How to Start a Diesel Performance Shop

Diesel Performance Shop Image

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.

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 9 steps:

You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your diesel performance shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

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 long it will take you to break even?
  • 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 very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.

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STEP 2: Form a legal entity

Establishing a legal business entity such as an LLC prevents you from being personally liable if your diesel performance shop is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.

You should also consider using a registered agent service to help protect your privacy and stay compliant.

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For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?

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!

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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?.

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

  • This separates your personal assets from your company's assets, which is necessary for personal asset protection.
  • It also makes accounting and tax filing easier.

Get a business credit card

  • This helps you separate personal and business expenses by putting your business' expenses all in one place.
  • It also builds your company's credit history, which can be useful to raise money and investment later on.

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.

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:

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

Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.

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.

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.

Recommended: Get started with local advertising for your business with a $300 credit from Yelp.

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.

STEP 9: Establish your Web Presence

A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.

Start A Diesel Performance Shop In Your State

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Select your state below for an in-depth guide on completing each of these steps in your home state.

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.

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.

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.

Next Steps

Get more ideas with our Business Ideas Tool.

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