicle services and customer experience. Customer experience has now become a major playing factor that determines the success of any business line in the automotive sector. 

Customers require quick oil change services, door-to-door oil change services, and many other customer experience-related attributes. 

We are seeing a general trend in automotive businesses moving towards ERP software implementation to tackle customer expectations, quick service, streamlining business processes, customer relation, and retention issues. We suggest you check out good ERP softwares for your oil change business. 

Skills you need to start an Oil change business? 

  • Entrepreneurial skills – After all, business is a business and without entrepreneurship, let’s just say business will be harder. This ranges from business management to looking into future trends and making business decisions. It’s all entrepreneurship! 
  • Automotive knowledge – You will definitely need work experience in this field to know more about vehicles and oil changes. 
  • Communication skills – Well, of course. You’ll be regularly interacting with customers and the impression you make will decide if they will be a loyal customer or a run-away one. 
  • Marketing skills –  Marketing is everything, from the way you portray the trust and reliability of your business to the way people end up perceiving your business. It’s all after marketing. Marketing is what will generate leads and customers for your business. 

Now,

How exactly do we start an oil change business? 

Let’s head to the most important part. We’ll cover this in a step-by-step manner that is tried and tested by users around the globe. We’ll break it down to you in simple steps for easy understanding. 

Market Potential Analysis

The first step that we could suggest is to thoroughly understand the market in your desired location. Not all locations are suitable for oil change businesses. 

Select location 

Make sure to choose a location that gets a lot of traffic. This step could be harder because you’ll also need to make sure that you’re not setting up near any other similar oil change business. Especially not close to the “big box” companies. This is important because the location you set your business in plays one of the most important roles in determining the profitability of your business. (especially for oil change businesses).  A series of data needs to be collected before starting in order to understand the size of the market, the number of customers, etc. Customer surveys can be done to understand the customer pain points and needs.

Competitor analysis

They say keep your friends close and your enemies/ competitors closer. This couldn’t have been more true for garage businesses like the oil change business.  Competitor analysis is a great way to understand the strengths and weaknesses. This helps you in understanding your preferred market location better and you can now figure out what advantage customers will have from your business compared to your competitors. You need to have some unique selling point that keeps you apart from the competition. This can be done only when you prepare a competitor analysis chart. 

Customer segmentation and target

Know your customers. This is the first step to setting up a successful business. You need to understand the preferences and general income of your expected/ potential customers. The income level of your customers varies from location to location and based on this, you can determine your service prices. 

Proper estimation of costs and revenue

Prepare a revenue forecast chart. This gives you an edge. 

How to prepare, you ask? 

Here’s how- 

You’ll need a significant amount of data for this. You would’ve collected most of these during your market research period. 

  • The average price of an oil change
  • How many times a year an average car requires an oil change. 
  • How many customers are in your location
  • Your competitors – who they are, where they’re located, and whether they specialize in cars or other vehicles too (such as motorcycles)

You can find these data on Google or we suggest befriending a repair shop or other oil change shop owners who won’t be a direct competition for you. Take them out for coffee or do anything required to discuss these matters with them. Collect these data. 

Now, take our spreadsheet or Google sheets and lay out the data in a meaningful way.

Sales forecast

The best way to set up a financial chart is to create a sales forecast chart. This will give you an average estimate of your turnover. 

All you have to do is evaluate the average price for oil change service and multiply it by the number of customers or sales that you’re expecting to make. That should do!

Overhead costs

These are the expenses that are required to run your business on a daily basis. Find out the number of staff you’ll need to carry out the services. Take a look at the price quote from your suppliers, insurance bills, utility, etc to calculate an accurate estimate. 

These are some simple ways for cost estimating and revenue prediction. Find out more about this from here

Feasibility checks like this are extremely important as they reduce risks and the chances of losses. 

Finalizing the space for the oil change business

Now’s the time to finalize space and set up your oil change business. Finalize a good name for your business first. 

Make sure the location you’ve selected is located either along the highways or in the middle of the city where a high volume of traffic would be expected, of course, keeping in check with nearby similar businesses. Most importantly, make sure to follow the local government regulations.

Once all this is finalized, find a property. This step always involves you making a crucial decision whether to purchase the property or sign a lease. If in case you decide to lease the property, make sure it’s a long-term lease. 

Tools and Equipment

Now, you have to decide if you’re going to be an Oil change specialist business or a multi-specialty business. 

It’s time to purchase tools and equipment that are related to your business depending on the specialization you chose. It makes sense for oil change businesses to start investing in new-age technology equipped to provide niche services

For an oil change-only business, you’d need equipment like radiator flushing machines, transmission flushing machines, oil drain buckets, oil tanks to hold bulk oil, hoses, cash registers, and small required equipment. 

Hiring the right employees

This is the tiring part. Employees make the core functioning of any business. The same goes for an oil change business. 

You’ll most definitely need a few oil change technicians and a manager depending on the size of your business. A plus point for you is that you needn’t recruit skilled technicians for this role. Anyone can do this job if taught once. Hence, one less thing to worry about. Phew! 

Of course, you’ve got to pay them salaries as well. This part can get tricky but you check out this website to find out the average salary of technicians and managers in your location. The website is called Payscale.com and you can reach out to find salaries for oil change businesses from here

Hiring apprentices can help develop long-term and meaningful working relationships which can be beneficial for your oil change business. The experienced employees provide stability while the new ones bring freshness and updated skill sets. Encourage them to clear certifications to make your business look more authentic and professional. Employees with diverse skill sets and decent communication skills should be preferred because, in the end, your employees too will be communicating with your customers. 

