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 used tire business. 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 used tire business?
The startup costs for a used tire business go to three primary areas. Business owners need:
- A retail location
- Equipment for installing tires
- Used tires
A good location will have a storage space for inventory, a small retail area and a garage for working on cars. It’ll also be in a low-rent district so that overhead can be kept minimal. Good locations include old auto shops and warehouses that are no longer in use.
Business owners that want to reduce equipment costs can look for used equipment that’s in good condition. Purchasing used, high-quality equipment is preferable to getting new, lower-quality tools because high-quality equipment is often more efficient to use. It’ll save time and reduce labor costs associated with installing purchased tires.
When purchasing tires, business owners should get a large, varied selection. The inventory gathered should include many sizes of car, truck, low-profile and high-performance tires. Good places to purchase tires include junkyards, tire shops and retreading centers.
It’s also a good idea to forge a relationship with a wholesale supplier of rims, but rims can be purchased on an as-needed basis.
In total, these expenses may range from a few thousand dollars to tens of thousands. The range depends on how much a space costs, what type of equipment is purchased and how large an inventory a business opens with.
What are the ongoing expenses for a used tire business?
The ongoing expenses for a used tire business are manageable. They include lease payments, utilities, employees’ salaries and inventory expenses.
Who is the target market?
The target market of a used tire business is anyone who owns a vehicle and wants to save money. All vehicles need tires, and many drivers are willing to consider used tires because they provide an excellent value.
How does a used tire business make money?
A used tire business makes money by selling used tires to customers. Most tires are sold individually, in pairs of two or in sets of four. Tire Business reports that the average sale at one business, Drakes Tire’s, is a pair. Sales at another business, Rob’s Used Tires, are evenly split between individuals, pairs and sets.
How much can you charge customers?
Used tires cost much less than new ones. Gently used tires sell for up to half their initial cost, while more worn tires sell for much less.
Despite these low prices, businesses can still earn a handsome profit. Used tires can be purchased wholesale for very little because other businesses must pay a fee to dispose of old tires if they don’t sell them to a used tire business.
For each tire sold, many businesses charge an additional $15 to $45 to mount and balance the tire.
How much profit can a used tire business make?
Because there is such demand for tires, a used tire business can bring a significant profit. For instance, S & S Distributors, LLC moves 10,000 tires each week. Even at a fraction of the cost of new tires, that amounts to a sizable weekly revenue.
How can you make your business more profitable?
A used tire business can increase its profitability by also selling rims and new tires, and by offering tire repair service. Some businesses may get into more significant automotive repairs.
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.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your used tire business 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.
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!
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
All businesses involved in automotive vehicle maintenance must comply with federal and state-level environmental regulations. A checklist for compliance with federal environmental regulations can be found here.
In most states, it is necessary to obtain an appropriate business license. 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.
Used tires businesses may also wish to look into applying for a resale certificate, which allows retailers to purchase goods intended for resale without paying sales tax.
For more 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 used tires shop business is generally run out of a “garage,” a retail location uniquely equipped to store and repair cars. 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 garage:
- 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 an Car Repair 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 recommendedto 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 you business’ location to ensure your used tires 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 used tire business
A used tire business is best marketed through inexpensive marketing tactics that don’t increase how much a business must charge. Radio and online ads work well, as do Craigslist postings.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
One of the challenges of getting customers is convincing drivers that used tires are a safe alternative to new ones. Businesses can do this by telling customers about their pre-sale tire inspections and offering a warranty. Rob’s Used Tires offers two-, four- and eight-week warranties based on tire grade.
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 Used Tire Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Anyone who likes working on vehicles and enjoys working with their hands might be well-suited for running a used tire business. Having basic people skills is also helpful, as business owners must be able to sell tires to customers.
What happens during a typical day at a used tire business?
A typical day at a used tire business consists of:
- Picking up used tires from nearby locations
- Inspecting used tires for condition and quality
- Selling used tires to customers
- Installing used tires that customers purchase
Installing tires involves removing tires that are currently on a vehicle, and mounting and balancing the used tires that are purchased.
What are some skills and experiences that will help you build a successful used tire business?
In order to successfully run a used tire business, it’s necessary to know how to inspect used tires and how to install them. Business owners can get an initial education by working at a tire center (either used or new), and they can further their knowledge through courses offered by the Tire Industry Association. Some courses that business owners might want to take include:
- Basic Automotive Tire Service (ATS)
- Certified Automotive Tire Service (ATS)
- Advanced Tire Pressure Monitoring Systems (TPMS)
These courses cover topics like dismounting, mounting, installing, removing and repairing tires.
More advanced courses on commercial tires are also available. When starting out, however, business owners should focus on the basic courses that focus on tires for personal vehicles. This is where most of the market demand is.
What is the growth potential for a used tire business?
Some used tire businesses focus on online sales in order to reach buyers across the country. Most, however, have one or two locations that serve a defined geographic area. Hooper’s Tire Outlet is a business that has two locations serving Upstate New York. BestUsedTires.com is an example of an online-based business.
TRUiC's YouTube Channel
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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.
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 used tire business?
When opening a used tire business, it’s important to only sell safe, good-quality tires. All tires should be inspected, and they should have a decent amount of life left. Just one bad tire that fails could cause an accident and devastate a business.
Some ways to test tires’ conditions include:
- Performing air tests to check for leaks
- Visually inspecting tires for defects or previous repairs
- Inspecting tread depth and overall wear
How and when to build a team
Used tires businesses usually have a small team of employees from the outset. The number of employees can be kept minimal, but at least a couple people are needed so that someone can talk with customers while another employee is installing tires.