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How To Start An Oil Change Business

How To Start An Oil Change Business

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How To Start An Oil Change Business

How To Start An Oil Change Business

Are you an auto enthusiast looking to leverage your skills into a viable business? Or perhaps you’re a savvy entrepreneur searching for a lucrative venture in the automotive industry? Starting an oil change business could be the perfect fit.

Changing a vehicle’s oil is difficult and inconvenient if the vehicle’s owner isn’t really set up to perform the service. Oil change businesses offer a convenient alternative, and many customers seek these businesses out of necessity. If you often work on cars and are comfortable performing oil changes, then starting an oil change business might be a profitable opportunity. While this type of business usually requires a significant startup investment, applying creative branding and great customer service can help to establish it as a successful long-term opportunity.

Our comprehensive guide is here to help with the vital aspects you need to know – from the industry overview to the steps to kickstart your venture to answering common questions.

Business Overview

Oil change businesses provide lubrication services for a variety of vehicles, helping to keep those vehicles running at their best. This standard part of vehicle maintenance is difficult for auto owners to perform on their own, and oil change businesses offer a convenient alternative. Most businesses perform oil changes while customers wait, making prompt, efficient service important.

Many businesses don’t just provide oil changes but also provide complementary services like topping off other fluids (brake, windshield washer, power steering, and coolant), checking tire pressure, tire rotations, replacing air filters, and more.

The allure of this business is that it caters to the ongoing maintenance needs of virtually every vehicle owner, offering a substantial customer base.

Industry Summary

The automotive oil change industry is a significant segment within the overall automotive aftermarket service industry. As of 2023, oil change services have grown by 5% annually to $10.6 billion in revenue. There are currently 33,646 oil change businesses in operation, employing over 72,000 people.

The industry’s growth correlates with the number of vehicles on the road and how far they’re driven. During that five-year period, crude oil prices fell, encouraging people to drive more. Per capita, disposable income also increased during that time, which may have prompted consumers to travel, take road trips, and otherwise drive their vehicles more.

Several key trends are shaping the future of the oil change industry.

First, the increasing shift towards synthetic oils, known for their better engine protection and longer intervals between changes, has influenced the types of products and services offered. Second, the growing popularity of electric vehicles (EVs) has started to impact the industry. Although EVs do not require traditional oil changes, they still need various types of routine maintenance, allowing adaptable businesses to stay relevant.

Even with the rise of EVs, consumers are increasingly favoring to have their oil changed by a business that can get the job done in under 30 minutes, which usually means not waiting at the dealership. As a result, drive-through oil change services and mobile oil change businesses have become more prevalent. Moreover, technology is playing an increasingly significant role, with many businesses implementing digital solutions for appointment scheduling, reminders, and customer relationship management.

In addition, according to Lubes’N’Greases, consumers are realizing that vehicles are being built to last, and that’s a positive for the oil change industry. With more vehicle owners keeping their vehicles longer, they’re more willing to perform routine maintenance to keep those vehicles operating well. An increase in the number of vehicles that are 11 years old and older is expected to drive increased demand within the oil change industry.

Checklist To Start An Oil Change Business

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If you’re thinking about starting your own oil change business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.

Step 1: Research the Market

Before embarking on your journey to start an oil change business, understanding your market’s potential is paramount. Why is it so crucial? Primarily because it allows you to gauge the level of demand for your services in a given area. High demand can equate to more customers and thus a higher likelihood of business success.

Assessing the market helps you gain insights into the number of potential customers, their needs, preferences, and behaviors, the competitive landscape, and pricing trends. This information can then inform your business decisions, from location choice to pricing strategy, marketing approach, and more.

Understanding the market also helps you minimize the risk of business failure. Starting a business requires significant investment, both in terms of time and money. By conducting thorough market research, you can make sure that your investment has the highest possible chance of yielding a profitable return.

