You need a minimum of $187,980 to open a medium-scale tire retail shop in any city in the United States of America. Tire is a major component in the automobile industry hence the regular demand for tires from automobile owners.

Establishments in the retail market for auto tires sell automobile tires and tubes that are used on all types of passenger and freight vehicles.

Over and above, the Auto Tire retail Industry is a profitable industry and it is open for any aspiring entrepreneur to come in and establish his or her business; you can choose to start on a small scale in a street corner or on a large scale with several outlets in key cities in the united states of America.

Estimated Cost Breakdown to Open a Tire Shop

Interestingly, you may not need to break the bank to open your tire retail shop because you can actually save up to get it done. Please note that general pricing guidelines for new tires: Inexpensive tires will generally be in the range of $50 – $150 each.

Moderately priced tires will usually be in the range of $100 – $300 each. High-end tires (ultra-high performance or specialty off-road tires) can be $300 – $1000 each.

But if rims need to be replaced, the price tag can run anywhere from $200 to $500 for each new wheel, depending on your car. If you’re looking to save a few dollars on replacement rims, search through craigslist or eBay for some take-off rims. These are the key areas where you will spend your startup capital;

1. The total fee for registering the business in the United States of America – $750.
2. Legal expenses for obtaining licenses and permits as well as the accounting services (software, P.O.S machines and other software) – $3,300.
3. Marketing promotion expenses for the grand opening of Isabella & Nancy ™ Bridal Shop, LLC in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
4. The total cost for hiring business consultant including writing a business plan – $2,500.
5. The total cost for the purchase of insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
6. The cost for payment of rent for 12 months at $1.76 per square feet in the total amount of $35,600.
7. The cost for shop remodeling (construction of racks and shelves) for the show room – $20,000.
8. Other start-up expenses including stationery ($500) and phone and utility deposits ($2,500) – $3,000
9. The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $40,000
10. The cost for start-up inventory (stocking with a wide range of different sizes and brands of tires, rims, tubes and other related merchandize) – $60,000
11. The cost for store equipment (cash register, security, ventilation, signage) – $4,750
12. The cost of purchase and installation of CCTVs: $2,500
13. The cost for the purchase of furniture and gadgets (Computers, Printers, Telephone, TVs, Sound System, tables and chairs et al): $4,000.
14. The cost of launching a website: $600
15. Miscellaneous: $2,000

From the rough estimate as listed above, you would need a minimum of one hundred and eighty – seven thousand, nine hundred and eighty USD ($187,980) to establish a medium – scale but standard tire retail shop business in any city in the United States of America.

Before you can open a tire shop, you should have certain things in place, and in this article, we will consider some of the key factors that will influence the cost of opening a tire shop.

3-Year Sales Forecast and Breakeven Analysis

• Average monthly sales revenue of $30,000 in the first year.
• Projected 12% annual revenue growth
• COGS is 60% of sales revenue due to the high cost of tires and related supplies.
• Fixed Costs (rent, salaries, insurance, etc.): $8,000 per month.
• Variable Costs (marketing, utilities, etc.): 10% of monthly sales.

Year 1:

• Monthly Revenue: $30,000
• Annual Revenue: $30,000 × 12 months = $360,000
• COGS: 60% of $360,000 = $216,000
• Variable Costs: 10% of $360,000 = $36,000
• Fixed Costs: $8,000 × 12 months = $96,000
• Total Costs: $216,000 (COGS) + $36,000 (variable) + $96,000 (fixed) = $348,000
• Profit: $360,000 – $348,000 = $12,000

Year 2:

• Annual Revenue: $360,000 + 12% = $403,200
• COGS: 60% of $403,200 = $241,920
• Variable Costs: 10% of $403,200 = $40,320
• Fixed Costs: $96,000
• Total Costs: $241,920 (COGS) + $40,320 (variable) + $96,000 (fixed) = $378,240
• Profit: $403,200 – $378,240 = $24,960

Year 3:

• Annual Revenue: $403,200 + 12% = $451,584
• COGS: 60% of $451,584 = $270,950.40
• Variable Costs: 10% of $451,584 = $45,158.40
• Fixed Costs: $96,000
• Total Costs: $270,950.40 (COGS) + $45,158.40 (variable) + $96,000 (fixed) = $412,108.80
• Profit: $451,584 – $412,108.80 = $39,475.20

Break-Even Point

Contribution Margin per Dollar of Revenue = 1 – Variable Cost Ratio – COGS Ratio

: 1 – 0.10 – 0.60 = 0.30 (30%).

