How to Start a Custom Car Shop

This business is needed because of the large demand for vehicle customization. Since all jobs are customized or fabricated on-site, the complexity of each job varies with the customer and request. The market for this business consists mostly of automotive enthusiasts.

Learn how to start your own Custom Car Shop and whether it is the right fit for you.

Ready to form your LLC? Check out the Top LLC Formation Services.

Start a custom car shop by following these 10 steps:

  1. Plan your Custom Car Shop
  2. Form your Custom Car Shop into a Legal Entity
  3. Register your Custom Car Shop for Taxes
  4. Open a Business Bank Account & Credit Card
  5. Set up Accounting for your Custom Car Shop
  6. Get the Necessary Permits & Licenses for your Custom Car Shop
  7. Get Custom Car Shop Insurance
  8. Define your Custom Car Shop Brand
  9. Create your Custom Car Shop Website
  10. Set up your Business Phone System

We have put together this simple guide to starting your custom car shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Custom Car Shop Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

  • Your state's business records
  • Federal and state trademark records
  • Social media platforms
  • Web domain availability.

It's very important to secure your domain name before someone else does.

Want some help naming your custom car shop?

Business Name Generator

What are the costs involved in opening a custom car shop?

Costs for starting a custom car shop vary and generally depend on location. However, basic costs include:

  • Air compressor - range from $100 used to $2,000 new
  • Refrigerated evaporating system - $1,500 to $3,500
  • Jitter bugs, dual-action sanders - $200
  • Sanding blocks - $0.50 to $1 each
  • Masks and paint suits - $250
  • Cabinet (for solvents, paints, and cleaners) - $80 to $2,500
  • HVLP guns of different sizes - $500 to $1,000 each
  • Lift - $1,500 to $3,000 each (you will need between 3 and 5 of these)
  • Air tools (like impact, air nozzle, etc) - $60 to $200 each
  • Tools to stock boxes - $150 for basic 50 to 100-piece mechanic’s tool set; $40,000 for a 1,390-piece comprehensive set
  • Parts washer - $100 to $200
  • Diagnostic machine - $3,000 to $4,000
  • Rebuilding counters - $400
  • Woodworking tools - $200 for a basic set
  • Fiberglass tools - $100 for a basic set
  • Electrical tools for stereo and complete body wiring - $150 to $300

These are basic costs. Total costs may be higher, depending on the specific needs of your business.

What are the ongoing expenses for a custom car shop?

Ongoing expenses after initial overhead include insurance, rent, and labor costs.

  • Rent - $1,500 to $15,000 per month, depending on location
  • Insurance - $4,000 per year
  • Labor - $20,000 to $45,000 per year, per employee
  • Supplies - Vary based on job

Who is the target market?

Custom vehicles appeal to the automotive enthusiast crowd, which is a subset of the general population. Most jobs are sold retail to customers. Some shops, however, do work with corporation or governments, offering fleet work for these organizations.

How does a custom car shop make money?

This business depends on consumers coming into the shop, requesting custom work on their vehicle. The shop is paid a fee for this service. Generally, the fees are variable and depend on the job being performed. Some fees are flat or fixed-rate, while others are variable and billed by the hour.

Customers pay the shop and the shop pays the mechanic for the work performed.

How much can you charge customers?

Custom car shops charge customers market labor rates of at least $100 per hour or a flat rate for specific services. Clients typically pay for parts upfront and labor when the job is completed.

How much profit can a custom car shop make?

Shop owners typically make an average income of between $50,000 and $100,000 per year. The shop itself may bring in several hundred thousand or a million dollars in revenue.

How can you make your business more profitable?

Custom car shops can make more money by branching out and offering basic maintenance. In today’s economy, the market for customization is smaller than it was just 10 years ago. However, costs for customization have risen. This means work may bring in good revenue, but jobs may be sparse. Filling in with routine maintenance can help boost revenue.

Want a more guided approach? Access TRUiC's free Small Business Startup Guide - a step-by-step course for turning your business idea into reality. Get started today!

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your custom car shop is sued.

Form Your LLC

Read our Guide to Form Your Own LLC

Have a Professional Service Form your LLC for You

Two such reliable services:

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

You can acquire your EIN through the IRS website. If you would like to learn more about EINs, read our article, What is an EIN?

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

  • Separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • Makes accounting and tax filing easier.

Recommended: Read our Best Banks for Small Business review to find the best national bank or credit union.

Get a business credit card

Getting a business credit card helps you:

  • Separate personal and business expenses by putting your business' expenses all in one place.
  • Build your company's credit history, which can be useful to raise money later on.

Recommended: Apply for an easy approval business credit card from BILL and build your business credit quickly.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a custom car shop. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.

Services Contract

Custom car businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, and service level expectations. Here is a resource explaining the necessity of a “pre-build contract.”

Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your custom car business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.

Labor safety requirements

It is important to comply with all Occupational Safety and Health Administration requirements:

Many of the regulations for custom car shops are general. Employers must take steps to create a safe working environment and report employee injuries.

Certificate of Occupancy

A custom car shop is generally run out of a warehouse. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.

