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How to Start a Tire Shop

How to Start a Tire Shop

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How to Start a Tire Shop

How to Start a Tire Shop

Tire replacements are a cyclical maintenance task. Car owners need a tire change every 50,000 (or so) miles. So, when starting a tire shop, you can safely assume it will be a business with ongoing demand: As long as cars are on the road, tires need to be replaced.

Business Description

The primary service provided by tire shops is tire replacement. However, tire shops can also offer other valuable services, such as

  • alignments
  • tire rotations
  • wheel balancing
  • tire repairs (i.e., tire patches for hole repairs)
  • brake replacements
  • selling custom wheels

Many shops operate on an appointment basis but will also offer walk-in services to increase the number of customers served daily. Tire shop customers include owners of cars, trucks, or trailers. Additionally, the shop may specialize and offer tire services for specialty vehicles like semis or RVs.

A tire shop makes a profit by selling inventory at a slight markup and charging fees for labor or add-on services. In addition, tire shops typically purchase bulk inventory to get a better price-per-tire rate—this, too, allows the shop to keep a larger profit on tire sales.

Industry Summary

In 2023, the United States tire industry earned an estimated $37.2 billion in revenue, a 1.5% increase compared to the previous year. However, tire shops experienced an overall decline in revenue starting in 2020. The slide is partly due to the global pandemic, supply chain issues, and shortages. Between 2018 – 2023, tire shops had an average of 2.2% revenue decline per year.

The number of tire dealers in the United States was around 24,906 in 2023. The overall change in the number of tire shop businesses between 2018 and 2023 was minimal, averaging a 0% change over the five years. But between 2022 and 2023, there was a 0.3% growth—hopefully signifying that growth will continue.

Industry Trends

Tire shop trend patterns were highlighted during the global pandemic, which affected vehicle usage, the economy, and supply chains. Yet, these trends still appear outside of the pandemic’s influence. For instance, the state of the economy will affect how frequently customers change their tires.

Economic influence. Consumer spending habits and unemployment rates influence how frequently car owners change their tires. Of course, repairs are unavoidable when they come up, but when extra income is tight, consumers tend to change their tires less often and use their tires for as long as possible.

Conversely, during strong economic periods and low unemployment, consumers tend to have extra money or more comfortable budgets. This allows them to change their tires more frequently.

Car usage changes. The tire mileage determines a tire’s age rather than the number of years. For instance, a driver who commutes in their car 50 miles a day will need new tires before a driver who drives only 50 miles per week—even if both drivers got their current set of tires at the same time.

The pandemic reduced the miles put on tires because much of the population cut back on driving due to stay-at-home orders and the shift to remote work. However, tire mileage is expected to increase in the coming years as people resume in-person work and begin driving more often.

Target Market

The target market for a tire shop is broad, as the business can serve a wide variety of vehicle owners. A main distinction in the industry’s market is whether the business serves personal auto drivers, commercial drivers, or both.

Personal autos. Personal autos are cars, trucks, trailers, motorhomes, or motorcycles. These customers need tire changes for their vehicles on a consistent basis. Additionally, tire shops are helpful when the customer gets a flat tire or needs a re-alignment. Targeting areas with a high concentration of commuters will bring your business many customers because commuters tend to put more mileage on their cars and, therefore, need tire changes more frequently.

Commercial autos. Commercial autos include vehicles like semi-trucks, box trucks, or buses. Contracts with commercial companies can lead to consistent and lucrative work for your business, especially when the business has a large fleet of vehicles (i.e., a school district’s fleet of buses).

Checklist for Starting a Tire Shop

Opening a successful tire shop requires considerable planning and preparation, which can include business planning, finding a location, obtaining the proper licensing, and more.

To see the most common steps involved in getting started, this helpful checklist will guide you in setting up your business.

Step 1: Write a Business Plan

If you are planning to open a tire shop, it is essential to create a business plan. A business plan serves as a blueprint of how you will operate your tire shop and is used to obtain funding from a lender or investor by showing how the funds will be used.

