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Behind Closed Doors

xBy John Cannell

There is nothing much sadder than an abandoned farm, with a tumbledown house, collapsed barns, and Mother Nature rapidly reclaiming her land. A stroll around reveals old farm equipment rusting into the ground, perhaps an old truck or car in the woods, and many touching signs of lengthy human habitation. Babies were probably born there, and, no doubt, people died there, perhaps buried in the little cemetery just down the road. If the broken windows and sagging doors could talk, many tales could they tell, both happy and sad.

Along these same highways and byways, we often see many closed down service stations, repair shops, even dealerships, some boarded up, others still displaying faded “For Sale” signs. Some of the premises are of recent vintage, with service equipment still inside, while others will soon be beyond reclamation. Although it might seem a stupid question to some readers, why do some automotive repair facilities fail miserably, while others, sometimes against the odds, enjoy great success.

You’ve all heard the mantra voiced by most real estate agents, “Location – Location – Location!” well, this is the number one consideration for your shop. Land might be cheap on Tancook Island in Nova Scotia for example, but a three bay shop would obviously, not fly too well there. This is an extreme example, but businesses are located every day in places where there is little need for the product or service being sold, and closure is unavoidable, or, perhaps even worse, the business just squeezes by from day-to-day.

We are not even going to talk about equipment, right or wrong, good or bad, but about the science of business location, and that is very much “a science”. Often, we are inclined to establish our new shop near our home or birthplace, based on the belief that our friends and relatives will support us, because they know us so well, and we feel comfortable with them.

Firstly, are there enough friends and relatives to support you? How big an area could you reasonable expect to serve? What is the population of that area? Will all those cousins and buddies really support you 100%? Not likely, especially, if you have a competitor who also thinks everyone is his buddy and double especially, if he is already established, and doing good business.

The end of the line for a once proud service station and restaurant

In a situation like this, your best bet might a buyout of the established shop, or a buy-in as a partner, providing, of course, the two of you can get along. The last thing you should do is to open a shop just down the highway and duke it out, toe-to-toe with each other to the advantage of the customers, but inevitably resulting in one or both of you, closing up.

Obviously your second consideration is to determine the population of your area, and identify the main employers. Are the main employers stable? Have they been in business for many years and, (important!) are they expanding their workforce? Next, obtain the vehicle population figures, the vehicle mix (cars, trucks, farm), and the average age of these vehicles.

Obviously, vehicles in the 2-10 year age group will be preferable. Older than this usually indicates a lower-than-usual average wage, a retention of older vehicles, and probably a high percentage of do-it-yourselfers. On the other hand, although a high percentage of new vehicles might indicate a higher-than-average wage base, it could also signal the presence of an aggressive dealer or two who are adept at retaining customer service.

This information is important for your success, and to present to the bank manager. Business plans backed by valid statistics and surveys stand a much better chance of being stamped “Approved”, as opposed to telling the bank officials that you know all these local folks, and they have all promised to deal with you. He/she has heard this claim before.

Federal and Provincial government departments can supply the foregoing information through Statistics Canada; Service Nova Scotia; Service New Brunswick; InfoPEI; Newfoundland & Labrador Statistics Agency; etc., all of whom can be reached byvisiting the above websites, phone, e-mail, facsimile, or, in person.

Alternately, you may wish to contact one of the many companies who specialize in business plans. Just type in “Business Plans” on your PC. You will get dozens of responses, ranging from instructions how to complete your own plan to fully complete presentations.

Generally, the procedure involves an in-depth interview in which they will ask you all about your proposed business, including the type of business, number of bays, specialties, number of employees licensed or apprentice, etc. etc. They will carry out a feasibility study, covering all items we have discussed, and come back to you with a business plan which outlines all your costs to get into business, details of financing, your projected income over the first five years, your expected expenses, and your estimated net profit. Bankers love this stuff!

At this stage you are not yet in business, you may not even want to go into business, but you are armed with what you need to know to decide whether you should proceed with your dream shop, try another location, or perhaps open up a Pizza Delight.

In the next issue, having established our general location, we can become more specific, check out some start-up costs and see if we can find someone who has money to give away. We certainly do not want to see your building end up all boarded up with the doors locked!

You can contact John in Saint John, New Brunswick here