How to Start an Appliance Repair Business
If you find fixing machines fascinating and have a knack for getting to the root of a problem, you may want to try your hand at the appliance repair business. Starting an appliance repair business will mean that you’ll have the chance to work on many different appliances, putting your creativity, attention to detail, and problem-solving techniques to use. With your own business, you’ll be in charge of everything from marketing to scheduling, but this can also be a rewarding opportunity to build up a business and be your own boss.
Appliance repair businesses often offer repair services for broken appliances like refrigerators, stoves, freezers, washing machines, dryers, and garbage disposals. Often, these services are provided in a homeowner’s home since transporting these appliances is difficult. Repair businesses can help save homeowners money over the cost of purchasing a brand-new appliance. To offer prompt service, many repair businesses keep a stock of common repair parts for the appliances they specialize in, allowing them to travel to the customer, identify the issue, and repair the problem all in one visit.
Before you open a repair business, consider what competition is already present in your area and what market needs may be currently unmet. Could local homeowners use a technician who specializes in refrigerators? Are smart devices increasingly popular in the area, and are homeowners looking for a technician who can specialize in these types of repairs? The more unique you can make your business, the better you’ll stand out from the competition.
Transitioning into a full-time appliance repair service can be difficult as you build up that initial customer base, so consider starting your business on a part-time basis at first. Homeowners may particularly appreciate the availability of services on the weekends when they’re not at work, so a part-time weekend business might be a great stepping stone to taking the operation full-time.
According to IBIS World, from 2014 to 2019, the appliance repair industry grew by an annualized rate of 0.2 percent and is expected to grow by 1.3 percent in 2019. The industry is a $4.9 billion market as of 2019 and has the potential to continue to grow because of the increase in disposable income. As consumers have more disposable income, they’re more likely to pay for nonessential appliance repairs, rather than putting these repairs off or attempting DIY repairs themselves. This means that appliance repair businesses may see increased demand for their services.
One of the largest trends affecting the appliance repair industry is the transition from traditional appliances to smart appliances. According to the New York Times, smart appliances’ popularity is only likely to continue; 59 percent of adults surveyed in 2018 indicated that they were interested in using a smart home appliance or device. Traditional appliances are being modified to include smart features, such as refrigerators equipped with touch screens. To keep pace with these smart appliances, repair businesses will need to learn the ins and outs of this new technology.
Appliance repair businesses also face competition from major manufacturers who offer their own repair services, like Sears and Whirlpool. While appliances are under warranty, consumers are likely to take advantage of these services, which may be fully or partially covered. Independent repair businesses face the challenge of marketing themselves so that consumers are aware of their availability and choose to hire them when they need appliance repair.
The target market for a repair business partially depends on that business’ focus. Some repair businesses focus on a type of appliance, like repairing kitchen appliances, while others may specialize in repairs for a particular brand, like GE or Panasonic. Generally, a business’ target market will be consumers (most typically homeowners) who have the disposable income to afford appliance repair.
Checklist for Starting an Appliance Repair Business
If you’re thinking about starting an appliance 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
After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
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 an appliance 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!
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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.
Step 4: Select your Location
Some appliance repair businesses start in the owner’s garage and may even offer a pick-up service. Doing so dramatically reduces your expenses, but at a cost to having drive-by traffic seeing your sign.
Related: Choosing a business location
Step 5: Register for Business Licenses and Permits
A small appliance/electronics repair license will be required from the state before opening your business in some states. There are also regulations for repairs that involve refrigerators or air conditioners. The Environmental Protection Agency requires technicians to have a Type 1 certification under the Clean Air Act.
In addition, there are some general business registrations that will be needed. These will vary but could include a business license, sales tax permit, Employer Identification Number, and Occupancy Permit.
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 an appliance repair company is another. Even though the costs to start an appliance repair business, financing it can be difficult. The borrower(s) will need to have good credit and personally invest 15-25% towards the total start-up costs to get a loan.
