Tax return; Funds to start shop on the side? Advise within...

[suprarx7nut]

So this year, I'm actually getting more back than I thought on my tax return. I try to keep my withholdings equivalent to what I will owe, but I ran into a large bonus check this year which was heavily taxed (~36-38%, i believe). Damn bonuses, always messing up my tax plans...

Anyways, I've always wanted to start my own business. Problem is, I don't want to be a run of the mill mechanic and I dont want to wait until I'm 30 to save up funds to go full time with it. I would like to basically flip niche cars, but on a professional scale. I'd partner with another car-enthusiast co-worker (possibly two) and gets a dealers license to gain access to auctions and sell more than 3 cars per person/year.

My idea is to rent a small shop:
2-4 cars worth of space, maybe 1500 sq ft
1 single lift to start (probably lease the lift)
Compressed Air setup


It would be very minimal to start. The plan would be to buy/sell at least a car every other month with an average profit of $500-2500. Rent on the shop would amount to a few hundred $$ per person, so nothing we couldn't cover if we went a few months without a profit. Time spent would all be after work week hours or on weekends.

My end fantasy goal is to run a shop similar to Underground Racing or Heffner Performance, designing, fabricating, engineering eye-candy systems but that's many, many years off.

Dumb idea? Good idea? What are your thoughts?

 

[airhead04]

Sounds Like A Plan. I too have a similar goal in mind when I return home to Florida. Then again, if I can get in with a company similar to Titan Motorsports or Induction Performance, then my plans may change.

 

[3p141592654]

You planning to setup an LLC? You need to figure in some cash for licenses, tax prep, utilities, insurance, and marketing.

 

[Supracentral]

You planning to setup an LLC? You need to figure in some cash for licenses, tax prep, utilities, insurance, and marketing.

Legal Zoom (http://www.legalzoom.com) does a good job of it. Plan on spending a minimum of about $400.

 

[suprarx7nut]

You planning to setup an LLC? You need to figure in some cash for licenses, tax prep, utilities, insurance, and marketing.

Not sure yet, that's one of the many details to be determined.

Legal Zoom (http://www.legalzoom.com) does a good job of it. Plan on spending a minimum of about $400.

Awesome, thanks!

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[IJ.]

Personally I wouldn't do the partner thing if there was any way around it....

By all means take people on as employees if needed/justified.

If you can't do it on your own start smaller and work it up over a few years.

 

[suprarx7nut]

Personally I wouldn't do the partner thing if there was any way around it....

By all means take people on as employees if needed/justified.

If you can't do it on your own start smaller and work it up over a few years.

The partner thing does worry me, in principle at least. I thoroughly enjoy being solely responsible for my own success and failure, but when it's a side gig, the extra hand really comes in handy. I've done partner project cars before with another friend and it worked out rather well. Buying power was doubled, labor was doubled, cars were fixed nearly twice as quickly and decisions were more sound having the extra mind to double check everything.

I sense you've been bitten before though. Had my previous partner not been so pliable I'd probably have gotten tired of it. I knew more about the cars and what needed to be done, so he was very willing to do most anything I thought was right.

Point noted though, Ian. The third party of this possible venture is one I'm a little iffy about. I dont really question his business sense or mechanic ability, but rather his motivation. I want to be successful and make some $$ and I'm not sure he would share that mentality. A while back when I was talking about my salary negotiation and bonus structure he said, "You know, there's more to life than money" and while i completely agree with the sentiment, it was a little off putting as a younger guy vying for more success. Had I followed his advice I'd be making 10% less than I am now. Glad I ignored him then, lol.

 

[IBoughtASupra]

Start on your own, we waited many years before getting into the business. Its best to do it on your own as you will have control and less conflict. I have seen situations were the owners don't agree on how to do a certain setup and that leads to arguments and a split up, yes, something that simple.

 

[3p141592654]

I would not do anything involving cars without liability protection. An LLC is the simplest way to protect your assets. If you have partners, then get legal help to draw up the operating agreement. Doing it right at the start will save potentially huge issues later.

 

[MightyAl]

Agreed with starting out right. I had 2 other partners in my shop. One was horrible and the other was good. I wish we would have drawn things up beforehand to make it more official. It started out a mess and ended up a mess mostly due to our own lack of familiarity with business. Definitely a learning experience but the worst part was the customers. It would have been fun if not for them.

 

[Supracentral]

Personally I wouldn't do the partner thing if there was any way around it....

As someone who has been there, done that and has the emotional/financial scars to prove it, I couldn't agree more.

Here's a good set of litmus tests that you can use for potential partners in a business:

Would you feel OK about handing this person your entire life savings, in cash, and asking them to hold onto it for you for 5 years?
Would you feel OK giving this person your drivers license, birth certificate, social security card and checkbook to hold onto?
Would you feel OK having this person sleep in the bed, with your wife/girlfriend while you're out of town for a week on a business trip?