The process of researching whether there are enough customers for a new oil change business involves several steps. Here are a few cost-effective ways to conduct market research for your oil change business:

Utilize online resources: There are several online databases and tools that can provide valuable information about your local market. The U.S. Census Bureau, for example, offers data on population demographics and car ownership in specific areas. Online mapping tools, such as Google Maps, can be used to scout potential locations and evaluate the competition in your desired area.

Analyze your competition: Visit existing oil change businesses in your desired area to understand how they operate. Look at their pricing, the services they offer, how busy they are, and how they market their services.

Leverage social media: Use social media platforms to gauge interest in your potential business. You could create a post or poll to see how many of your local connections would be interested in a new oil change business.

Networking: Attend local business networking events or join online forums and communities related to the automotive industry. Networking with other business owners can provide first-hand insights into the market, potential partnerships, or mentorship opportunities.

By leveraging these resources, you can gather rich, actionable data about the potential market for your oil change business. As a result, you’ll be better prepared to make informed decisions that will guide your new venture toward success.

Step 2: Write a Business Plan

After confirming there is a viable market for your oil change business, the next step is crafting a business plan. A business plan is more than just a document that is used to get funding; it’s a tool that helps you think through your business strategy, identify potential challenges, and establish clear goals and benchmarks for growth.

If you’re seeking external funding, your business plan needs to be strong in a few specific sections. While all parts of the business plan are essential, some sections are especially important for demonstrating the viability and potential profitability of your oil change business to potential investors or lenders. These include:

Market analysis: This section should demonstrate your understanding of the market, the demand for oil change services, the competition, and the potential customer base in your target area. Show your competitive edge, whether that’s superior service, unique add-on services, competitive pricing, or an underserved market.

Marketing and sales strategy: Detail your marketing plan, and how you’ll attract and retain customers. As an oil change business often relies on repeat customers, discuss your strategies for customer retention. Show how your business will stand out in a crowded market.

Financial projections: This might be the most important section for securing funding. Provide a detailed breakdown of your start-up costs, projected income, and cash flow. Create a clear timeline showing when the business will start to turn a profit. Be realistic but optimistic. It’s essential to show investors that you have thought through the financials and that your business will be profitable.

Related: How to write an oil change business plan

Step 3: Secure Funding

Once you have verified your market and completed your business plan, the next step in starting your oil change business is securing the necessary funds. A few of the most common sources of funding include:

Personal savings: Personal savings are a common source of start-up capital. The main advantage of using personal savings is that you retain complete control over your business, and you don’t have any debt to service, which can significantly ease your business’s financial pressure in the early stages.

However, since the cost to start an oil change business can be high, so finding additional money to start may have to come through banks and/or investors.

Bank loans: Bank loans are commonly used to finance small businesses. They are particularly relevant for oil change businesses, which usually require a physical location and equipment which can be used as collateral.

When seeking a bank loan, be prepared with your business plan, financial projections, and a clear explanation of how the funds will be used. Banks will consider your credit score, collateral, business plan, and cash flow projections when deciding whether to offer a loan.

Keep in mind that bank loans typically require periodic repayments with interest, which will need to be factored into your business’s operating expenses.

Small Business Administration (SBA) loan guarantees: The SBA doesn’t lend money directly but instead guarantees a portion of the loan, making banks more willing to lend to small businesses.

A few SBA loan programs exist, but the 7(a) program is most common for an oil change business. The application process can be quite rigorous and requires a solid business plan, financial projections, and good credit.

Angel investors: Another source of funding are angel investors. These individuals invest their personal funds into startup businesses in exchange for ownership. They can be successful entrepreneurs themselves, corporate executives, professionals like doctors or lawyers, or even friends and family. Angel investors often invest in industries or technologies they are familiar with or passionate about, making them hard to find for investing in an oil change business.

Remember, each funding option comes with its own set of pros and cons, and what works best will depend on your individual circumstances and the specific needs of your business. Therefore, it’s crucial to consider your options carefully and potentially seek advice from a financial advisor or accountant to help make the best decision for your business.