Related: How to write a business plan

Step 2: Choose a Business Name

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.

If you’re stuck for inspiration, try to think of something that captures the spirit of what you want your shop is about. Is there a quirkier side? Are you big on safety and durability? If so, consider how you could incorporate this into the name of the business.

Additionally, you can look up synonyms related to tires, vehicles, and safety that may spark an idea, or even combine different words to make catchy combinations.

Related: Tips on naming a business

Step 3: Form a Business Entity

A business entity (also referred to as a legal 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 which business entity is best for a tire shop, 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!

ZenBusiness - Best for beginners. $0 plus state fees & free registered agent for 1 year!

Northwest - Best privacy protection. $39 plus state fees & free registered agent for 1 year!

Step 4: Select Your Location

Picking the right location when starting a tire shop can be challenging because of competition and cost.

A few important factors to consider when selecting your location include the size of the building and lot needed for the shop, proximity to major roads for customers, parking availability for customers, zoning regulations and restrictions in the area, and local competition.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

If you’re planning to open a tire shop, you will want to ensure you understand which licenses are necessary before opening. While requirements vary by state and city, some of the most common licenses needed for a tire shop include a local business license, sales tax license, occupational permit, and Employer Identification Number (EIN).

Additionally, a tire shop will need to be aware of their state’s environmental regulations, regarding the disposal of used tires.

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 tire shop is another.  

First, you’ll need a business plan that outlines your goals, what makes your tire shop unique, and how you will spend the funds. Once you have your business plan ready, it’s time to reach out to lenders to review it. The bank may fund the tire shop, or they may require additional support from a loan guarantee by the Small Business Administration (SBA).

Regardless, it’s worth noting that a bank will want the borrower to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

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 Plan in Place

There are many ways to promote your new tire shop with a wide range of cost.

You can start by creating a community presence supporting local organizations, joining the Chamber of Commerce, and introducing your shop to related businesses such as car dealerships and repair shops.

Also, taking advantage of digital advertising avenues such as social media platforms, sponsored ads, email campaigns, and online reviews will also help draw attention to your business.

Last, be sure to ask satisfied customers for referrals; word-of-mouth can spread quickly when someone is truly pleased with their experience.

Related: Low-cost ideas to market a new business

Every business is going to need a logo. Make a professional logo in no time with the free logo makers from BrandCrowd and Canva.

Step 9: Get Business Insurance

Starting a tire shop requires more than just a good product and customer service, it requires the right insurance as well. There are a variety of business insurance policies that all tire shops should consider, such as general liability insurance, commercial property insurance, and workers’ compensation insurance.

General liability coverage helps protect your business if there is ever an incident involving property damage or accidental injury to someone on your property, while commercial property coverage covers damage to the building or items owned by your business. Finally, workers’ compensation provides benefits to employees in case of injuries incurred at work.

Having the proper coverage in place before you open your shop can provide invaluable peace of mind for yourself and your staff.

Related: Types of insurance your business may need

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How much does it cost to start a tire shop?

Creating your initial budget will help you plan for expenses and costs as you begin your new tire shop. Of course, a tire shop has several ongoing expenses, such as inventory and supply purchases (about 50% of your revenue will likely go to purchases), but here are some of the main startup costs to start a tire shop.

Business formation costs. Opening a new business requires a business license, insurance, and sometimes, permits. Insurance has no one-size-fits-all price because every business has different levels of risk and coverage. The best way to get a price on an insurance policy is to contact an insurance agent or company for a quote.

Business licenses and permits are regulated at the state level and vary per state. Most licenses and permits cost less than $1,000, and you can check your state’s webpage for small businesses to determine the fees.

Inventory. Inventory purchases are a large initial expense because you will need to gather a base set of materials. While tire suppliers can offer quick delivery of tires, many sales are made because the customer wants the job done right away.

After this, inventory purchases decrease to a maintenance level to keep a steady supply. Tires cost between $50 – $300 per tire, depending on the quality of the tire, size, and type (such as an all-weather tire).

