Costs of setting up mot station/garage

tonytee

I was just afer some advise regarding setting up an MOT station in the Birmingham area.

I am not a mechanic so will employ a MOT tester. I want to set up a new business doing class 4 and 7 MOT's (cars and vans)

I lost my job recently and want something to do with my time and start back on the road of making money and earning a living. I have around £10k but can get another £10k from my mother.

Any advice on this matter please?

vikingaero

I'd argue that you need to be a MOT tester too. My friends own a MOT Centre and they (husband and wife) are both Testers. What do you plan to do if you only employ someone and they are off sick? Are you going to cancel a whole days appointments?

Microstar_2

I am an MoT tester (AE) and own two garages with MoT facilities and about to open up a third.
Just doing MoT's is not a great way to make money. Typically we heavily discount our MoT's and use them to generate foot-fall. To make MoT viable as a business proposition you need one man testing ATL. I don't think your £20k will get you very far to be honest. I would think again.

tonytee

I was thinking it would generate lots more business being a 'just MOT centre' Customers would be safe in the knowledge that the garage wasnt 'making up' needless repairs.

How much would it be to set up? I know 20k would not cover everything but would getting the equipment on finance be a good idea?? Especially for tax purposes..

Thanks again.

xocbc

Well having working for a busines that set up a new garage a few years ago...

£20k won't scratch the surface.

The MOT equipment will cost you £20k, plus you will have the costs of installing it/making good the area in which is will be installed (and there are very strict rules about dimensions/levels etc that the MOT people will check). You cannot use the MOT ramp for other work, so you will need another ramp if you wanted to expand to do to work on vehicles. A compressor, tools, the list is endless.

You will not make enough money simply doing MOT tests and nothing else. You are limited to the number of tests a tester can do per day. Without the income from the repairs, you will find that the MOT income alone will really struggle to cover the costs, wages for tester, wages for you, rent, electric/gas, finance on ramp etc, in fact I doubt you would be able to put together a viable business plan based on MOTs alone. Also, because MOTs are discounted by so many places, don't bank on getting £50+ for each one.

Ideally you will need more than one tester - if one is sick/on holiday/only prepared to work mon-fri you will suddenly find that you are unable to do any work.

I'd advise to rethink this idea to be honest.

tonytee

Thanks for all that advice.

Leasing the equipment will be the best idea for sure and at around £125 per week its the best idea for someone in my situation. I will only lease the premises if they comply with the regulations, so I dont see why 20k is not enough?

A second hand ramp shouldnt cost that much should it?

I guess it would be better to offer more services.

goldspanners

have you thought about insurance. and also testing,calibration and genral maintenace of all this equiptment aswell.

£125 a week to lease the equiptment (seems a low price) is 2 and half MOT's at full price per week.

mikey72

tonytee wrote: »

I was thinking it would generate lots more business being a 'just MOT centre' Customers would be safe in the knowledge that the garage wasnt 'making up' needless repairs.

How much would it be to set up? I know 20k would not cover everything but would getting the equipment on finance be a good idea?? Especially for tax purposes..

Thanks again.

It's a bit swings and roundabouts, the down side of that is the customer then has to find another garage to do the repair work, so a simple repair of a couple of hours turns into a three day job with the re-test.

somech

nice idea
the down side being if you know nothing of the garage trade you may as well burn £20k.
please think about it very carefully also bear in mind if 1 piece of equipment fails you have to stop testing and it can take 3-4 days to get it fixed and 4 days with no tests is no income.
invest your 10k in something you know as the garage world is a vey fickle place and very hard to make money in

tonytee

Thanks everyone for taking the time out to respond.

Some very good comments and lots to think about, much appreciated.

xocbc

I’ve had a think about this and here is a more comprehensive response. This is from my own experience of managing a small garage that moved to a new premises and decided to move into MOTs at the same time. Without the proper thought it is a very bad idea (as was the case in my experience because the company owner did not really understand the full implications and didn’t prepare properly).

Firstly, you need to draw up the most comprehensive list of expenses that you can think of. This needs to be broken down into setup costs (which will come out of that initial £20k), and ongoing costs (which will need to come out of any income from the MOT ramp).

