Do you want to start a car customization business? If YES, here is a detailed guide on how to start a custom car business with no money and no experience plus a sample car customization business plan template.
With the right location, top-notch service and good marketing, you can serve several customers that require the interior and exterior of their automobiles to be customized to fit into their style.
A custom car is a passenger vehicle that has been either substantially altered to improve its performance, often by altering or replacing the engine and transmission; made into a personal “styling” statement, using paint work and aftermarket accessories to make the car look unlike any car as delivered from the factory; or some combination of both.
Please note that starting a car customization and modification business also needs significant investment capital, solid planning, and concentration to detail in order to keep your business profitable. You can start your custom car (car customization and modification) business plant from a small town in the United States and if you are consistent and creative, it won’t be too long before your brand becomes internationally recognized.
Steps to Starting a Car Customization & Modification Business
1. Understand the Industry
The car customization and modification business accommodates highly skilled auto mechanics who have what it takes to give their customers far beyond what they are expecting; it is a highly creative industry.
Basically, car customization and modification garages engage in customizing and modifying cars by altering some parts or the whole car to improve its performance, often they alter or replace the engine and transmission and also, they work on the body and sound system.
A customized and modified car may be a personal “styling” statement, making the car look unlike any car as delivered from the factory.
Custom cars are distinct from cars in stock condition. A car customization and modification engineer may adopt the visual and performance characteristics of some relevant modification styles, and combine these as requested by the client.
The car customization and modification business is indeed a growing and profitable business. Statistics has it that household customers account for the largest share of car customization and modification revenue at approximately 76 percent.
Car customization and modification customers are broadly defined as consumers that have a driver’s license, own a car, and are older than 16 years of age. This demographic is further segmented by income brackets, with households in the highest division representing the greatest demand for car customization and modification services.
Business customers contribute 22 percent of industry revenue. Revenue from this segment is largely derived from celebrity managers. Slower economic activity during the recession led to fewer businesses using vehicles to conduct shows, however a resumption of economic growth since 2010, has seen this segment strengthen.
Government customers comprise approximately 2 percent of the car customization and modification revenue. This segment includes federal, state, and local government organizations.
The car customization and modification line of business will continue to experience growth in developed countries like United States of America, Canada, United Kingdom, Germany, Australia and Italy et al. As a matter of fact, there are no companies with a leading market share in the industry.
Statistics has it that in the united states of America alone, there are about 61,332 licensed and registered car customization and modification businesses responsible for employing about 194,594 employees and the industry rakes in a whooping sum of $9bn annually with an annual growth rate projected at 2.7 percent.
Car customization and modification businesses all over the world are still enjoying good patronage particularly if they are well positioned and if they know how to reach out to their target market.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who make use of customized cars is far reaching; households, individuals (celebrities and public figures), corporate organizations, government officials, and agencies amongst others, hence the demographic composition for a custom car business is all encompassing.
So, if you are thinking of starting your own custom car business, then you should look beyond producing and marketing your cars to just people in your city, but also people across the United States of America and other parts of the world.
3. Decide Which Niche to Concentrate On
It is important to start that there are two clear cut niche areas when it comes to custom car business. These two niche areas are conventional and electric cars. However, there are other area of specializations that a custom car business may choose to specialize on.
- Rat rod: imitates (or exaggerates) the “unfinished” and amateur-built appearance of hot rods of the 1930s, 1940s, and 1950s
- Restomod – restored and modernized. Safety and convenience upgrades, such as disc brakes, AC, etc., but can include fuel injection and overdrive upgrades, etc. Externally might resemble a stock car with period correct mods rather than customs.
- Street machines: Typically, American cars with large-displacement engines modified for speed and often appearance.
- Street rod – consist largely of period specific vehicles and components, or emulate visual characteristics of cars through the’40s vintage.
The Level of Competition in the Industry
The competition that exists in the custom car business goes beyond competitions in your city or country; it is both national and international. This is because major custom car businesses do customize cars that can be found on the road all across the United States of America. So, it will be right to say the competition in the business is tough.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your products or business properly, you will always make headway in the industry. Just ensure you have what it takes to churn out reliable and well-modified cars, and you know how to reach out to your target market.