Related: Finding the money to start a business

Step 4: Register the Business

Starting an oil change business, like any other business, requires going through several legal steps to register and legalize the business. Here are the key steps:

Form a business structure: The first step is deciding on a business structure. The most common types of business entities are sole proprietorship, partnership, Limited Liability Company (LLC), and corporation. An LLC or corporation is often a good choice for an oil change business because it provides owners with limited liability protection. This means that the business assets are separate from the personal assets of the investors, an important consideration in a business that deals with vehicles and potentially hazardous materials like used motor oil.

Related: Comparison of business structures

Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process.

Related: Tips and ideas for naming an oil change business

During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.

Related: Finding a domain name for your business

Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a local business license, seller’s permit, signage permit, and Employer Identification Number (EIN).

In addition to business registration, the handling and disposal of used motor oil is regulated by the Environmental Protection Agency (EPA) under the Resource Conservation and Recovery Act (RCRA). The EPA provides guidelines for managing, reusing, and recycling used oil, however, individual states may have their own specific requirements, including registering for an environmental permit to legally handle and dispose of used motor oil.

Related: State guides for general business licensing

Starting an oil change business involves many legal considerations, and it’s crucial to ensure you’re compliant to avoid future problems. It’s recommended to consult with a legal expert or a business counselor during this process to ensure you’ve covered all your bases. While it may seem overwhelming, taking the time to properly register and legalize your business will pay off in the long run by protecting you and your business.

Step 5: Secure the Location

Once your oil change business is funded and legally compliant, the next step is finding the perfect location and preparing it for operations. From facility design to equipment placement, every detail matters in creating a customer-friendly and operationally efficient space. Here are a few steps to consider include:

Find the right location: In the oil change business, location is key. High visibility, easy access, and ample parking can significantly impact the success of your business. You’ll want a location that’s convenient for your target market, whether that’s in a busy shopping center, near a high-traffic commuter route, or in a residential neighborhood.

When assessing potential locations, consider zoning regulations, the condition of the premises, rental rates or purchase prices, and the potential for expansion. Don’t forget to evaluate the competition in the area – being close to related businesses can increase footfall, but being too close to another oil change business might split your market share.

Prepare the location: Once you’ve secured your location, the focus shifts to preparing the space. A typical oil change facility requires a specific layout, with at least one service bay equipped with a car lift or a pit. The configuration should allow for smooth movement of vehicles and technicians alike.

Visiting other oil change businesses can provide practical insights on how to best set up your space. You might also consider hiring a professional experienced in auto service shop layouts to help maximize your space’s efficiency.

To help design the shop, free software like SmartDraw or SketchUp can help design your space. These tools allow you to create a virtual layout of your shop and move elements around to optimize workflow, safety, and customer experience.

Purchase equipment: Once your layout is finalized, you’ll need to install your equipment. This includes hydraulic lifts or pits, oil drains, air compressor systems, tools, and oil storage systems. All equipment must be professionally installed and meet any local safety regulations.

Design the waiting room: Last, don’t overlook creating a comfortable and welcoming customer area. Even if customers are only there for a short time, a clean, comfortable waiting area can make their experience much more positive and increase the likelihood of repeat business.

In conclusion, the process of finding and preparing a location for your oil change business is a significant step that can directly impact the success of your business. With careful planning, a thoughtful layout, and a customer-centric approach, you can set your business up for operational efficiency and a strong customer appeal.

Step 6: Hire & Train Employees

As you prepare to launch your oil change business, one of the crucial steps you’ll need to take is hiring employees. Building a reliable and skilled team can be pivotal for your business’s success. Employees for an oil change business typically fall into categories such as service technicians, customer service representatives, and, in some cases, a manager or supervisor.

Types of Employees in an Oil Change Business

Service technicians: These are the employees who will be performing the oil changes and other services you offer. They should be skilled, efficient, and understand the mechanics of different types of vehicles. Certification, like the Automotive Service Excellence (ASE) certification, can be an added advantage.

Customer service representatives: These employees interact directly with your customers, handle appointments, manage billing, and answer queries. They play a critical role in shaping the customer experience, so good communication and interpersonal skills are essential.

