How to Start a Small Engine Repair Business
Small engine equipment is everywhere, from the lawn mower that homeowners use each summer to the chainsaws and weed whackers that landscaping companies rely on almost daily. When those engines break, most people turn to a specialist to help with the repair. If you’re experienced in working on small engines, opening up your own repair business could be a lucrative business venture.
Small engine repair businesses specialize in working with various types of small-scale machines in need of repair. These businesses diagnose, repair, and often maintain two-stroke and four-stroke engines from manufacturers such as Briggs & Stratton, Honda, Kohler, and Generac. These small engines will be found on all types of equipment like ATVs, dirt bikes, snow blowers, lawn mowers, leaf blowers, snowmobiles, motorcycles, pressure washers, outboard boat motors, chainsaws, and more. Many of these businesses work out of shops, though some may offer deliveries and drop-offs, while others may offer mobile services.
A small engine repair shop can earn revenue in many ways. The first revenue stream comes from repair services, whether the business is working with professional service providers, homeowners, or both. A business can establish a second revenue stream by buying broken equipment, repairing it, and selling it for a profit. A reputable small engine repair business can contract out its services to manufacturers in need of local repair services to fix products that are still under the manufacturer’s warranty. A business can also offer additional services, like equipment rentals, to generate year-round and reliable revenue.
When starting a repair business, it may be tempting to venture into all types of small engine repair. This can backfire, though. With such a wide array of machines, a business will need to learn many different systems and repair techniques and will need to establish vendor accounts with many different parts suppliers. By specializing in certain types of engine repairs, a business can establish itself as being the best resource around and more efficiently diagnose and repair the products that are brought in.
According to the United States Bureau of Labor Statistics, the employment of small engine repair mechanics is predicted to grow by 3% from 2019 to 2029. This growth is on par with average growth for all occupations. Engines for boats and outdoor power equipment have become more sophisticated, meaning that repairing and maintaining them requires more parts, technical knowledge, and workers. The development and popularity of electric motorcycles add more opportunities to this industry. The use of small engines in landscaping, tree work, and gardening should create a steady demand for repair services.
As of 2019, small engine mechanic employment reached 78,100. Of that employment, 25,700 employees were motorboat mechanics and service technicians, 17,400 were motorcycle mechanics, and 35,000 were outdoor power equipment and other small engine mechanics. By 2029, total industry employment should reach 80,300.
Certain trends are shaping the small engine repair industry. According to Contractor Equipment, more products now have integrated internet functionality for easier diagnostics and performance monitoring. This higher-tech design captures more data, so repair technicians who know how to interpret that data can more quickly diagnose and repair the equipment. Available fuel options are also expanding, and equipment using gas, diesel, or propane is now commonplace.
There’s also been growth in electric tools. Battery technology continues to expand, as do hybrid engines. This increase in different power types means that repair technicians will need to be versatile to meet the market’s changing demands.
A small engine repair service may market to various audiences. Contractors and professionals who use their equipment daily will naturally need more frequent repairs than homeowners who occasionally use their equipment. A repair shop may specialize in certain types of repairs, such as working with newer products equipped with advanced technology or working with hybrid engines.
Checklist for Starting a Small Engine Repair Business
If you’re thinking about starting a small engine repair business, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write a Business Plan
Before starting your business, you’ll need to write a business plan. This business plan can help you get organized and highlight all of your business’s details, including your target market, the types of services you will offer, competitors, and how you will make a profit. You’ll need this business plan if you decide to apply for financing from a bank or investor. Multiple sources have also found that taking the time to develop a business plan increases the chance of a business becoming successful.
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 small engine 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 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 name for a business can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select Your Location
You can start a smaller shop right out of your garage, but as that business grows, you may need to move to a larger space. Renting a shop can help your business to appear more professional and will give you more room to take on a larger volume of machines at a time. The size, location, and amenities available at the shop will all affect its rent price. A location in a higher-traffic area can support your shop’s visibility and make it easier for customers to drop off and pick up machines, but that type of location may come with higher rent.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
There is no specialized licensing for a small engine repair business but will likely need to research general business registrations. Some common registrations include a business license, sales tax permit, Employer Identification Number, and Occupancy Permit, among others.