4. Know Your Major Competitors in the Industry
It is the norm that in every industry, there are always brands that perform better or are better regarded by the customers and general public than the others.
Some of these brands have been in the industry for a long time, while others are best known for their innovations and quality of their cars. These are some of the leading custom car businesses in the United States of America and in the globe;
- George Barris
- Bill Cushenberry
- The Alexander Brothers
- Gil Ayala
- Darryl Starbird
- Roy Brizio
- Troy Trepanier (of Rad Rides by Troy)
- Boyd Coddington
- Darryl Hollenbeck (working out of at Vintage Color Studios; winner of the 2016 America’s Most Beautiful Roadster (AMBR) trophy with a custom Deuce)
- Harry Westergaard
- Dave Stuckey
- Dean Jeffries
- Barry Lobeck
- Phil Cool (who won the 1978 AMBR trophy with a bright orange Deuce, cover car for the July 1978 issue of Hot Rod)
- Troy Ladd of Hollywood Hot Rods
- Doane Spencer (builder of a 1940s Deuce considered the template for the hiboy)
- Ron Clark and Bob Kaiser (of Clarkaiser Customs)
- Joe Bailon (inventor of candy apple paint)
- Gene Winfield
If you are looking towards successfully launching a business and maximizing profits, then you need to ensure that you get your economic analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.
Custom car business is not a Green business, as a matter of fact, you will come across several workshops if you travel across different cities in the United States of America. So, if you are mapping out your economic analysis, you should carry out thorough market survey and costing of the required raw materials, branding and other equipment needed to successfully run the business.
If you are considering opening a custom car business, then your concern should not be limited to the cost of setting up the plant and churning out custom cars, but also on branding and on how to build a robust business network. The truth is that if you are able to build a robust business network, you are sure going to maximize profits in the business.
5. Decide Whether to Buy a Franchise or Start from Scratch
When it comes to starting a business of this nature, it will pay you to start from the scratch as against buying a franchise. Besides, it is easier to start and run a car customization and modification garage from scratch to profitability without leveraging on a known brand name. People will patronize your services based your ability to uniquely customize cars.
Please note that most of the successful car customization and modification companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
6. Know the Possible Threats and Challenges You Will Face
If you decide to start your own custom car business today, one of the major challenges you are likely going to face is the presence of well – established custom car businesses whose products can be found all across the United States and the global market.
The only way to avoid this challenge is to create your own market perhaps concentrate on electric cars. Another major threat that you are likely going to face is economic downturn and unfavorable government policies. It is a fact that economic downturn affects purchasing power.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
When you are considering starting a custom car business, the legal entity you choose will go a long way to determine how big the business can grow.
You can either choose general partnership, or a limited liability company for your custom car business. But people prefer limited liability Company for obvious reasons. As a matter of fact, if your intention is to grow the business and have your customized cars across the United States of America, then choosing Limited Liability Company or even general partnership will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for sole proprietorships and general partnerships.
Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholder meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your custom car business; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and of course taxes.
If you take your time to study the various legal entities to use for your custom car business, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or ‘S’ corporation especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your custom car business so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company.
8. Choose a Catchy Business Name
You will agree that when it comes to choosing a name for your business, you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. If you are considering starting your own custom car business from the scratch, here are some catchy names that you can choose from;
- R Nelson® Car Customization and Modification Garage, Inc.
- Blueberry® Car Customization and Modification Company
- Car Nation® Car Customization and Modification, Inc.
- Trend Setters™ Electric Cars Customization and Modification Garage, Inc.
- Green Line® Custom Cars Garage, Inc.
- Lord Gabby® Custom Cars Garage, Inc.
- Auto Mike® Car Customization and Modification Company
- Mason Drillstock® Car Customization and Modification Co, LLC
- High Tech® Car Customization and Modification, Inc.
- Road Master® Custom Car Garage, Inc.
