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1.1
setting up and operating a Auto sales and purchase, Repair, Service and customization workshop offering various services. This document gives insight information about the various technical and general requirements for each particular service offered. The document provide all relevant details to entrepreneurs in making the correct decision providing various technological as well as business informations. The document also allows flexibility in change of various parameters to suit the customized needs of the entrepreneur.
1.2
General Description
The Auto Repair market has a lot of competition, almost all offer repair and service features. Very
few have fully equipped workshops with latest machinery, technical equipments, spare parts and skill full work force for the repair of racing and imported cars. However, availability of parts, latest machinery , technical equipment supports the service and repair departments by allowing them to turnaround jobs at a faster rate than the competition. There are no other auto shops which provide warranty on the sale of used local and imported cars. The uniqueness of the proposed business is that it provides customers warranty on the used cars up to 1 year and free checkup and service facilities for 6 months after the sale. The other unique feature of proposed venture is that it offers customization of cars according to the customers demand and requirements. The document addresses the unmet need of having a quality auto repair workshop that provides: Quick and quality repair & maintenance services; Wheel Alignment and Balancing Facilities High Pressure Cleaning Services; and Easy access to new and used retail parts to meet the demands of the customer. Sale and purchase of used cars Warranty on the sale of used cars Customization of cars according to customers demand
1.3
Business Opportunity
The Auto sales and purchase, Repair, Service and customization Workshop business is a viable
business provided that it is operated with a good business acumen that involves having a thorough knowledge and experience of the repair and service operations and also managing the jobs with the right type of skilled manpower. When these factors combine with good customer relationship management and effective business development skills, the business is expected to give considerable profits which are expected to grow over the years.
1.4
proposed Auto Repair & Service Workshop is assumed to operate on a Partnership basis.
1.5
following services: Mechanical, and Denting & Painting Wheel Alignment & Balancing High Pressure Cleaning Spare parts Sale and purchase of used cars Warranty on the sale of used cars Customization of cars according to customers demand
The following table presents an overview of the proposed main services to be offered under the first two major categories identified above:
1.6
setup are:
1.6.2
Hands on Experience
Having a thorough knowledge and hands on experience of all the relevant technical details is a must
for entry into this business. The proposed business partners have relevant work experience, knowledge and practical work experience in managing automobile dealers and workshops.
2
2.1
years. It was further estimated that the car industry experienced a growth rate of 51.4% during July 02 to April 03 signifying an increasing demand for cars which is expected to continue in the future. Furthermore, increasing competition between leasing companies have caused the lease rates to decline considerably which have made car an affordable commodity for a majority of the middle-income class which constitutes a considerable segment of the population of Pakistan. These factors coupled together reflect on the growing need for quality repair and service facilities. Similarly, wealthy people and new generation are more inclined towards the sports and imported cars. In spite of purchasing the local cars they prefer to purchase imported cars. In Pakistan there is no such auto dealer who can import the cars, customize them and also give warranty on them. There is a big segment of such people which can be targeted. Unlike many countries, the Pakistani car industry is unique in the sense that once the car comes on the road it is expected to run for an indefinite period requiring major repair and maintenance services throughout its operational life. Moreover there is a considerable demand for wheel alignment and wheel balancing services, which is required by almost every car, whether new or old. The roughness of the roads and continuous friction causes a continuous disruption to the alignment and balancing of the wheels which require adjusting These days trends are also changing now customers want quality services with out consuming time. They want Auto workshop from where they get all the services in less time. People these days are very much conscious about the quality services and are willing to pay more for quality services to save some time. Conclusively it can be said that there exists an ample demand for quality repair and service workshops in Pakistan and also that the existing scenario provides conducive opportunities for entry into this business venture.
