How to Write an Oil Change Business Plan

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One of the first steps to making your oil change business (or any business for that matter) succeed is getting it on paper. A business like this will likely require a loan to cover startup costs and exhaustive research into location and demand strategy, and the place to document all of these how-tos will be your business plan.

Writing a business plan is critical to the success of your oil change business.  Writing an oil change company business plan can be intimidating for the first time, but we have tips to help you get started on the right path.

Why is a Business Plan Important?

While many people write their oil change business plan for the purpose of funding, the business plan can offer many more benefits.

You have likely already spent a lot of time thinking about your oil change business, but it’s next to impossible to stay organized and reach all of your goals by not writing them all down. It’s very difficult to have a clear vision until you put those thoughts on paper, and that’s where the business plan comes in.  Creating a business plan provides a blueprint to connect all the dots and make your vision a reality.

Another point to encourage you in writing your business plan is that the Small Business Administration shows that over 21% of small businesses fail in the first year, and 50% fail in the first five years.  Some of the more common reasons for business failure include not starting with enough money, lack of planning, and overestimating revenue.  The business planning process can help identify these issues, which can help reduce costly mistakes after opening.

The business plan is also important because of the critical feedback you can get on your venture.   It’s very common for new entrepreneurs to be overly optimistic when starting their business and blind to what they don’t yet know.  Having another business owner, consultant in the industry, or accountant look over your plan will provide critical feedback to find weaknesses in the plan. Getting these insights and fixing the plan before taking it to a lender or investor increases the likelihood of having a successful business and receiving funding.

Taking the time to write a business plan is not something many prospective oil change business owners want to do because it’s unfamiliar and takes time. Keep in mind, though, that writing a business plan is nowhere near as hard as running an oil change business, especially one that wasn’t properly planned from the start.

What Goes in a Business Plan?

There isn’t a set format that business plans are required to use, however, there are certain topics that need to be covered. Below we have an oil change business plan outline that should be helpful in getting started.  However, since this is your plan, write it the way that makes the most sense for your business and the intended reader.

Executive Summary

The executive summary is included at the beginning of a business plan but will be the last thing written.  This section should be a clear, concise, and high-level overview to help the reader (often a lender or investor) quickly decide whether or not your project is one they will continue reviewing.  If they aren’t engaged after reading the summary, they will not likely read further, so it is important to quickly generate interest.

Common elements of an executive summary for an oil change business plan includes:

  • Overview of your XYZ
  • Why an oil change business is needed in your area
  • Location
  • Experience of the owner(s)
  • Amount being requested
  • How much the owner(s) are investing
  • What the money will be used for

Business Overview

The business overview section of an oil change business plan provides details of what the business is going to do. If you are using the plan for funding, you will have the opportunity to tell the loan officer all the great things you plan to do.  However, the plan will likely be going to a loan review committee who won’t get to hear your story, so be sure to get all the important details on paper! It’s especially important to show the excitement you have for the business and knowledge of the industry.

For an oil change business, some key components of the business overview include:

  • A snapshot of the overall business concept and business model
  • A brief overview of products and services, including:
    • Core products and services like conventional oil changes, semi-synthetic oil changes, full synthetic oil changes, and diesel oil changes,
    • Add-on products and services such as oil change upgrades, car washes, and cleaning services, and other scheduled maintenance and preventive services such as tire rotations, wiper blade replacement, air filter changes, transmission flushes, and vehicle alignment
  • Assets  required to bring the business to life, including human resources and physical resources such as:
    • Facility
    • Facility buildout to suit the specific needs of an oil change business
    • Parking
  • Financial resources required to bring the business to life, including:
    • Which financial resources are required in dollar amount
    • From where ownership intends to obtain these funds, and
    • How these funds will be used across the business model to fund the startup
      • For example: If your oil change business start requires $15,000, demonstrate how these funds will be allocated among your initial investments, including buying or leasing of the space, the price of buildout, inventory, equipment, marketing, personnel plan, IT systems, professional services, and any other miscellaneous startup expenses.