9. Discuss with an Agent to Know the Best Insurance Policies for You
In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your custom car business.
Here are some of the basic insurance covers that you should consider purchasing if you want to start your own custom car business in the United States of America;
- General insurance
- Auto insurance
- Health insurance
- Liability insurance
- Workers Compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
- Facility /Building insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
If at all there are any businesses that require intellectual property protection, then a custom car business especially as it relates to your design and models et al should be one of them. The truth is that your brand, design and your style need to be protected or else anybody can successfully fake or create similar products.
So, if you want to protect your unique design, your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
11. Get the Necessary Professional Certification
If you want to make an impact in the cars and automobile manufacturing industry, you should work towards acquiring all the needed certifications in your area of specialization. You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business.
Certification validates your competency and shows that you are highly skilled, committed to your career and up-to-date in this competitive market. These are some of the certifications you can work towards achieving if you want to run your own custom car business;
- Certificate in Automotive Technology
- Automotive Service Technology Certificate
- Vehicle Acoustics – NVH
- Certificate of Advanced Studies (CAS) Computational Fluid Dynamics
- Certificate IV in Automotive Mechanical Diagnosis
- Professional Program Certificate in Electric Cars (TU Delft)
Please note that you can successfully run a custom car company in the United States and in most countries of the world without necessarily acquiring professional certifications as long as you have adequate experience cum background in the Car Customization and Modification industry.
12. Get the Necessary Legal Documents You Need to Operate
The essence of having the necessary documentations in place before launching a business in the United States of America cannot be overemphasized. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own custom car business in the United States of America;
- Certificate of Incorporation
- Business License
- Business Plan
- Non – disclosure Agreement
- Employee Handbook
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Company Bylaws
- Memorandum of Understanding (MoU)
- Franchise or Trademark License (optional)
13. Raise the Needed Startup Capital
Opening a custom car business is indeed capital intensive. Securing a standard production facility, assembling machine and equipment are part of what will consume a large chunk of your startup capital. In essence you would need to source for fund to finance the business.
No doubt when it comes to financing a business, one of the first things you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for startup capital for your custom car business;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell shares to interested investors
- Applying for Loan from your Bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
14. Choose a Suitable Location for your Business
The fact that you are not expected to showcase cars customized and modified in your garage for sale directly to end users does not mean that location has little or no significant impact when it comes to the success of your business. The truth is that your choice of location when it comes to establishing a custom car business must meet certain requirements or else you will not get the approval of the regulating authorities in your state or country.
So, what you are expected to do before choosing a location for your custom car garage is to ensure that you visit the regulating authority to give you the requirements for such business before going ahead to settle for a location. Besides, you are expected to choose a location that is easily accessible, a location that is secured and a location with a good number of skilled and affordable workforce.
15. Hire Employees for your Technical and Manpower Needs
If you are considering setting up a custom car business, it means that you should be prepared to purchase equipment and machines such as industrial (power) screwing machines, forklifts and conveyor system amongst others. If you don’t have enough cash, you can start with fairly used equipment/machines but if you are financially buoyant, then you should go for brand new ones since they usually have a long lifespan.
As regards leasing or outright purchase of a plant or garage facility, the choice is dependent on your financial standings, but the truth is that to be on the safe side, it is advisable to start off with a short – term rent / lease while test running the business in the location. If things work out as planned, then you go on a long – term lease or outright purchase of the property.
When it comes to hiring employees for a standard custom car business, you should make plans to hire a competent Chief Executive Officer (you can occupy this role), Admin and Human Resources Manager, Sales and Marketing Manager, Plant Manager, Automobile Engineers in various areas of specializations, Electric Electronics Engineers, Quality Control Officer, Machine Operators, Accountant, and Client Services Executive. On the average, you will need a minimum of 8 to 20 key staff members to run a custom car business.
The Services Delivery Process of the Business
Operating a custom car business seems a complex process but it is a process that relatively runs on autopilot. Custom car garage may adopt the visual and performance characteristics of some relevant modification styles, and combine these as desired.