2.2
Marketing Plan
The main challenge to the proposed business is of location that can affect the business but to prevent
these effects, effective marketing strategies are developed. This would help in providing knowledge to the customers about the services and unique characteristics of the business. The effort made to overcome the location factor and to attract customer can be done by the effective marking plans. The Marking strategy that the new business would adopt is first to attract customers by aggressive advertising on the internet, cable T.V, newspapers and in magazines. Opening ceremony of the work shop is conducted and during the first week customers are given 50% discount on all repairs and services. To make the customers permanent all the services and repairs are done the given time so that the customers would not have to wait for the long time. Waiting room for the customers is also set, so that they can set and do not get boor during the repair time. The work shop web site is also establish on which all the information relating services, repairs , customization ,purchase and sale of the cars is given so that customers in the workshop city and in other city get all the information with the single click. In work shop web site the rates of the services and customization options are also given. In customization section of the web site customer can enter his requirements and can get the export opinions and advice from the workshop exports through e-mails. The new business will also start a scheme for its loyal customers called Ak bar payment bar bar repair. In this customer had to deposit a fix payment for a year and can repair the car for unlimited times in a year.
3 3.1
location of its setup. Auto Workshops located on main roads or prime locations usually depend on walk-in customers while those that are based on off-road locations have their business coming in from contacts, referrals and companies. The proposed business would be setup on off-road location. The main reason is that the on the road locality are very expansive and the room required for the workshop would not be available on the main or prime location. The workshop is setup near to the main road or prime location where enough space for the workshop is available and is less expensive. The location can affect the business but to prevent these effects, effective marketing strategies are developed. This would help in providing knowledge to the customers about the services and unique characteristics of the business. The effort made to overcome the location factor and to attract customer can be done by the effective marking plans. Following are the main factors which are considered in deciding the location are:
3.1.1
advertisements, work shops, exhibitions, website etc. This would help in attracting customers.
3.1.3
Existing Competition
Concentration of similar types of workshops can give difficult competition, which increases if the
competitors are well established and famous for their service. Therefore it is advisable to choose such locations only when the owner is expected to have considerable amount contacts and referrals.
3.1.4
auto workshops prefer to be located within close proximity to the spare parts markets to ensure ready availability of desired spare parts. Therefore less money is tied up in maintaining an adequate spare parts inventory.
considerable portion of the cost of sales. The following table gives a breakup of the total administrative manpower required to operate the proposed setup. GENERAL MANAGEMENT Designation Type Owner Accountant Purchaser Office Assistant/ Store Keeper Guard Number 4 1 1 1 1 6,900 4,600 4,600 5,750 Monthly Salary (Rs.)
Considering the size of the proposed establishment it is assumed that the owners would be managing the overall affairs of the workshop. A full-time accountant is required to process and check bills, invoices, job orders etc. The purchaser would be primarily responsible for keeping track of the spare parts inventory in the store and making daily purchases; spare parts inventory purchases and other purchases as and when required. To keep the specific level of spare parts inventory available in the store. The office assistant would be responsible for handling customers & complaints, following-up on bills and managing all activities related to spare-parts store keeping. A security guard would be required for ensuring safe custody of customer cars during day and night. The following table gives the details for the proposed technical labor that forms the integral part of the cost of sales:
JOB / DUTY ALLOCATION Designation / Type In charge Designation / Type Mechanics Assistant Mechanics Helpers Designation / Type Head Denter Denters Assistant Denter Helper Designation / Type Painter Assistant Painters Helper Total Number 2 Monthly Salary (Rs.) 19,000 Monthly Salary (Rs.) 13,800 10,350 4,600 Monthly Salary (Rs.) 13,800 10,350 6,900 4,600 Monthly Salary (Rs.) 13,800 10,350 4,600 124,200
The In charge would be responsible for checking and diagnosing the customers car to ascertain any additional repairs / replacements that might not have been identified by the customer. Once the estimates and repair / replacement work is agreed with the customer the In charge would then allocate the job and ensure its timely completion. The In charge would also be required to check the cars (trial run) before delivering them to the customers
WHEEL ALIGNMENT & BALANCING Designation / Type Operator Assistant Operator Designation / Type Cleaner Assistant Cleaner Total Number 1 1 HIGH PRESSURE CLEANING Number 1 1 4 CUSTOMIZATION OF CARS Designation / Type Mechanics Assistant mechanics Helpers Total Number 1 2 2 5 Monthly Salary (Rs.) 13,800 6,900 4,600 36,800 Monthly Salary (Rs.) 13,800 6,900 41,400 Monthly Salary (Rs.) 13,800 6,900
The total monthly salary of the technical staff would amount to Rs. 202,400 and is assumed to increase by 15% per annum.