If the answer to any of those is "no", don't get into a partnership... :nono:

And while it may sound like I'm trying to be funny, I'm not. Becoming business partners is something that requires an insane amount of trust, similar views, similar philosophy, similar ethics and a very well aligned opinion on how to run a business, and what specific direction you want your business to go in.

Think long an hard about partnerships and investors. 99 times out of 100, you're better off starting small, using your own finances and growing slowly. Also, there are some benefits to starting small; it's much better to make mistakes when you have a half a dozen customers to deal with and nobody knows who you are. Growing too fast can sometimes put you in a situation where you have more customers than you can handle, and everyone knows your name. When you make mistakes in that state, it can ruin you.

 

[te72]

Personally I wouldn't do the partner thing if there was any way around it....

By all means take people on as employees if needed/justified.

If you can't do it on your own start smaller and work it up over a few years.

I would not do anything involving cars without liability protection. An LLC is the simplest way to protect your assets. If you have partners, then get legal help to draw up the operating agreement. Doing it right at the start will save potentially huge issues later.

Two of the best things I've seen in here so far. Mike's post above mine is well worth considering too. There are about 2 people in this world I would consider entering into a business partnership. Not that I don't like them or get along with them, far from it. It's just that business is a VERY tricky consideration to deal with. I love your idea, and would love to do something similar myself (resto-mod old small cars? Hell yes!), but I would only do it if I DIDN'T need the money. Buddy of mine makes monsters out of vehicles, and his customers always leave happy. However, the income is inconsistent, certainly NOT a guarantee... that's something to consider. Do you NEED the money? Or is this more of a hobby that you're willing to pour money into without seeing a return on it?

Like I said, if I had money to throw around and was bored, I'd do it in a heartbeat. If I were hoping to make money on it, I probably wouldn't pursue it too far unless I had a guaranteed market.

 

[suprarx7nut]

Thanks for all the responses guys, I appreciate it. I'm gathering more info and planning as we speak.

I'm also pursuing an engineering gig with Toyota [crossing fingers, jumping up and down in little hops] and will start to dedicate a serious amount of time to this if Toyota doesn't pan out.

te72: Your points are exactly why I would do this sort of thing as a side gig to start. I have a very steady, rather relaxed engineering job at the moment. I rarely have to work over 40 hr/week and have time to devote to extra projects. Since my extra effort isn't valued with my current employer I'd like to pursue other avenues of further my 1)experience 2)enjoyment 3)possibly income.

After I've exhausted the Toyota engineering attempt, I'll focus on this idea heavily and start working hard numbers involving all the foreseeable fees and costs of opening up a shop with necessary licensing and insurance.

Another possibility would be to rent a shop as a partner, but run the business independently. Not sure if that's kosher with business regs, but that may be a possibility.

 

[te72]

Sounds good man, good luck to you with the Toyota thing. Maybe you can engineer some glass that makes people in trucks/suvs *think* they're driving faster than they are so they're not always riding my ass at (and even over) the limit.

 

[suprarx7nut]

Still working some random Toyota contacts seeing if breaking into the industry is feasible if I want to stay out of the Detroit area. I would live just about anywhere except a few areas of the country. Unfortunately, one of the areas I'm trying to avoid is where most the automotive engineering in the US seems to be done.

Just wanted to update this thread so people know this wasn't a 15 second pipe dream, lol. Still weighing options.

 

[te72]

Have you considered testing venues? I know all the major manufacturers have durability and endurance testing facilities throughout the country, mostly located in extreme climates, such as northern Michigan and the southwest. I know Phoenix at one time hosted GM's proving ground. IIRC, they still have Volvo, Nissan, and Ford down there in the valley as well...

Is there a need for engineers in that side of the business? I don't know that their jobs would be at the same location, but it makes sense to me, for ease of diagnosis, and designing fixes for problems that come up, right?

 

[suprarx7nut]

Have you considered testing venues? I know all the major manufacturers have durability and endurance testing facilities throughout the country, mostly located in extreme climates, such as northern Michigan and the southwest. I know Phoenix at one time hosted GM's proving ground. IIRC, they still have Volvo, Nissan, and Ford down there in the valley as well...

Is there a need for engineers in that side of the business? I don't know that their jobs would be at the same location, but it makes sense to me, for ease of diagnosis, and designing fixes for problems that come up, right?

That's exactly the facility I'm.applying at and where I want to work. They just hire a small fraction of engineers there compared to the headquarters and plants in Michigan.

So it seems at least...

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[te72]

I'd love a job like that myself.

"Here, I broke this, can you fix it without making it bulky and overweight/overpriced?"

Seems like fun...