Usually, when a customer brings his or her car to be customized, depending on what the customer has in mind, the process usually involves altering or replacing the engine and transmission; made into a personal “styling” statement, using paint work and aftermarket accessories to make the car look unlike any car as delivered from the factory; or some combination of both.
The process also involves swapping headlamp rings, grilles, bumpers, chrome side strips, and taillights as well as Frenching and tunneling head- and taillights. The bodies of the cars can be changed by cutting through the sheet metal, removing bits to make the car lower, welding it back together, and adding lead to make the resulting form smooth.
After the car is fully customized and modified and assembled, then the car will be subjected to various tests via the quality and safety control unit in order to ensure that the cars coming out of the plant meet the expected standard.
16. Write a Marketing Plan Packed with ideas & Strategies
Running a business requires that you should be proactive when it comes to marketing your goods or services. If you choose to launch a custom car business, then you must employ strategies that will help you attract customers or else you will likely struggle with the business because there are well – known brands that determine the market direction for this industry.
Customers will bring their cars to be customized and modified in your garage if they know that they are going to get the best in terms of comfort, durability, quality and value for their money. As a matter of fact, your marketing strategy will center on quality and pricing, and above all excellent customer service.
The truth is that, if you are able to put the above stated in place, you won’t struggle to retain your old customers and at the same time win over new customers. Businesses these days are aware of the power of the internet and which is why they will do all they can to maximize the internet. These are some of the marketing ideas and strategies that you can adopt for your custom car business;
- Introduce your cars by sending introductory letters alongside your brochure to corporate organizations, businesses in the auto retailer industries, transport companies, households, celebrities and key stake holders throughout the United States and Canada.
- Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
- Creating a basic website for your business, so as to give your business an online presence
- Directly market your cars via your various showrooms across the nations
- Advertise our business in community based newspapers, local TV and radio stations
- List your business on yellow pages ads (local directories)
- Encourage the use of Word of mouth marketing (referrals)
17. Work Out a Reasonable Pricing for your Services & Products
One key factor that will help you sell your customized cars at a competitive price is to ensure that you source your materials and parts from trusted and affordable companies, cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name.
Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your cars. You can also try as much as possible to work with independent contractors and marketers; it will help you save the cost of paying sales and marketing executives.
18. Develop Iron-clad Competitive Strategies to Help You Win
The quality and uniqueness of cars customized and modified in your garage, your business process and of course your pricing model are part of what you need to stay competitive in the industry. If middlemen are making profits from working with your garage, they will be more than willing to help you push your custom cars to every nooks and crannies of the cities they have their business network.
Another possible competitive strategy for winning your competitors in this particular industry is to build a robust business network especially with auto assembling plants. Over and above, ensure that your organization is well positioned, key members of your team are highly creative and your custom car brands favorably compete with the some of the best in the industry.
19. Brainstorm Possible Ways to Retain Clients & Customers
When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps to attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your services delivery, they can hardly source for alternative service provider or products.
Statistics has it that one of the major reasons why clients source for alternative service provider or product is when there is a drop in quality. Another reason is poor customer service. If you can continue to improve on the uniqueness and quality of your custom cars, your customer service delivery and after sale maintenance, then you won’t struggle to maintain loyal customers.
Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers, and building loyal clientele base, you should purchase a customized CRM software.
With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).
20. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
If you are in business and you are not deliberate about boosting you brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend fortunes year to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them to be.
If your intention of starting a custom car business is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
No matter the industry you belong to, the truth is that the market is a dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand awareness and create a corporate identity for your custom car business;
- Place adverts on both print (newspapers and automobile magazines) and electronic media platforms
- Sponsor relevant community based events/programs
- Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your business
- Install your Bill Boards on strategic locations all around your city or state
- Distribute your fliers and handbills in target areas
- List your custom car business in local directories yellow pages
- Advertise your custom car brands in your official website and employ strategies that will help you pull traffic to the site.
- Ensure that all your staff members wear your branded shirts and all your vehicles are well branded with your company logo et al.