PROJECT INVESTMENT
This section will provide the total cost of the project ITEM COST (RS.) 675,000 850,000 120,000 90,000 100,000 30,000 1,000,000 650,000 550,000 250,000 125,000 25,000 900,000 552,000 50,000 80,000 6,047,000
Construction Office / Store Construction Service Stations Masonry Work Mechanical Repairs Equipment Denting Equipment Painting Equipment Wheel Alignment Machine Wheel Balancing Machine High Pressure Cleaning Equipment Piston Pump Spare Parts Purchases Lubricant Purchases Advance Rent & Deposit Working Capital Pre Operating Costs Office Furniture & Equipment Total Cost
5.1
Equipment Requirement
The equipment required for running an Auto Workshop would relate to the activities that the
workshop tends to undertake. In this case, the equipment required would be as follows: MECHANICAL REPAIRS & MAINTENANCE Equipment Complete Mechanical Toolbox Work Bench Vice Tool Box Cupboard Voltmeter / Ammeter Timing Light Battery Charger Compression Gauge Others Total DENTING Equipment Denting Toolbox Mechanical Toolbox Pressure Jack (Large) Gas Cylinder Carbide Tank Welding Kits Drill Machine (Hand) Puller Jack Others Total Number 2 1 1 1 1 2 2 1 Estimated Cost (Rs.) 20,000 13,000 30,000 6,000 3,000 6,000 3,000 4,000 15,000 100,000 Number 2 2 2 1 2 2 1 1 Estimated Cost (Rs.) 26,000 5,000 9,000 5,000 5,000 12,000 7,000 6,000 15,000 90,000
PAINTING Equipment Painting Compressor (2 hp; 1k lbs) Spray Gun (Small) Spray Gun (Large) Pipe Others Total Number 1 1 1 1 Estimated Cost (Rs.) 15,000 3,000 4,000 1,000 7,000 30,000
HIGH PRESSURE CLEANING Equipment High Pressure Cleaner (including Piston Pump) Piston Pump Total Equipment Complete Computerized Alignment Equipment (Including Heads, Disc plates etc.) A Class Computerized Wheel Balancing Machine 1 Total 650,000 1,650,000 1 1,000,000 1 1 WHEEL ALIGNMENT & BALANCING Number Estimated Cost (Rs.) 550,000 250,000 800,000 Number Estimated Cost (Rs.)
5.2
5.2.1
plates, spark plugs, nuts / bolts etc. for about 8 to 10 models of most common car brands like Suzuki, Toyota and Honda. These purchases would also include daily consumables items like carbide, sand papers etc. that are required for denting & painting services. It is estimated that initial purchases for spare parts & consumables would amount to Rs. 125,000 which would subsequently average to purchases of Rs. 3,200 on a daily basis (Rs. 80,000 for 25 day month) after commencing of operations.
5.2.2
Lubricants
The workshop would also be required to keep a minimum inventory of lubricants to meet the
immediate requirements of the customer. Usually lubricants are expensive and many workshops dont find it affordable to keep a large inventory of such items. It is estimated that an initial inventory of Rs. 25,000 would be required for lubricants and the monthly purchases would amount to Rs.10,000 per month after resuming of operations.
5.3
software based operating system. Some machines have electronic panels that only show the deviations while the newer ones have a computer interface having more features. The prices of wheel alignment machines are based on two factors (i) (ii) Condition and Make or Brand. Wheel alignment machines have a very long life lasting for over 15 20 years with very little depreciation. Because of this many machine suppliers in local markets are refurbishing old / used machinery by repainting them and selling them in the market. Brand new European machines cost around Rs. 850,000 1,000,000 (A Class) while the others cost around Rs. 650,000 750,000 (B Class). Brand new Chinese machinery with A Class features also costs around Rs. 650,000 750,000 but despite the low cost people prefer to opt for European brands since Chinese Machinery are still in the testing stages. For the purpose of this study we have assumed procurement of new European branded machinery costing around Rs. 1,000,000 having the latest features and easy to operate facilities.
