How to Start a Diesel Performance Shop
In addition to being found in medium- and heavy-duty vehicles, such as commercial vans and semis, diesel engines are also installed in some sports cars, passenger vehicles and pickup trucks. Diesel performance shop businesses specialize in servicing the diesel engines in these light-duty vehicles and maximizing their performance. (Pickups branded “heavy duty” still fall into the light- or medium-duty range of diesel vehicles.)
The number of diesel passenger vehicles in the United States pales in comparison to how many petrol-powered cars and trucks there are. The niche market requires specialized mechanics, however, and it’s growing. In 2016, over 280,000 additional diesel passenger vehicles were registered across the 50 states.
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Learn how to start your own Diesel Performance Shop and whether it is the right fit for you.
Start a diesel performance shop by following these 10 steps:
- Plan your Diesel Performance Shop
- Form your Diesel Performance Shop into a Legal Entity
- Register your Diesel Performance Shop for Taxes
- Open a Business Bank Account & Credit Card
- Set up Accounting for your Diesel Performance Shop
- Get the Necessary Permits & Licenses for your Diesel Performance Shop
- Get Diesel Performance Shop Insurance
- Define your Diesel Performance Shop Brand
- Create your Diesel Performance Shop Website
- Set up your Business Phone System
There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your diesel performance shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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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:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a diesel performance shop?
The startup costs for a diesel performance shop business are substantial. Shops need a space to perform work in, diagnostic software, shop management software, equipment, tools, and supplies.
Some business owners try to save on startup costs by purchasing a service truck rather than acquiring a traditional garage. A service truck is more suited to working on commercial fleets than personal diesel vehicles, however. Businesses that have fleets usually have a yard where work can be done, but individuals are often hesitant to let mechanics work in their driveway or home’s garage.
What are the ongoing expenses for a diesel performance shop?
The ongoing costs for a diesel performance shop are labor, parts and overhead. Labor should account for 30 percent of revenue, parts for 25 percent, and overhead for 10 percent.
Who is the target market?
The target market for a diesel performance shop is anyone who owns a light-duty diesel vehicle. This includes contractors who have a diesel pickup trucks, automotive enthusiasts who have diesel sports cars and everyday drivers who drive fuel-efficient diesel models.
How does a diesel performance shop make money?
A diesel performance shop business makes money by charging for the repairs, maintenance and other work done. Invoices include charges for labor and parts.
How much can you charge customers?
As mentioned, customer charges are broken into labor and parts costs.
Labor rates vary, but they’re often a little less than $100 per hour. For example, Big Cabin Service Center charges $85 per hour and Graber Diesel Repair of Cheyenne’s rate is $80 per hour.
Parts should be marked up by 30 to 60 percent of their cost. Some shops use lower markup percentages for more expensive parts.
How much profit can a diesel performance shop make?
The profit potential for a diesel performance shop is substantial. The above operating costs leave a 35 percent profit, and the average diesel repair runs $800. Thus, a business can expect to make about $280 per typical service.
How can you make your business more profitable?
Diesel performance shop businesses can increase their revenue and profits by branching into heavy-duty diesel service. Working on larger equipment requires CDL licenses, more room, more specialized knowledge, and more expensive equipment. It gives businesses access to commercial accounts that can provide lucrative ongoing work, though.
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 Diesel Performance 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.
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 diesel performance shop is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
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 for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Learn how to get an EIN in our What is an EIN guide or find your existing EIN using our EIN lookup guide.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
- LLC Taxes
- Sole Proprietorship vs LLC
- LLC vs Corporation
- LLC vs S Corp
- How to Start an S Corp
- S Corp vs C Corp
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.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
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.
Open net 30 accounts
Net 30 accounts are used to establish and build business credit as well as increase business cash flow. With a net 30 account, businesses buy goods and repay the full balance within a 30-day term.
NetMany net 30 credit vendors report to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our best net 30 vendors, guide and start building business credit.
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 Divvy 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 diesel performance business. 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.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Certificate of Occupancy
A diesel performance business is generally run out of a garage or auto shop. 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 diesel performance business.
- 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 diesel performance business will be in compliance and able to obtain a CO.
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.
Learn more about General Liability Insurance.
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.
Recommended: Learn what business insurance for your Diesel Performance Shop will cost.
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 diesel performance shop
Marketing efforts for a diesel performance shop business should be focused reaching local drivers, for most people won’t drive too far for any auto service. Posting ads at local gas stations and in newspapers can be effective, as can strong local search engine optimization and targeted online pay-per-click campaigns.
How to keep customers coming back
A diesel performance shop business can set itself apart by providing high-quality service at reasonable rates. Basic good customer service builds loyalty, which creates referrals.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
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.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
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: Phone.com
Phone.com is our top choice for small business phone numbers because of all the features it offers for small businesses and it's fair pricing.
Start a Diesel Performance Shop in your State
- District of Columbia
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- West Virginia
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Is this Business Right For You?
Anyone who is mechanically inclined and has a passion for diesel engines may enjoy running a diesel performance shop. Business owners frequently work on engines themselves, and having a passion for this kind of engine helps business owners connect with their customers.
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What happens during a typical day at a diesel performance shop?
A typical day at a diesel performance shop business is full of activity. Business owners:
- Diagnose and repair existing problems
- Check and perform routine maintenance
- Order and install aftermarket parts
- Recommend engine upgrades and improvements
In many cases, business owners serve a dual role as advisor and mechanic, helping customers decide what work should be done and then complete that work.
What are some skills and experiences that will help you build a successful diesel performance shop?
While it’s not necessary to be a diesel technician before opening a diesel performance shop business, being a competent technician is extremely helpful. Business owners who themselves are familiar with diesel engines can check technicians work rather than rely on technicians for advice.
Business owners who aren’t already experienced diesel technicians can attend a training program through their local vocational school or community college, or via an online course. Penn Foster Career School and Ashworth College are two of many schools that offer online diesel technician programs.
However business owners pursue diesel tech training, their formal education should be paired with real-world experience working in a diesel performance shop. Business owners may want to work in the industry for anywhere from 6 months to several years before starting out on their own.
What is the growth potential for a diesel performance shop?
A diesel performance shop may have a single location or a number of locations. For example, J&S Diesel has a single location in Las Vegas while D&W Diesel has shops throughout the Northeast.
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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:
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 diesel performance shop?
Before launching a diesel performance shop business, business owners should first carefully review the competition in their area. Because diesel passenger vehicles aren’t as common as gasoline-powered ones, a region can’t support as many diesel performance shops as it can traditional petrol-engine mechanics.
Business owners who determine there are too many diesel performance shops in their area already may want to look for a different city with less competition. Alternatively, they can open a less specialized auto service center and offer diesel performance parts as a side business.
How and when to build a team
Business owners can start out themselves and hire employees as business grows. The first employees business owners hire are usually technicians, who make an average of $22.29 per hour. If a business becomes extremely busy, an office manager and a service/parts manager might be hired.
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