Manager/supervisor: A manager or supervisor oversees the daily operations, manages the staff, orders inventory, and handles any issues that may arise. This role is especially important if you plan to be an absentee owner or if you have multiple locations.

Owner’s Responsibilities Before Hiring
Before hiring employees, there are several responsibilities and legal obligations an owner needs to address:

Employer Identification Number (EIN): You must have an Employer Identification Number (EIN) from the IRS. The EIN is used to report taxes and other information to the IRS, and to report information about employees to state agencies.

Set up records for withholding taxes: According to IRS guidelines, you must keep records of employment taxes for at least four years. These records should include your EIN, personal details of employees, details of tax withheld, etc.

Employee Eligibility Verification (I-9 Form): U.S. law requires employers to verify an employee’s eligibility to work in the U.S.

Register with your state’s New Hire Reporting Program: You’re required to report new hires to a state directory within 20 days of hiring.

Workers’ compensation insurance: Businesses with employees are required to carry Workers’ Compensation Insurance coverage through a commercial provider, on a self-insured basis, or through the state Workers’ Compensation Insurance program.

Post required notices: Employers are required to display certain posters in the workplace that inform employees of their rights and employer responsibilities under labor laws.
In summary, hiring employees involves a significant amount of preparation, paperwork, and legal compliance. However, having a skilled and dedicated team is a crucial component to the success of your oil change business. By understanding and fulfilling your responsibilities as an employer, you lay the foundation for a positive and productive workplace.

Related: Hiring your first employee

Step 7: Implement Management Software

From tracking customer appointments to inventory management and invoicing, the right management software can streamline your operations, increase productivity, and enhance customer satisfaction.

A high-quality management software for an oil change business should be capable of handling multiple tasks. First, it should offer a robust scheduling and appointment system, allowing you to book customers efficiently and send out reminders to reduce no-shows. Next, it should include an inventory management feature to track your oil and other supplies, ensuring that you never run out of crucial items at inopportune times.

The software should also provide an invoicing and payment system, making billing easy and swift for both you and your customers. Additionally, having a customer relationship management (CRM) component would enable you to maintain records of your customers’ vehicle details, service history, and preferences, offering personalized service and promoting repeat business.

Here are three popular management software programs specifically designed for automotive businesses:

Shopmonkey: This comprehensive platform offers an all-in-one solution tailored for auto repair shops. Shopmonkey provides a range of features including appointment scheduling, digital inspections, inventory management, and customer communication tools. Its ability to streamline workflows, enhance customer service, and provide insightful analytics makes it a popular choice among auto service businesses.

GaragePlug: GaragePlug is an auto repair management software that operates on a cloud-based system, making it accessible from any device. This program enables businesses to manage bookings, create digital job cards, monitor inventory, and handle billing and invoicing. In addition, GaragePlug offers a customer management system, allowing for effective tracking of client history and preferences.

Fieldd: Fieldd, as a smart mobile workforce software, is well-suited for service businesses including oil change businesses. It offers an easy-to-use platform for managing bookings, scheduling and dispatching technicians, and providing real-time updates to customers. Features also include automated smart scheduling, route optimization for mobile technicians, customer relationship management, and performance analytics. Fieldd’s user-friendly interface and intelligent automation make it a great tool to enhance operational efficiency and the customer experience.

Related: Review of the best oil change management software

Step 8: Get your Marketing Plan in Place

Marketing your oil change business effectively is the next step we will cover. Even with the greatest business, if people don’t know that your business exists, the business won’t last for long.

One of the first steps is to create a compelling brand for your business. Your brand should communicate your business values, quality of service, and unique selling proposition. Having a well-designed logo and consistent branding across all your marketing materials can help establish a professional image.

Next, look at developing an online presence. Having a user-friendly website that showcases your services, prices, and contact information is necessary. Also, make sure it is search engine optimized, focusing on local keywords like “oil change in [your city].” Additionally, claiming your Google Business Profile, Yelp, etc. can significantly increase your visibility, allowing customers to find you easily when they search for quick lube services in your area.

