How to Start a Cell Phone Repair Business

Overview

How to Start a Cell Phone Repair Business

Do you have a knack for fixing things, and are you always the first of your friends to find out about the latest phone updates and tech? For technology lovers with a talent for fixing phones, opening a cell phone repair business may seem like the perfect venture. Before starting a cell phone repair business, take some time to understand the earning potential, startup costs, and common challenges to ensure your business succeeds.

Business Overview

Cell phone repair businesses help save consumers money by repairing broken phones, so consumers don’t have to purchase new ones. Common phone repairs include cracked screen repair and replacement, battery replacement, button, and headphone jack repair, and camera repair, though you’ll probably see plenty of other issues while in business, too. Some repair businesses have a physical storefront where customers can bring their damaged phones. At the same time, smaller startups may opt for a mobile repair business model to save on rental or lease fees while also offering the customer the convenience of a traveling repairperson.

If you’re considering starting a cell phone repair business of your own, this guide can help you understand the potential startup costs, your potential earnings, and what to expect as you start your business.

Industry Summary

As more people transition to smartphones, which are easily broken, the cell phone repair industry is growing to keep up with the demand. According to IBIS World, from 2014 to 2018, increased smartphone and tablet usage resulted in a 4.4% growth in the cell phone repair industry. By 2018, the repair industry reached $4.4 billion in annual revenue, and from 2014 to 2018, the number of cell phone repair businesses grew by 2.6% to a total of 8,551 businesses. Overall employment in the cell phone repair industry also increased by 22,692 during this five-year period.

Industry Trends

The increased use of smartphones means that more phone users encounter issues like water damage and cracked screens, requiring a talented repair person’s help. Because smartphones continue to become more common, we’ll likely continue to see an increased need for cell phone repair, especially as these phones are more expensive and warrant repairing rather than replacing. According to Statista, there were 1.52 billion smartphones sold worldwide in 2019 alone.

Smartphone manufacturers are making phones more durable, which could reduce the need for some repairs. Consumers who have a higher disposable income may decide to purchase a new phone rather than replace one. However, with upper-level smartphones from iPhone and Samsung costing more than $1,400 new, plenty of consumers are still likely to repair their phones when possible, rather than just replacing them.

Target Market

Because smartphones have a higher price point and are more expensive to replace than more basic phones, the majority of mobile phone repair clients are smartphone owners. Pew Research Center states that younger people, people with higher education levels, and higher incomes are more likely to be smartphone users. However, smartphone ownership in Americans age 50 and older has risen substantially from 2015 to 2018.

Simply put, the target market for a cell phone repair business is owners of damaged devices that are new and expensive enough to justify repairing rather than replacing.

Checklist for Starting a Cell Phone Repair Business

If you’re thinking about starting a cell phone repair service, it’s important to do your research first. Here is a checklist to help you get started.

Step 1: Write a Business Plan

After coming up with a business idea, the next step in starting any business should be to write a business plan.  Not only will a bank require you to have one to get funding, but multiple studies have shown that a business plan helps increase the odds of starting a successful business. A well thought out cell phone repair business plan will serve the entrepreneur as the road map for their business, helping them achieve their business goals.

Related: How to write a business plan

Step 2: Form a Business Entity

A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a cell phone repair business, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
 
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: Guide to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 3: Name the Business

Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Related: Tips and ideas for naming a cell phone repair business

Step 4: Select your Location

Cell phone repair businesses typically follow two models: A physical storefront or a mobile business. The mobile business option may be appealing because of the costs it saves over rent, but remember that this business design will require travel time and create wear and tear on your vehicle. It can also limit your repair capacity.

For a brick-and-mortar cell phone repair store, a lease can be a significant but necessary expense. Storefront space in a high-traffic area or kiosk in a mall can generate walk-in traffic and naturally spread awareness of a business. Lease costs vary according to the size of the space and its location.

A cell phone repair business can also be run out of a home as a mobile phone repair service.  This can be a good set-up to test the market and see if there is enough business before investing in a permanent location.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

The types of business licenses, permits, and registrations that will be required to start a business vary on the activities of the business in addition to where it is located.

No special licensing is required to open a cell phone repair shop, but there are some general local, state, and federal business registrations such as a local business license, state sales tax permit, Employer Identification Number, and Occupancy Permit, among others.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a cell phone repair shop is another.  Fortunately, the cost to start a cell phone repair shop can be relatively low, with a majority of the costs going towards remodeling, workstations, tools, signage, and inventory.  Funding for a new start-up can be difficult as banks are typically going to want the borrower to have good credit and personally invest 15-25% of their own money.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Ready

Marketing is essential for cell phone repair businesses because customers will only return when their phones are broken, so repair businesses can’t rely much on repeat business. Because of the nature of the repair business, a budget needs to include marketing expenses.

Marketing will be commonly anything from sending out direct mail postcards to handing out business cards, flyers, and brochures to advertising online to leverage digital marketing power through Facebook, Instagram, Yelp, Craigslist, and other social media platforms drive business.