5.3.2
alignment machines. However the price variation of these electronically operated machines is greater where used machines cost around Rs. 200,000 while new ones cost around Rs. 1,200,000. For the purpose of this study we have assumed purchase of a wheel balancing machinery containing good features and costing around Rs. 650,000.
5.3.3
deprecation such that it needs to be replaced after every 3 years. Usually the water tank and the pressure valves and hoses loose their durability within this time period and need to be completely replaced. For some service stations the replacement time period ranges around 2 years depending on the continuous use of the product. High pressure cleaning equipment is available in local markets ranging from Rs. 750,000 to
800,000 of various European Brands like ITM ITALIA, EUROCLEAN, and KRENZELEY etc. Due to its high depreciation the high pressure equipment requires a lot maintenance costs on a monthly basis which even amounts to one fourth of its original cost per month. For the purpose of this study we are assuming a quality pressure cleaning equipment costing around Rs. 550,000 having life of 3 years with maintenance cost of approximately 25 % of its written down value. An additional Rs. 250,000 will be required for the purchase and installation of Piston Pressure Lift. Since the machines require diesel fuel for operation, it is assumed that the fuel cost would be Rs. 5,000 per month.
5.4
5.4.2
space for Denting & Painting and Mechanical services and also for general parking services for walk-in customers.
The proposed land will be acquired on a rental basis with 3 month deposit and 3 months advance rent after which rent will be payable on a monthly basis.
operations that eliminate waiting on part of the customer and help to offer value added services to the customer who need their cars fixed right away. The following factors need a continuous focus for making the proposed setup a successful business venture:
6.1
business rather than concentrating on volume and losing out old customers. All the workers at the workshop need to be trained and held responsible for providing superior service and developing long lasting trust bond with the customers. This is very important in this industry, where trust and honesty reflect on the image of repair and service facilities. This would help in maintaining a consistent revenue base, to ensure stability of business on the long- run.
6.2
hence the main effort required is to maintain and enhance customer loyalty by providing quick and quality services. Otherwise, the customer would not take time to move to other workshops.
6.3
Provision of quality repair and service facilities solicits skilled and experienced workmen which are an integral component of this business. It is important that the manpower hired should have the required technical capability and customer relationship management skills. Unless the entrepreneur is not skilled and does not possess the required know-how he would not be able to properly hire and manage the manpower.
6.4
in order to give quick service and prevent any inconvenience caused to the customer. Moreover, quick accessibility to used / new auto parts is another important factor that enables to provide hassle-free service to the
customers. However, the entrepreneur needs to carefully manage the auto parts inventory to ensure that minimal working capital is tied up. Some workshops usually keep auto parts for the most common car brands while parts of less common / unpopular brand are usually made available on call basis.
6.5
Specialized Skills
Some Auto Workshops become famous due to their expertise in particular area / field or brand. These
workshops develop their expertise over a period of years and become famous for specialized areas like Denting & Painting, Axle Repair & Maintenance etc. Some workshops are known experts for specific car brands like Suzuki, Toyota etc. These specialized skills draw the attention of car owners of particular brands or those who are facing specific problems, hence consistent quality needs to be maintained to develop such skills. Another specific issue that relates to specialized skills is the proper use of alignment and balancing equipment such that the customer is properly satisfied. This can be achieved only when the workers operating these machines are properly trained and knowledgeable about the processes.
estimation. The cost projections cover the cost of land, building, inventory, equipment including office furniture etc. The specific assumptions relating to individual cost components are given as under:
7.1
Denting & Painting, Mechanical Repairs & Maintenance, Customization of cars and the purchase and sale of local and imported cars. The Sales are expected to grow at a real rate of 12% per annum which reflects on the anticipated growth in the number of cars on the road hence the business is expected to increase based on volume rather than increased service charges.
7.2
Rent Cost
The rent for the assumed premises will be Rs. 150,000/- per month. It is assumed that Rs. 900,000
will be given in advance before possession of premises. This will include 3 months deposit and 3 month advance rent. The rent would be payable on a monthly a basis and is expected to increase at the rate of 10% per annum for the projected period.