Next. consider leveraging social media platforms like Facebook and Instagram to connect with potential customers. Regular posts about your services, special promotions, or car maintenance tips can engage your audience and boost your business visibility.

To help get people in the door, you can offer promotional deals or loyalty programs. Offering a discount on the first oil change service or a loyalty program that provides a free service after a certain number of visits can be effective in attracting and retaining customers.

Also, building partnerships with local businesses can be beneficial. For instance, collaborating with car dealerships without a garage or companies with a fleet of vehicles can provide consistent customers. You could also work with a local car wash and offer car wash coupons after an oil change to generate traffic.

Last, don’t forget traditional methods like local newspaper advertisements, radio spots, or direct mail. These can still be effective, especially for reaching an older demographic.

Remember, every community is different, so it’s important to understand your target market and tailor your marketing strategy accordingly. To get the best return from your investment, be sure to monitor the effectiveness of your different marketing efforts and adjust your strategy as needed.

Related: Low-cost ideas to market a new business

Step 9: Purchase Supplies

As you are getting close to opening your doors, the next step (if it hasn’t already been done) is finding reliable suppliers to provide you with the essential items needed for your daily operations, such as various types of motor oils, filters, lubricants, gloves, tools, and other service equipment.

Building a strong relationship early with your suppliers can be beneficial in the long run. Suppliers who value your business may go the extra mile to meet your needs, offer discounts, or provide valuable industry insights. Some suppliers also will be able to help with your startup, providing valuable information and tips to succeed.

Step 10: Prepare to Open!

As you near the launch of your oil change business, there are a few remaining steps to ensure that you’re fully prepared for operation. These steps are common to most businesses starting out, but every oil change business will have its own unique needs and challenges. It’s always advisable to seek advice from professionals such as accountants, lawyers, and business advisors to ensure that you’re fully prepared for your journey.

A few items to consider include:

Business insurance: Acquiring business insurance is essential to protect your business from potential risks. You may need several types of insurance such as general liability insurance, property insurance, and workers’ compensation insurance.

Related: Types of insurance an oil change business may need

Bookkeeping: Setting up a robust bookkeeping system is crucial to track your income, expenses, and overall business performance. Consider using accounting software like Wave Accounting (FREE) or Quickbooks can simplify this process. You may also want to hire an accountant or bookkeeper for professional assistance.

Bank account: Opening a business bank account helps to separate your personal and business finances, making bookkeeping and tax preparation easier. It also adds professionalism to your transactions with customers and suppliers.

Pricing: Carefully set your pricing by factoring in all your costs, including supplies, labor, overhead, and desired profit margin. Competitive analysis can help you understand market rates and position your pricing appropriately.

Credit card processing: Establishing a system to accept credit card payments provides convenience for your customers and can boost your sales. Consider options like Square or Stripe, which offer affordable and easy-to-use credit card processing services for small businesses.

Grand opening: Plan for a successful grand opening. This could include special promotions, local advertising, or a grand opening event. It’s a great way to attract your first customers and create a buzz about your new business.

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Greg’s Tip: Many successful oil change business owners emphasize the importance of exceptional customer service. A happy customer is more likely to be a repeat customer and to refer others to your business. Be transparent with your pricing, provide excellent service, and handle any customer complaints promptly and professionally.

Greg's Business Tip

Common Questions When Starting An Oil Change Business

How much does it cost to start an oil change business?

Starting an oil change business can be quite expensive, with total start-up costs ranging from $100,000 to $300,000 for a facility with two bays.

These costs can vary depending on a number of factors including location, size of the business, and the amount of equipment needed. Here’s a breakdown of some of the initial costs involved:

Business registration and licensing fees: The cost of registering your business and obtaining necessary licenses can range from $100 to $500 depending on the state.