Fixed Cost: $96,000 per year.

Break-Even Revenue = Fixed Cost ÷ Contribution Margin

: = 96,000 ÷0.30

Break-Even Revenue ​= $320,000

From the analysis above, your tire shop needs to generate about $320,000 in annual revenue to break even. Based on the forecast, the business will surpass its break-even point in the first year and continue to increase profitability in subsequent years.

Factors That Influence the Cost of Opening a Tire Shop

1. The Cost of Leasing or Renting a Shop

When it comes to starting a tire shop, one of the major factors that will influence the cost you will spend to get the business up and running is the cost of leasing or renting a shop. Trust me, the amount you will spend in renting or leasing a shop facility is indeed significant and you should be ready to spend a major chunk of your budget in this regard.

Interestingly, the size of the shop you want to lease, the location of the shop, and the additional facility that comes with the lease agreement will determine the amount you will spend.

2. The Cost of Registering the Business and Obtaining Licenses and Permits

If you want to start a business in the United States, you need to obtain the necessary business licenses and permits such as a general business license, a health and safety permit, zonal permits, a signage permit, a resale permit, and operational state facility inspection.

In fact, the amount you will spend on collecting the necessary licenses and permits will undoubtedly influence the final cost of opening your tire shop.

3. The Cost of Start-Up Inventory

Another major factor that will determine the overall cost of opening a tire shop is the cost of your start-up inventory. Although, there is no fixed amount you are expected to spend when it comes to stocking your tire shop, but no matter the amount you decide to spend, it will definitely influence your overall cost.

Please note that giving an estimate of the initial inventory cost can be challenging, but it’s important to stock enough products to attract customers while staying within your budget.

4. The Cost of Employing Workers

Even though you can open a tire shop as a one-man business, if you want to open a standard tire shop, you should plan to employ workers. It would help if you plan to hire a shop manager, accountant (cashier), vulcanizers or tire technicians, and salespeople.

Trust me, employee wages such as salaries, and additional costs like payroll taxes, benefits, and worker’s compensation insurance et al are major costs that usually influence the overall cost of starting any business including a tire shop.

5. Operational Expenses

Operational expenses are yet another major factor that can influence the cost of opening a tire shop. Interestingly, the size of your tire shop, the number of workers you want to employ, and of course the additional services you want to offer will determine the amount you should budget.

Please note that your operational expenses are part of your ongoing expenses and they include utilities, maintenance, accounting software, security, software systems for inventory management, point-of-sale (POS) systems, customer relationship management (CRM), and other ongoing expenses associated with running a retail business.

6. Additional Services Offering

Even though a tire shop is expected to sell different sizes, types, and brands of tires, but standard tire shops usually offer additional services. A standard tire shop can conveniently provide services that include; change of tires, wheel balancing, and alignment, and other related services.

With that, you will need to purchase balancing machines, alignment machines, weights, and other tools used to ensure proper tire balance and alignment.

7. Miscellaneous Expenses

Finally, miscellaneous charges are another aspect that will influence the entire cost of operating a tire store. Miscellaneous expenses are charges that do not fit into any category but are required for the running of the business. These costs will differ based on the nature of the business and the individual’s circumstances.

Miscellaneous expenses for a tire shop business can include professional services (such as accounting, legal assistance, and possibly business consultation services), costs associated with shipping products to customers or suppliers and postage for mailing documents or packages, as well as costs associated with office supplies, packaging materials, credit card processing fees, internet and phone services.

In Conclusion,

It is important to note that starting a tire shop can attract other factors not listed above, and these factors can be unique to the city, state, or country you plan to start the business. Interestingly, these factors can influence the cost of opening your tire shop.

So, in order to get a clear picture of the factors that will affect the cost of opening a tire shop in your city, it will be advisable to study tire shops and related businesses in your city.

Please note that this is a rough estimate and we usually advise our readers who are interested in opening a tire retail shop to go to the market or directly contact distributors and wholesalers of the types of tires, rims and tubes they want to retail in order to get the real time prices of these items.

The truth is that if you are a good bargainer, you can get a better deal that will help you beat down the estimated price as listed above.