Effective marketing and promotions for the business

Like we have already discussed, marketing is everything. Better your marketing campaigns means more will be the leads generated. A well-planned marketing campaign is what will help you fetch customers when starting an oil change business. 

Marketing strategy for an oil change business is similar to marketing any other aftermarket auto repair business. We have a comprehensive step-by-step guide for marketing that is sure to help you in all aspects. Find out about marketing from here

Invest in customer service

For starting an oil change business, the first thing any entrepreneur should keep in mind is to properly understand customers and serve them accordingly. You must thoroughly understand the pain points of your customers who visit you for oil-changing services. 

Oil change businesses can have a waiting room for their customers when their vehicles are being serviced. The list of available services along with their rates can be posted here on a board in the waiting room. 

Invest in a good oil change management software that can take care of all aspects that makes your customer experience brilliant. You find out how a good oil change management ERP software can help you with building a great customer experience here

All these factors need to be kept in mind because you need to once again understand that oil change businesses are repeat businesses. The customer who comes to your garage once needs to be retained for a long time.

Advanced oil change business management software like GaragePlug can automatically take care of building a premium digital experience for your customers and auto reminder features to lock your customers within your business’s ecosystem.

Document a foolproof business and finance plan

It is necessary to document a foolproof business plan on how your business would function, the cash flow, the plans for expansion in the future and other industry-related information. For securing funds for your business, you can either go to a bank or apply for loans from a local lender. Opt for minimum funds to secure a location, tools and working capital enough to sail through till the revenue starts coming in. 

Chart relationships with dealers and other organizations

Entering into a long-term partnership with tools and oil vendors is a key to sustainable growth. You must work on this aspect of your business. Vendors who visit garages to exchange tools and offer new products are a great source for referrals and can actually bring in new customers through word-of-mouth publicity. Dealers can help in cross-selling your services.

A good partnership with larger brand vendors can help build reputation and credibility for your oil change business. You can use the name and brand of the larger oil vendors in your garage. The idea is to utilize their big brand to leverage and boost your business.

If you choose to be an oil specialist, try partnering with neighboring repair shops or detailing centers such that you can refer each other when the requirement arises. Group business/ networking is a great way to build and grow your business together.

Overall, your communication skills and your deal-making skills will be put to test here. 

Operations Management

Once you’ve set up your business, you need to monitor key aspects of your business for smooth functioning. Some of the KPI (key performance indicator) that can be considered for this process is the satisfaction level of customers, the number of customers visiting, revenues generated and the expenses incurred. 

Involving all stakeholders of your business in this process can aid in the easy implementation of corrective actions to ensure sustained and improve KPIs. Future expansion plans and adding more services can only be considered once the present KPIs are consistent and matching expectations.

So, 

That’s mostly it!

From starting up your oil change business to finalizing and managing it. We have covered all the major aspects. 

But, there are some more important factors that come to play which need to be considered. These are non-specific and are region-based. So, depending on where you’re coming from, these factors will vary globally. 

More factors to consider

Business entity

Business entity refers to the structuring of your business’ ownership. It generally refers to how a business is legally organized to operate. 

To make it easier to understand, there are 4 major types of business entities – sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Find the pros and cons of each of them from here

Business Licenses and Permits

Depending on where you come from, you may need to pay for acquiring an oil change business license and get allowance permits. 

Oil change business, being a hydrocarbon servicing company, you may be liable to get an environmental license depending on your region. 

Register for taxes

Again, depending on where you come from, you will need to register for a variety of state and federal taxes. 

For this, you’ll need to apply for EIN. Find a quick guide to understanding EIN here

There are various tax strategies out there that can benefit you from taxes. A simple Google search will help you find these. Once again, these vary from region to region and only Google can help you understand the tax structuring for your country. 

Finance and banking 

For the purpose of personal asset protection, we suggest using dedicated business banking and credit accounts. 

If in case your business gets in trouble, you will be able to save your personal loan like housing or car loans can be protected from getting sued. 

Learn to build business credit that will help you get credit cards and other financial benefits with better interest rates. 

Insurance 

Insurance is important too! Just as much as the license and business permits. 

Insurance is the only way to protect your business’s well-being if in case something goes wrong. Be double careful!

There are many types of insurances that vary from country to country. A quick Google search is the best way to find out about suitable insurance for your oil change business. 

Conclusion

Starting an oil change business is one of the most profitable businesses that one could ever open. With clear proof with statistics, we have proved why. 

Although profitable, like any other business, the risks in running a business successfully will definitely apply in this case as well. 

You’ll need to approach with caution and take calculated risks, but of course, just like any other business. 

You’ll need to hone your entrepreneurial skills to succeed in this venture. 

But, in this blog, we’ve covered almost each and every aspect there is to start an oil change business. 

With these strategies, your business plans are good to go. All you have to do is work on the implementation, take care of the budget and keep tabs on the returns. 

Talk to our support team and we’d be more than happy to help you out with your oil change business.

There’s a chat icon to the bottom right side of the screen. Don’t be shy. Ping us and we’d get back to you in less than 5 min. 

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