Location lease/purchase: The cost of leasing or purchasing a location for your oil change business can vary greatly depending on the area. In some places, leasing a suitable location can cost around $2,000 to $5,000 per month. If leasing, factor in the initial deposit, and if purchasing, a down payment would be needed.

If you plan to have a mobile oil change business, a suitable vehicle and place to park the vehicle would be factored in instead.

Equipment: The cost of buying new equipment like lifts, oil drain containers, oil caddies, tools, and other machinery can range from $10,000 to $50,000.

Renovation and setup: Depending on the condition of your location, renovation, furniture, and equipment setup costs could range between $10,000 and $30,000.

Inventory: Initial inventory of oil, filters, and other supplies can cost around $5,000 to $10,000.

Business insurance: Initial costs for business insurance, which includes general liability, property, and workers’ compensation insurance, can be around $2,000 to $5,000.

Marketing and advertising: Initial marketing and advertising costs to announce your grand opening and establish your brand could range from $2,000 to $5,000.

Operating expenses: It is recommended to have three to six months of operating expenses on hand as a buffer. Operating expenses include utilities, salaries, lease payments, and day-to-day operational costs. Depending on the size of your business, these can range from $30,000 to $60,000 for the first three to six months.

Do keep in mind these figures are approximate and actual costs can vary based on a number of factors. It’s also important to account for unexpected costs or delays, as these can often arise during the start-up process. In-depth planning and budgeting can help ensure you’re financially prepared to start your oil change business successfully.

How profitable is an oil change business?

Profitability in the oil change business can vary significantly based on numerous factors like location, operational efficiency, pricing, and customer volume.

On average, an oil change service can cost a customer between $25 to $50, depending on the type of oil used and the market area. If the business performs 20 oil changes per day, it might generate revenue between $500 and $1,000 daily, or approximately $180,000 to $360,000 annually, considering a 5-day work week and not accounting for holidays or potential downtimes.

On the expense side, direct costs such as oil, filters, and other materials might range between $10 and $15 per oil change. This translates to a direct cost of around $200 to $300 daily, or $72,000 to $108,000 annually.

Operational costs, including lease payments, utilities, employee salaries, and maintenance, could amount to about $5,000 to $10,000 per month or $60,000 to $120,000 annually.

Subtracting these costs from the total revenue, a rough estimate for annual pre-tax profit could range from $48,000 to $168,000. It’s crucial to remember that these figures are estimations and actual profit can vary based on numerous factors. In addition, it’s typical for businesses to have a lower profit margin in their initial years due to startup costs and the time it takes to establish a steady customer base.

As another data point, Valvoline Instant Oil Change franchises earn an average of $282,067 per store per year.

Many oil change businesses are finding success in offering multiple services, like tire rotations, car washes, or even minor automotive repair services. Offering these multiple services can allow for upselling and can even bring in new customers. But just adding on new services for the sake of it won’t necessarily be effective. It’s important to perform market research to establish whether there’s a need for the services you’re thinking of offering.

What skills are needed to run an oil change business?

While starting an oil change business doesn’t require a business degree, certain skills and experiences can contribute to its success.

Oil change experience and knowledge: A business owner needs to have experience in performing oil changes and general awareness of the industry and the work that goes into an oil change. Familiarity with the different types of oils, like synthetic and conventional oils, is also important.

Automotive knowledge: An oil change business owner should also have general automotive knowledge. Experience working in a garage is ideal since it can contribute to important safety issue awareness and precautions.

Customer service skills: Providing great customer service will help a business quickly build up a good reputation. Some customer service area experience is helpful, especially since a business owner can train employees on how to provide great customer service.

Management experience: An oil change business will need multiple employees, so experience in hiring, training, and managing staff is helpful.

Marketing experience: Marketing is important to a business’s success. A business owner who is aware of some common marketing techniques can be involved in the business’ marketing and make wise choices about how to best use the marketing budget.

What is the NAICS code for an oil change business?

The NAICS code for an oil change business is 811191.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code?

Automotive Oil Change Association

How To Start An Oil Change Business

How To Start An Oil Change Business

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