To stock your shop with inventory before opening, you may stock 300 – 500 tires (or even more). With an initial inventory of around 300 tires, you will need to budget between $15,000 – $90,000.

Equipment. Opening a tire shop requires some important pieces of equipment, depending on the range of services offered.

At a minimum, a reliable lift, wheel balancer, power tools, and an air compressor will be needed. If you plan to offer wheel alignments, an alignment machine will be a necessity as well.

In addition to mechanical basics, other important items such as workbenches and shelving systems are critical elements in efficiently storing supplies and helping reduce safety hazards. Depending on whether you can find used items and the services offered, expect to spend $10,000 – $150,000 to get started.

Employee wages. Employee wages make up another large category for ongoing expenses. For instance, the average hourly wage in the United States for a tire technician is about $16. Full-time tire technicians earn about $2,500 per month.

Location costs. Location costs include rent and utility expenses—and you may also need to account for equipment purchases, such as a car lift. Commercial properties typically rent at a price per square foot per year, with the average rent for commercial space in the United States being around $9.54 in 2021. However, prices can increase to as high as $40 – $50 per square foot in high-demand areas.

How profitable is a tire shop?

Between markups on tire sales and labor costs for changing tires, a tire shop typically earns between $120 to $200 per set of tires changed. A shop can earn more by upselling other services, such as alignments, brake changes, tune-ups, and disposal services.

Let’s break down the earnings. The estimate of $120 – $200 in profit per set of tires comes from the tire markup and labor costs:

The markup per tire ranges between $15 – $30. So, profits on a set of tires equal $60 – $120.

The labor fee is about $15 – $20 per tire, totaling about $60 – $80 for a set.

Based on these figures, if your shop sees 10 customers per week (about two per day), then your shop earns about $1,200 – $2,000 per week on base services alone. But, of course, this figure would increase with the addition of add-on services.

Are there grants to start a tire shop?

It’s extremely rare to find a grant to start a tire shop. 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 tire shop?

Many day-to-day operations in a tire shop can be delegated to employees. However, running a tire shop will require management confidence and entrepreneurial motivation to drive your business forward.

Employee management skills. Likely, there will be a handful of employees working for your business. The employees can handle front-end customer service, tire repairs and replacements, payroll, and budgets. Management skills allow you to lead your team well, maintain company standards, and encourage a high work ethic.
Good management skills include educating and developing your employees’ strengths. For instance, strengthening your employees’ sales skills will improve your overall sales as the employees can upsell value-adding services.

Tire knowledge. Although you don’t need a degree or certificate to change a tire, you need to know the basics of tire changes and repairs. Hired employees may be the “expert,” but having an understanding of tire repairs for yourself will help you know that your employees complete quality work.

Operations management. Operations management includes oversight of appointments, employee work schedules, orders, and expenses. The ability to manage these business aspects helps improve efficiency and reduce waste.

Sales. Most of the shop’s profit comes from tire changes and basic repairs. However, your income will increase substantially with a focus on sales. For instance, during a standard tire change, you may upsell new brakes to your customer, adding value to the service and increasing the amount of money earned per customer interaction.

Final Thoughts

Starting a tire shop is a great opportunity for mechanically inclined and business-savvy entrepreneurs. Tire shops offer the security of consistency. They have ongoing demand and dependable profits.

The business even has a chance to increase revenue by you and your employees exercising sales skills. Indeed, the challenges of a tire shop will require hard work, but the effort results in rewarding outcomes, such as income for your business and repeat customers.

How to Start a Tire Shop

How to Start a Tire Shop

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I am a serial entrepreneur, educator, business advisor, and investor.

StartingYourBusiness.com is here because of the many clients I worked with who made decisions based on inaccurate and outdated information.

Starting a business is hard, but here you will find the practical tools, resources, and insider tips to help you successfully start a business.

If there is a question about starting a business or help finding a resource, I'm here to help!

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