Another important aspect of this section is to answer why this oil change business is needed.  Describe what makes your oil change unique among all the other oil changes in your area and why people will go to you versus the competition.

The owner of a successful oil change service needs to establish a competitive advantage, or what makes this particular business unique, better, or different from the competition, especially if competition exists nearby. A successful competitive advantage will be keenly attuned to what the customer wants and needs from this service, including these specific demand trends in the oil change industry:

  • Quality Service
  • Flexibility with Price
  • Proximity to Key Markets
  • Good Reputation
  • Convenience, Speed, and Access

Industry Overview

The industry overview section should describe the overall market for oil change businesses and the overall automotive industry, which creates a direct link between automotive purchasing and oil change service demand. If national sales trends aren’t increasing, try to find positives that support the decision to open your oil change, such as economic conditions and trends that support future industry improvement.

Examples of key economic indicators may include the following:

  • The prospect of improved disposable income per capita,
  • The prospect of decreasing unemployment,
  • The lowering world price of crude oil,
  • Increased motor vehicle production and registrations,
  • Higher total vehicle miles,
  • Higher average age of American vehicles, and
  • Increased travel.

The more supporting data you can come up with to support the strength of the industry, the better, but be sure to reference where you got this information.  A lot of industry information can be found with an online search or through industry associations, but if you haven’t already, take a look at our Guide to Starting an Oil Change business.

Company Ownership

Indicate the legal entity of the oil change and how ownership is structured.  If you aren’t sure about the differences between a sole proprietorship, partnership, corporation, or Limited Liability Company (LLC), be sure to check out our article comparing the different business entities.

Location

Discuss where your oil change will be located and why this location is desirable.  Make note of proximity to the following keys to success:

  • Proximity to the target market where they live, work, or shop,
  • Proximity to major thoroughfares, intersections, and highways,
  • Traffic patterns and density,
  • Proximity to complementary businesses such as grocers, fast food restaurants, and superstores,
  • Ease of traffic flow and access, ample parking, and a waiting area depending on whether the oil change is a quick change or not.

Location is always important but is uniquely essential to decision-making when opening an oil change service. Convenience, quickness, and value are key components to making an oil change business work, and these components tie in tightly with location selection.

Learn more about location selection.

Permits and Licenses

Before opening a new oil change, you’ll need to obtain several federal, state, and local licenses and permits.  Common licenses for an oil change business may include the following:

  • Federal – no federal licenses or permits apply for an oil change business
  • State & Local
    • Register Business Name – search for and register your business entity and name on your Secretary of State website.
    • Apply for an Employer Identification Number (EIN) / Tax ID Number – this process takes place on the IRS website.
    • Various state and local permits and licenses will vary widely and depend on where the oil change business will be located. According to the SBA, you’ll want to check with your governing state, county, and city to see which specific licenses and permits may apply. Start with the state’s commerce website or Secretary of State. You may need to obtain:
      • An Occupancy Permit
      • Sales Tax Permit
      • Payroll Tax Registration
      • Unemployment and Worker’s Compensation Registration

Learn more about licenses and permits for a new business.

Owners, Management & Employees

Owners

In this section, include a brief biography of the owners and their professional experience and education.  This section is especially important when looking for funding as a lot of weight is placed on the experience of the owner(s) and their ability to run an oil change business successfully. If the owner(s) don’t have direct industry experience, explain how their previous experience is relevant.

Employees

If there will be any employees, including information about staffing to detail what positions and how many people are needed to run the oil change.  Include the title of the position, the number of people needed for each position, hours needed per week or month, and the wages for those positions.

Milestones

Include a timeline of milestones already achieved and those that are being worked on.  By having a timeline, you will have a list of the sequence of when critical tasks need to happen.  