  • If you plan to lease a location:
    • It is generally the landlord’s responsibility to obtain a CO.
    • Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a custom car shop.
    • After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
  • If you plan to purchase or build a location:
    • You will be responsible for obtaining a valid CO from a local government authority.
    • Review all building codes and zoning requirements for your business’ location to ensure your custom car shop will be in compliance and able to obtain a CO.

Car Modifications

Certain car modifications may be unlawful, depending on the regulations in each state. Here is a resource addressing the legality of certain modifications by state.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

FInd out what types of insurance your Custom Car Shop needs and how much it will cost you by reading our guide Business Insurance for Custom Car Shop.

STEP 8: Define your brand

Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.

If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.

Recommended: Get a logo using Truic's free logo Generator no email or sign up required, or use a Premium Logo Maker.

If you already have a logo, you can also add it to a QR code with our Free QR Code Generator. Choose from 13 QR code types to create a code for your business cards and publications, or to help spread awareness for your new website.

How to promote & market a custom car shop

This type of business is heavily dependent on referrals. Most custom shops cater to automotive enthusiasts in a local community. Flyers and local ads may help but, ultimately, good service and quality work will help spread the word.

How to keep customers coming back

The most successful shops specialize in a market. For example, your shop might specialize in custom audio installations. You may not be able to do all types of audio installations when you first start out, but you could build out this specialty.

Other specialties include:

  • Wheel shop
  • Paint shop
  • Custom interiors
  • Custom alarms

STEP 9: Create your business website

After defining your brand and creating your logo the next step is to create a website for your business.

While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.

Here are the main reasons why you shouldn’t delay building your website:

  • All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
  • Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
  • Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.

Recommended: Get started today using our recommended website builder or check out our review of the Best Website Builders.

Other popular website builders are: WordPress, WIX, Weebly, Squarespace, and Shopify.

STEP 10: Set up your business phone system

Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.

There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use. Check out our review of the Best Business Phone Systems 2023 to find the best phone service for your small business.

Recommended Business Phone Service: is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.

Is this Business Right For You?

Custom car shops appeal to entrepreneurs who are automotive enthusiasts and love engineering and designing. As a custom car shop owner, you need to be willing to work long hours, manage a team of technicians, and love working with your hands. You also need to have a passion for the automotive enthusiast community, which tends to have its own unique culture apart from the general population.

Want to know if you are cut out to be an entrepreneur?

Take our Entrepreneurship Quiz to find out!

Entrepreneurship Quiz

What happens during a typical day at a custom car shop?

Custom car shops appeal to entrepreneurs who are automotive enthusiasts and love engineering and designing. As a custom car shop owner, you need to be willing to work long hours, manage a team of technicians, and love working with your hands. You also need to have a passion for the automotive enthusiast community, which tends to have its own unique culture apart from the general population.

If you have a team of mechanics, you also need to manage your crew. If your mechanics are on a flat rate flag system, you must set up jobs for them throughout the day.

What are some skills and experiences that will help you build a successful custom car shop?

ASE certifications are great to have for a business like this because it shows professionalism. However, you’ll also need extensive experience and training in the specific types of customizations your shop will perform.

Opening a custom car shop requires familiarity with building and rebuilding, repairing vehicles, and experience with customizing various makes and models. This experience is best developed working for an existing successful custom car shop. Customization of automobiles is also driven by trends. So, you need to keep your finger on the pulse of the market and follow the current trends.

It’s also important to pay attention to regulations, since modifications must comply with local, state, and federal law. Some customizations, like window tints, may be restricted or illegal and exhaust pipes need to comply with EPA regulations.

What is the growth potential for a custom car shop?

It is difficult to run a custom car shop out of a small location. Usually, a large warehouse (40’ x 80’-100’) with at least 8 service bays is required. This is because at least one bay will be needed for a paint booth, while two more are needed at prepping and staging areas for the mechanics to prepare a vehicle for paint (if you offer these services).

The remaining bays are for non-body work and maintenance work.

However, some custom shops do specialize in certain kinds of customizations (e.g. custom stereo installation). These shops can be run out of a large garage.

Custom car shops can expand to service more customers, even opening multiple locations should demand exceed the capabilities of the first shop.

TRUiC's YouTube Channel

For fun informative videos about starting a business visit the TRUiC YouTube Channel or subscribe to view later.

Take the Next Step

Find a business mentor

One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.

Having a support network in place to turn to during tough times is a major factor of success for new business owners.

Learn from other business owners

Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.

Resources to Help Women in Business

There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:

  • Funding
  • Events
  • Guides
  • Support

If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.

What are some insider tips for jump starting a custom car shop?

Getting started in this business is expensive. A few ways mechanics get around this is to start working in someone else’s shop, leasing space. You could also lease a smaller building and specialize in one or two different areas of custom work. Grow as finances allow.

How and when to build a team

While some shop owners are “one man shops,” this is a difficult business to do alone. Consider hiring a crew immediately. At minimum, you will want one mechanic to take over day-to-day service so you can run the shop and perform all managerial duties.

Have a Question? Leave a Comment!