7.3
Construction Cost
The Auto Workshop involves construction cost which translates into three main
components as follows: Office / Store Construction which involves a two storey building in which the ground floor would accommodate the owners office and administration while the first storey would serve as a store for spare parts and other items. The office and store construction cost is taken to be as Rs. 750 per square feet which comes to a total of Rs. 675,000 for the two storey structure (450 sq. ft. x 2). This cost is inclusive of all accessories and fittings except for AC and Office Furniture. Masonry work would be required in the area allocated for Denting & Painting and Mechanical Works. It is assumed that the proposed workshop would be able to
accommodate 6 cars for mechanical repairs and around 8 cars for denting & painting at one time. This would require a total of 14 bay areas to be constructed with underground ducts and ramps in 6 of the bay areas for mechanical repairs. The cost for masonry will be as follows: MASONRY WORK FOR BAY AREAS Item Mechanical Work (Duct & Ramp) Denting Painting Total Bay Areas 6 4 4 14 Estimated Cost (Rs.) 60,000 30,000 30,000 120,000
The third main construction would be required for making two separate sections for (i) Wheel Alignment & Balancing and would be approximately: (ii) High Pressure Cleaning. The cost of construction for these
Wheel Alignment & Balancing (Rs. 400 per Sq. Feet x 1000 Sq. Feet) High Pressure Cleaning (Rs. 400 per Sq. Feet x 1000 Sq. Feet) requiring high ceiling for piston pump car lift.
CONSTRUCTION COST FOR WHEEL ALIGNMENT / BALANCING & PRESSURE CLEANING Item Wheel Alignment & Balancing Ramp for Alignment High Pressure Cleaning Total Estimated Cost (Rs.) 400,000 50,000 400,000 850,000
(Note: For wheel alignment there should be at least a minimum space of 5 feet from the front & back end of the car and a space of 2 feet at the sides for flexibility in operating the machine)
7.4
Utilities Requirement
It is estimated that work shop will use over 5000 units and will use up to 250 Gallons of water and
The following table presents the assumed breakup of utilities on a monthly basis: the Telephone bill would be 5000 and may have expense of 10,000 relating newspapers, magazines etc
7.5
Depreciation on Building, Technical Equipment, Alignment & Balancing Equipment and Office Furniture & Fixtures is assumed to be at the rate of 10% per annum based on the diminishing balance method for the projected period. Depreciation on High Pressure Cleaning Equipment will be calculated on a straight-line basis with no salvage value at the end of 3rd year; hence it has been assumed that this equipment will be replaced after every three years at a cost which will be 10% greater than the acquisition cost of the previous equipment.
7.6
hand to meet the working capital requirements / contingency cash for the initial stages. The requirement is based on the utilities and salaries expenses for at least three months. The following table gives the break up.
The provision for pre operating costs is assumed to be Rs. 50,000 which will be amortized equally over a 5 year period.
7.7
Account Receivables
A collection period of 45 days is assumed for sales. Further provision for bad debts has been assumed
7.8
office purchases which are expected to increase at the rate of 10% per annum for the projected period.
7.9
Financial Charges
It is assumed that long-term financing for 5 years will be obtained in order to finance the Auto
Workshop setup which would mainly include Construction of Building, Masonry work, Purchase of Equipment etc. This facility would be required at a rate of 15% (including 1% insurance premium) per annum with 60 monthly installments over a period of five years. The installments are assumed to be paid at the end of every month.
7.10 Taxation
The tax rate applicable to small companies i.e. 20%.
The weighted average cost of capital is based on the debt/equity ratio of 50:50.
High Pressure Cleaning Maintenance Cost High Pressure Cleaning Replacement Lease Period Lease Installments Financial Charges (Lease Rate) Tax Rate
Refrences:
Kotler, Philip, Kevin L Keller, Abraham Koshy, and Mithileshwar Jha. Marketing Managment A South Asian Perpecptive. 13th. New Delhi: Dorling Kindersley, 2009.