Setup costs:
· Deposit on lease/rent (likely to be 3 or even 6 months up front)
· Deposit on least/rent of MOT equipment (could be a high % and might be hard to get the finance in current climate)
· Costs of preparing premises for an MOT bay. Very specific requirements here, quite small tolerances in levels etc, you need to read up the regulations very carefully and make sure that the builder understands them. VOSA will not approve the MOT station even if something is 1mm out of level etc. Also signage for MOT and business (can be costly also). Even getting all the wiring done will be expensive and will of course require the premises to have a suitably rated supply
· Costs of preparing drawings/plans for above (and possibly planning permission)
· Computer equipment suitable for and including costs of any items required for electronic MOT testing
· Recruitment costs
· Other equipment costs (compressor, exhaust fume extractor, alarm, any tools that the mechanic doesn’t bring etc)
· Costs of becoming an MOT station – training/certification
· Initial advertising
· Cash register and facility to accept card payment

Regular weekly or monthly outgoings
· Rent
· Business rates (DO NOT forget about this, can be costly)
· Lease/rent/finance on MOT and any other equipment
· Wages (for you and MOT tester)
· Employer’s contribution to NI/Tax etc
· Electricity
· Gas
· Water rates (don’t forget this either!)
· Telephone/internet
· Ongoing advertising (even a small ad each Saturday in the local paper will be expensive)
· General office supplies
· Insurance (public liability, employer’s liability, professional indemnity, insurance to be able to drive customer's cars and general insurance etc)
· Maintenance to equipment/replacement of broken equipment
· Bank charges (including the % taken by card processor)

Out of that initial £20k, you will need to retain a good % for contingency, in case you have an unexpected expense, or in case business is slower than expected.

A tester can only do so many tests per day (can’t remember the figure but its 6 or 8 I think), so in other words, your maximum income for one tester and no repairs will be 6 or 8 times the MOT fee. Do not assume that you will get the maximum amount of MOTs 6 days a week. You might get busy given time, but in the first few months you won’t until people know about you, so you need to assume that your income will be relatively low. Even with 4 a day, that’s approx £200 a day or £1200 a week based on Mon-Sat opening. £1200 a week won’t leave much profit after you pay out all those bills and two wages. A few slow weeks (and you will get those at certain times of the year), and you will be in trouble very quickly. In addition, if you get contract work from a dealership, they won’t pay you £50 per MOT, more like £35-£40.

MOTs were only part of our business and we went into it to provide regular work throughout the year as much of what we did was more seasonal (tuning etc) and it smoothed out some of the troughs in our income. However, the testing alone would have been a waste of time, it was the repairs that generated the income – mark-up on parts and of course the idiotic mark-up that all garages make on labour. We were lucky that we could fit tyres, exhausts and do all mechanical and electrical work so could deal with any failure on-site. That’s what makes the income and makes it worthwhile.

As stated above, if the MOT ramp, brake tester, headlamp aligner etc break down, you have 0 income until it is repaired. If the MOT tester is sick you have 0 income. He/she will need 4 weeks holiday a year, again 0 income during those weeks. Staff are now entitled to paternity leave as well, so if it's a male mechanic and his partner has a child, 0 income for weeks. It is not viable.

Also worth considering is that most people nowadays book their car in for a service at MOT time, in other words it goes to the dealer or an independant garage and just gets done. If I put my car in for an MOT and it fails on something smallish, I want it repaired there and then and ready for collection that day. I do not want the hassle of taking it somewhere else, repairing it, bringing it back. I suspect most people are the same, it's just too much hassle. I, and I suspect many others, cannot afford to be without my car overnight or for a couple of days, or the time messing around finding somewhere to repair it at short notice and rebooking a retest.

I suspect that when you fill in figures against everything listed above, it won't seem to be such a good proposition after all and I’d really urge you to give this some serious thought, because I think you might be wasting £20k that you could make more money from doing something else with it. Even with a full MOT bay every day, you would have to work very very hard to make very little out of this.