Do you want to know how much money tire shops make yearly? If YES, here are 8 factors that determine the income & profit margin for used tire shop owners. Whenever any entrepreneur wants to start a new business, one of the first questions that they usually ask or rather one of the first info that they try to get is how profitable the business is or how much they are likely to make from the business.
This narrative also applies to entrepreneurs who are looking towards starting a used tire business. They would want to know the profit margin they would be expecting from their investment.
The truth is that there is no one-mold-fits-all when it comes to how much a used tire retail shop is expected to make. There are some factors we are going to look into before giving an estimate of how much an average used tire retail shop make yearly and these factors are;
8 Factors That Determine How Much Money Do Used Tire Shops Make Yearly
Table of Content
- 1. The Size of the Used Tire Retail Shop
- 2. The Location of the Shop
- 3. The Brand of Used Tires Retailed in the Shop
- 4. Other Related Products and Services Offered by the Store
- 5. The Management Style of the Shop
- 6. The Business Model of the Used Tire Retail Shop
- 7. The Advertising and Marketing Strategies Adopted by the Shop
- 8. The Number of Years the Business is in Existence
- Estimated Profit Margin for a Used Tire Retail Shop
1. The Size of the Used Tire Retail Shop
One cannot conveniently state the amount a used tire retail shop is expected to make yearly if you do not know the size of the tire shop. As a matter of fact, the amount a small road – side used tire shop is expected to make annually will be far different from the amount a standard used tire shop franchise will make annually even if they operate in same location.
Also, the amount invested in a small road-side shop is different from the amount invested in a large and well-organized used tire retail shop hence the amount they will both make will be far different. One the average, starting a used tire retail shop could cost anywhere between $5,000 and $500,000 depending on what you want to achieve.
2. The Location of the Shop
When it comes to setting up a new business, location plays a major role which is why feasibility studies and market survey are essential before settling for a location. Usually, if your used tire shop is located in an area with good human and vehicular traffic, and you stock your shop quality used tires from different brands, you may not have to struggle to get people to visit your shop and make purchase.
Please note that the amount a shop located in a low traffic area will make yearly will be far lower when compared to the amount a shop located in a high-traffic area will make. So, if you want to make it big with your used tire retail business, then be ready to rent a store in a high traffic area. Please note that you are going to pay more to rent a store in a high-traffic zone.
3. The Brand of Used Tires Retailed in the Shop
Another important factor that will determine how much a used tire retail shop is expected to make yearly is the brand of used tires in the shop. Ideally, a used tire business makes money by selling used tires to customers. Most tires are sold individually, in pairs of two or in sets of four.
They are also shops that retail used passenger vehicle tires, light vehicle tires, medium- and heavy- duty truck tires, tricycle tires, motor-bike and used bicycle tires from different manufacturers (brands) from the United States and abroad. Brands like Michelin, Pirelli, Goodyear Eagles and Nexen CP671 are in high demand and profit margin is usually hire from these brands.
4. Other Related Products and Services Offered by the Store
Aside from retailing a wide range of used tires, retailing other complimentary products such as tubes, valves, rims, spanner wheel and jacks et al will surely boost the amount you are expected to make from your used tire retail shop.
So also, if you offer additional services like re-threading of worn out tires and also purchasing used tires that are still in good condition directly from your customers as against going to the market to buy from wholesalers/merchants, will position you to earn a higher profit margin.
5. The Management Style of the Shop
Another key factor that will determine the amount a used tire retail shop is expected to make yearly is the management style of the shop. Trust me, the results you will get when you have a good manager will be far greater than what an average or bad manager will get, even if you give the managers same conditions to work and same products to retail.
6. The Business Model of the Used Tire Retail Shop
There are different business models that a used tire retail shop can adopt and these models offer different results. For example, the amount a used tire retail shop that also runs an online store will make yearly will be different from the amount a strictly brick and mortar shop will make yearly.
The amount a used tire retail shop that also sells franchise will make yearly will be far different from the amount a one-location walk -in shop will make. This goes to show that the amount a used tire retail shop will make yearly is dependent on the business model of the shop.
7. The Advertising and Marketing Strategies Adopted by the Shop
Another key factor that will determine the amount a used tire retail shop can make yearly is the advertising and marketing strategies adopted by the shop. Trust me, there are several advertising and marketing strategies that can help a business increase their earnings.
But the results you will make will far outweigh the amount you spent on advertising and marketing. Of course, you don’t expect a used tire retail shop that engages in aggressive advertising and marketing to make same amount yearly with a shop that is passive with its advertising and marketing.
8. The Number of Years the Business is in Existence
Another key factor that will determine the amount a used tire retail shop is expected to make on a yearly basis is the number of years the business is in existence. In business, the number of years you are in existence will go a long way to determine the amount you will make especially if the business is properly managed. This is because you would have over the years won loyal customers.
For example in your first fiscal year (FY1) you might make a hundred thousand dollars ($120,000), in your second fiscal year (FY2) you might make two hundred thousand dollars ($200,000) and in your third fiscal year (FY3) you might make two hundred and fifty thousand dollars ($550,000). Interestingly, most businesses including used tire shops usually breakeven from the third year of operation.
In conclusion, the amount a used tire retail shop will make yearly is strictly dependent on all of the factors listed above. Usually, a small-scale but standard shop located in a high-prone human and vehicular traffic location in the United States of America can make between $120,000 to $350,000 annually all things being equal.
Estimated Profit Margin for a Used Tire Retail Shop
Please note that in the United States of America, used tires cost can vary from $25 to $160, usually 30 – 50 percent of the price of a new tire of the same model. This number depends on a range of factors, so you may get the same type of used tire for $50 or $90.
According to a report published by CostHelper, a standard, all-season tire costs between $50 and $200 each with an average price of $80 to $150. For a pickup truck or SUV, drivers may pay $50 to $350, with an average cost of about $100 to $250.
Have it in mind that the normal markup on auto parts is in the 30 to 40 per cent range, but tire sales are so competitive, very few garages ever attempt to earn this type of profit. In essence, the profit margin of used tires is between 30 to 40 percent and it includes all the factors involved in getting the used tire to the shelf.