And for obvious reasons, it’s also very high on Greg Sands’ list of considerations when he’s opening a new repair shop – which he does with some regularity.
Over the course of his career, the Atlanta-based entrepreneur has started more than 90 shops in six different U.S. states, selling most of them when opportunities presented themselves or circumstances demanded it.
He now runs 30 stores and is in the process of building six more. All the wheeling and dealing has made him something of a real estate expert but in speaking to audiences at Automechanika Chicago this spring, he stressed that he and his wife-slash-business-partner Sherri are, at heart, repair shop owners.
“We know and love this industry,” he told CARS magazine. “We don’t get hung up on real estate or just buying and selling businesses. In fact, we own more operational businesses than real estate. We’re building more stores, but overwhelmingly – maybe 75% of our shops – are leased, build-to-suit operations.”
He says he welcomed the chance to speak to shop owners in Chicago as a means to give back to an industry that has been very good to him and his family.
When it comes to opening a new shop, lesson number one is to spend extra time considering the location of the shop because the right spot can be the difference between years of struggle and instant sustainability.
Greg Sands, co-founder of the direct mail company Mudlick Mail, owns more than 30 auto repair shops in the U.S. He uses different a number of different brand names, including Service Street Auto Repair.
“Most of the time when people are considering a location, it comes down to convenience for them. They want it to be close to where they live. But close may not be the best location for a shop,” he says. “Many shops start in a bad location and it takes years to make them profitable. Don’t make the same mistake when you open your second shop.”
Here are some things to keep in mind when you start scouting a new location.
Never look for just one location
“Look at all areas zoned for automotive. Don’t get in the rezoning business. You can lose a fortune trying to get something rezoned,” he says. “And never look at only one location. The more you compare, the better you’ll do.”
Don’t get hung up on a particular building or a particular business, he warns. If it looks like it isn’t going to be possible, move on.
“Out of five opportunities that you work on, you might get one deal done,” he says. “Don’t be impatient.”
Be the first in a good location
A great location has excellent visibility, and plenty of parking, on a busy street, near the kind of essential services (grocery stores, pharmacies, medical clinics and dental offices) that attract a lot of traffic. If you’re the first one in that area, and you secure the most visible, most accessible spot, additional auto repair shops in the area won’t hurt you. In fact, they’ll probably help attract potential clients to the area, and you’ll get the biggest share of them.
“Whoever moves into a prime area first is going to win,” he says. “Being ‘first in’ protects you forever because even when others move in nearby, they’ll have a lesser location.”
Be aware that the traffic count can be too high as well as too low. He looks for streets that see more than 18,000 cars per day… but not more than 40,000 cars per day.
“At that rate, people are flying by and not even seeing you.”
Be where the customers are
“New developments… that’s our favorite,” he says. “We look for growing areas, out in the suburbs where we can be the first in and the people haven’t made their buying decisions yet.”
Sands is a big believer in using demographics to find the right clientele – available through a number of sources, including any good real estate broker. He looks for pockets where the average income is greater than $75,000 per year. Then he figures out how well served they are for automotive services.
“Look for the number of shops in a two-mile radius – including quick lube shops,” he says. “Divide the ideal number of customers by the number of shops. If you have 1,000 homes or more per location, you’ll do well. You should be able to do $100,000 a month in sales.”
In his calculations, new-car dealerships don’t really count as competition. “Their main business is to sell cars, not fix cars,” he says. “They also have a different type of client base.”
As for other shops, there are few situations more stressful than being in the middle of an industrial area where you have competitors on every corner.
“Everyone’s beating each other up all the time for staff and customers. That’s a tough way to make a living,” he says. “Many of us tend to start out that way because that’s all we can afford. But the key is to evolve from that not-so-great location to a better one. Take the lessons you’ve learned and find a location that’s not so competitive.”
Be on the right side of the street
“You want to be on the going-to-work side,” he says. “That’s ideal.”
The idea is that people are comfortable taking their vehicle in for service in the morning, when they are on their way to work. If it is easy for them to get to you, you’re making it easier for them to make the decision to stop in.
When you’re inside a city and there’s no ‘to-work’ side of the road, visibility and accessibility are the keys.
Cheaper is not better
In real estate, there’s a reason some buildings can command a higher lease or are worth more money.
“For a lot of people, their decision-making process boils down to the price of the real estate. But looking for the cheapest spot is a terrible mistake,” he says. “Yes you can get something for a lower price in a particular area of town, but you have to understand there’s a reason it’s that cheap.”
Sands believes new auto repair shops face a very different launch than restaurants, where the community can’t wait to try it out. They start with a bang and then the trick is to keep their customers. Auto repair shops start quiet and need to build momentum through good word of mouth.
“Tenacity and determination wins in the automotive world,” he says. “In a new shop you don’t have a base of customers, so the growth is usually slow. Finding the right location just makes that start-up phase a little shorter.”
Allan Janssen is the editor of CARS magazine. You can reach him at 416-614-5814 or firstname.lastname@example.org