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
While repair business customers may become repeat customers, they will only return to a business when an appliance breaks. This means it’s important for repair businesses to actively market themselves to bring in new customers. Marketing options include direct mail, print advertising, social media, and more, and the costs of marketing will vary according to the method and volume used.
Your reputation will eventually become the most important marketing strategy as word-of-mouth referrals tend to drive most repair businesses.
Also, even though the profit margins can be slim, home warranty companies can provide consistent leads that make it worth it.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting an appliance repair business. A few of these include:
– Commercial liability insurance protects the business if a customer is ever injured due to work, and this insurance can cover resulting expenses like legal fees.
– Worker’s compensation insurance applies only if the business hires staff and covers expenses like medical bills if an employee is hurt while working.
– Commercial auto insurance will cover the business’ vehicle and offers protection in the case of an accident.
The costs of insurance policies can vary based on factors like the value of the business’ equipment and the business’ location. To get the most accurate idea of what insurance may cost, request quotes from multiple companies. Then, compare those quotes and pay particular attention to how their premiums, deductibles, coverage limits, and coverage exclusions vary.
Step 10: Hire Employees
While many independent appliance repair businesses are one-person operations, a business can grow to the point where it’s necessary to hire employees. Glassdoor reports that appliance repair technicians make an average salary of $32,606.
Labor is often the largest cost for an appliance repair business, right after the purchases of parts. Before hiring employees, make sure to calculate not only the salary cost but also payroll expenses such as payroll taxes, workers comp insurance, health insurance contributions, and unemployment insurance.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system is critical to the long-term success of your business.
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 an appliance repair business?
The cost to open an appliance repair business will partially depend on your business model. Most repair businesses travel from home to home, meaning that they need a truck or SUV to hold tools and supplies and potentially transport household appliances. Establishing a brick-and-mortar store is another option but will limit the business to working only on appliances small enough that customers can transport them themselves.
An appliance repair business can be opened on a bare-bones model for about $1,000, but expect to spend closer to $5,000 for a well-stocked business, and more if you need to purchase or lease a business vehicle.
Some common startup costs include for an appliance repair business include:
– Diagnostic tools
– Repair tools and equipment
– Inventory of repair parts
– Vehicle, including storage to organize supplies
How much can an appliance repair business owner make?
The earning potential of an appliance repair business depends on factors like its area of specialization, the business size, location, and how many years the business has been in operation. The Bureau of Labor Statistics reports that, as of May 2018, the median annual wage for home appliance repair technicians was $39,270. The upper 75th percentile earned an average wage of $50,100, while the top 90th percentile earned $60,930. By differentiating your repair business from others, maximizing your profit margins, and marketing your business effectively, you can potentially increase your earnings.
What skills are needed to run an appliance repair business?
Opening an appliance repair business doesn’t require a business degree, but certain skills and experiences can increase the business’s chances of success.
Appliance repair skills and experience. A repair business owner needs to be talented in working with and repairing the appliances they specialize in. As appliances become more complicated, a detailed understanding of how appliances work and plenty of experience in identifying problems and fixing appliances will leave a business owner well-prepared for the challenges they’ll face in fixing the appliances brought to them.
Creativity and problem-solving skills. Problems can and will arise in this industry, so a business owner who’s creative and takes an active role in problem-solving will do well. Repair technicians may need to be resourceful in finding difficult-to-get parts and overcoming other challenges.
Organization skills. From tracking invoices and part orders to keeping track of all the parts when disassembling an appliance, repair business owners need to have great organization skills.
Customer service skills. Customer service is a major component of running a repair business. Good phone etiquette, good interpersonal skills, and the ability to stay calm even if a customer is unhappy will go a long way to building a customer base and developing a good business reputation.
Scheduling talents. A repair business owner also needs to be able to create and maintain a schedule. This can be tricky when traveling from home to home for repair appointments, but being able to arrive at appointments on time can build customer loyalty.
Are there grants to start an appliance repair business?
It’s extremely rare to find a grant to start an appliance 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 an appliance repair business?
The NAICS code for an appliance repair business is 811412.
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?