Step 6: Find Financing
Starting a small engine repair business requires an initial investment, and if you want to reduce those startup costs or fund a large equipment purchase, you may need to find financing. You’ll need good credit to get a business loan and will also need to invest your own money in 15-25% of the start-up costs.
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 Plan in Place
A strong marketing plan will not only help to get your business started but can also help to bring in new customers on an ongoing basis. Common marketing techniques for a small engine repair business include social media marketing, online advertising, direct mail, print advertising, and even in-person visits to local landscaping and construction companies. Customer loyalty and referral programs can also help to build up your customer base.
Some shops will build relationships with commercial accounts such as lawn mowing businesses.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a small engine repair business. A few of these include:
– General liability insurance helps to protect the business if a customer is ever hurt while on the business property or as a result of the work the business has performed.
– Worker’s compensation insurance helps to pay for expenses that could result if an employee were hurt while working.
– Commercial auto insurance covers a business-owned vehicle, protecting the business against expenses that could occur if the vehicle was in an accident.
The cost to insure a small engine repair business will vary depending on factors like the value of the business’ shop and equipment and how many employees are on staff. To get the best idea of what to budget for insurance, request quotes from multiple insurance providers. When evaluating the quotes, consider how the premiums, coverage exclusions, coverage limits, and other factors compare.
Step 10: Hire Employees
A small engine repair business owner may be able to handle all of the work themselves during the business’s early days, but as that business expands, it may be time to hire employees.
According to Salary.com, small engine mechanics earn an average of $17 per hour, though that can range from $15 to $20 per hour.
Salaries aren’t the only expense that comes with hiring employees. A business will also need to budget for related expenses like paid time off and worker’s comp insurance.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your engine 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.
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 small engine repair business?
It is possible to start a smaller repair business out of a home garage, saving on the initial cost of a shop rental. This smaller business can cost $5,000 or more to start, while a full shop outfitted with a comprehensive supply of tools can cost closer to $25,000.
Some common startup costs for a small engine repair business include:
– Repair equipment
– Workshop set up with tools, workbenches, and storage.
– Truck and trailer
– Shop renovation costs
How much can a small engine repair business owner make?
Many factors will determine a small engine repair business’ profitability. The business’ revenue will depend on the types of repairs made, its location, its profit margins, reputation, and much more. A business owner can maximize its profits by identifying a niche with plenty of local demand, offering complimentary services like maintenance and cleaning, and even offering delivery and pickup for an additional fee to expand the business’ potential customer base.
Some repair businesses have increased their revenue streams by not only repairing equipment for customers but by also buying used or broken equipment and repairing it to resell. This strategy can help expand the business’ customer base, reach customers looking to buy equipment, and then convert them into returning customers when they later bring their products in for maintenance or repair.
Another potential profit center is selling parts and consumables such as spark plugs, filters, and blades.
Are there grants to start a small engine repair business?
It’s extremely rare to find a grant to start a small engine 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 skills are needed to run a small engine repair business?
Starting a small engine repair business doesn’t require a business degree, but certain skills and experiences will be helpful.
Background in mechanics. A mechanical background and experience in repairing engines is essential. Previous experience working in a repair shop setting will prepare a business owner for the challenges that come with running this type of business. Even if you do not have previous small-engine repair experience, numerous schools offer in-class and correspondence small-engine repair training that can lead to certification.
Troubleshooting abilities. Creativity and troubleshooting abilities can help a business owner to navigate any problems that may arise.
Attention to detail. Attention to detail is essential in this industry, and a business owner will use this skill in everything from diagnosing an issue to ordering the right replacement parts.
Organization talents. A repair business owner will need organizational talents for everything from keeping track of parts to tracking which machine belongs to which customer.
Customer service skills. Strong customer service skills can help a repair business owner create positive experiences for customers, encouraging valuable repeat business.
What is the NAICS code for a small engine repair business?
The NAICS code for a small engine repair business is 811411.
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?