As the business becomes better known for its excellent service, word-of-mouth referrals will be a powerful source of new customers. Exact costs will depend on the type of volume of marketing that’s best for each business.

Related: Low-cost ideas to market a new business

One important marketing task is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 9: Obtain Business Insurance

There are several types of insurance to consider when starting a cell phone repair business. A few of these include:
– General liability insurance will cover damages or medical expenses if a customer trips or falls or is otherwise injured while in a repair store.
– Workers’ comp insurance covers the cost of an employee’s lost wages if they are injured while on the job. Businesses must purchase workers comp insurance if they have employees.
– Vehicle insurance will cover damages incurred if you have a mobile business. Personal policies will likely not cover you in the case of an accident while on business.

The cost to insure a cell phone repair business will vary according to business specifications, location, and the value of the store’s inventory. To get the most accurate information on insurance costs, contact at least five insurance companies for quotes. Be sure to compare the coverage, including exclusions, payout amounts, and deductibles, when deciding which plan is the best option.

Step 10: Hire Employees

Many cell phone repair businesses are owned and operated by a single person; however, it is important to consider having at least one part-time employee if the owner is sick or needs to take time off. Larger businesses with many clients may hire employees to help keep up with the demand. According to Glassdoor, the average salary for a cell phone repair technician is $32,606. In addition to budgeting for employee salaries, be prepared to pay for taxes, workman’s comp insurance, and paid time off for employees.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your cell phone repair business is critical to your business’s long-term success.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How much does it cost to start a cell phone repair business?

One of the advantages of starting a cell phone repair business is that its startup costs are relatively minimal compared to other brick-and-mortar businesses. You’ll still need a budget to get started, but the below costs can give you a sense of just how much you’ll need to save up.

Some costs to start a cell phone repair business include:
– Chairs ($40 – $80 each)
– Workstation desk ($200 – $400)
– Articulating light ($100 – $250)
– Tools like tweezers, screwdrivers, UV light, etc. ($50-$100)
– Repair parts inventory and supplies – Need to be sure you have sufficient stock for most phones as customers don’t want to wait long ($200 and $800 minimum)
– Phone accessories, screen protectors, and cases to upsell ($150 – $400)
– Repair ticketing and invoicing system
– Working capital for payroll, rent, utilities, etc.

The right tools make a difference in efficiency and doing the job right. It may be tempting to save some money by purchasing less expensive tools, but consider you will be using these for multiple hours each day. Also, while buying certified replacement parts will cost a little more, the quality of those parts is a lot better than 3rd party vendors that you might find on eBay or Amazon. This will ultimately result in a better experience for your customers.

How much can a cell phone repair business owner make?

A cell phone repair business’s profits will vary according to the types of repairs offered, the number of employees, location, etc. According to CellStore Software, cell phone repair businesses typically enjoy extremely high-profit margins. Most of the costs are in parts and labor, and the option to offer a mobile service instead of a brick-and-mortar store can further cut startup costs. In some cases, you may see profit margins between 80% and 100% on particular repairs depending on the phone’s brand as iPhone repair parts are generally less expensive than Android-based phones.

For instance, if a store charges $70 for an average repair and does 10 repairs each week (a conservative estimate for an established business), the weekly revenue will average $700. Assuming an 80% profit margin, the weekly profits will come to $560, and monthly average profits would be $2,240.

Up-selling products like screen protectors, phone cases, and other accessories can also increase profits.

What skills are needed to run a cell phone repair business?

Planning, opening, and running a cell phone repair business requires certain skills. While you don’t need a degree in business, the following skills and education will be helpful.

Cell phone repair experience. Possibly the most important skill in getting this business off the ground is experience repairing cell phones. The ability to troubleshoot problems, replace broken parts, and repair various cell phone models and brands are essential since customers expect a repairperson to be knowledgeable, talented, and fast. Some people acquire these skills through experimentation and by teaching themselves about repairs, but there are also various courses (both online and in-person) that offer more formal education in cell phone repair.

Customer service skills. Good customer service is also key to successfully running your business. Customers will come to you frustrated and possibly worried about being able to retrieve data from their phones. In some instances, you may have to break the news that their data is lost or their phone needs an expensive repair. Being able to handle customer emotions and provide good customer service can help build and sustain a repair business.

Business skills. Some business skills will also be necessary for starting and managing a cell phone repair business. It’s important to set appropriate prices, manage supply inventory, market the business, and more.

Interest in the technology industry. Cell phone technology rapidly evolves, and a successful cell phone repair person will need to keep pace with the new technology so that they can repair new phone models as needed. The more technical knowledge that a repair person has, the better quality service and advice they can give to their customers.

Are there grants to start a cell phone repair business?

It’s extremely rare to find a grant to start a cell phone repair business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a cell phone repair business?

The NAICS code for a cell phone repair business is 811213, which is classified under Communication Equipment Repair and Maintenance.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Resources
The Repair Association
The Association of Device Repair Service Excellence

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!