Marketing

The competition for oil change businesses is high, and business growth will continue to increase at an annualized rate of +0.6% through the year 2025. It is a competitive environment, and the number of ways to market keep expanding.  Without a solid plan to get the message out about your oil change service, it may be hard to get customers to patronize your oil change over another.  Getting noticed in the market is critical, so what will you do to get the message out and make your oil change business stand out?

The marketing section is one of the most important sections of the business plan but is often not given the time and attention to detail as it needs. Why is it so important?   Because your business needs customers to spend money and without sales, there is no business.  Without knowing who your customers are and how to reach them, they may never hear about your oil change.

Some key areas of the marketing section for an oil change business may include:

  • Target Market
  • Promotional Strategy
  • Competitive Analysis

Target Market

The first building block in the marketing plan is defining the target market.  A target market is a group or groups of people most likely to benefit from a company’s offerings.  A target market shares similar characteristics such as demographics (age, gender, education, or income), interests (sports, hobbies, lifestyle, or values), or geographic areas.  Don’t think of targeting a specific group as excluding people and limiting business potential.  By defining your target market, you are able to more effectively spend your marketing budget by specifically going after the people who are most likely going to need oil changes.

After defining who your target market is, try and find numbers as to the size of this target market population.  You can find this information, along with other market and trend data on industry association websites such as the Automotive Oil Change AssociationNational Oil & Lube NewsLubes’N’Greases, and the US Census Bureau. Having actual data and statistics in your business plan lends credibility and will help to form the basis for the sales projections we will work on later.

Promotional Strategy

After defining the target market, the promotional strategy comes next.  The promotional strategy looks at how to best reach your target market.   By knowing your target market, assumptions can be made on how to best reach them by focusing on their media preferences.

When preparing this section, make sure to have a solid plan on how you will generate attention through the various marketing channels like print, radio, social media, website, etc.  Be sure to get actual costs for marketing to use in the financial projections later in the plan.

Competitive Analysis

The competitive analysis section will provide an overview of the competition in your area and why you believe people will choose your oil change over them.  You will likely focus on other oil changes, but don’t forget to look at indirect competition such as general automotive maintenance centers, tire retailers, warehouse clubs, and auto dealerships. These operations are relevant competitors as they typically have strong reputations and high-quality customer service.

You should list how many oil change businesses are in a nearby radius and focus your analysis on the top 3-5 competitors.   The purpose is to research and show you understand the competition and what gives you a competitive advantage.

Some of the key areas to look at in a competitive analysis include:

  • Competitor’s name
  • Location
  • Years open
  • Pricing
  • Features
  • What they do well
  • What you will do better

This is not the place to bash your competition or make references to how terrible of a person the owner is since this is subjective. Doing so also makes you look unprofessional.

Financial Projections

The financial projections of your oil change business plan are a critical component of the plan but are often the most intimidating.  Typically, lenders and investors will read the executive summary first to see if it is a project they would be interested participating in and then jump right to the projections.  If the thought of preparing your own financial projections is a bit daunting, software such as LivePlan helps make it easier.

Sales Projections

Sales projections can be complicated to estimate without market research, benchmarking competitive data, and a reasonable pricing strategy.  There are a number of ways of estimating sales for an oil change, but you will want to refer back to your target market research that was done earlier to support your assumptions.

This is a common place for new business owners to be overly optimistic and is where having a mentor or consultant help review the plan is helpful.

Read our article on creating sales projections for more information.

Seasonality

When looking at sales projections, the effects of seasonality also needs to be evaluated.  Seasonality is more significant in some businesses than others. It is important to estimate because it can show in the financial statements whether a business is projected to run out of money.

Simply dividing sales by 12 months is a common mistake picked up by lenders and investors because it shows the entrepreneur may not really understand the sales trends for the industry.

Local markets will vary, but oil changes are not a particularly seasonal business. The economic indicators referenced above are more likely to determine the flow of patronage much more than seasonality, as oil changes are generally considered to be a necessary maintenance service for motor vehicles.

Expenses

A list of expenses will also be needed in the business plan.  Not only will you have expenses directly tied to the service (such as oil filters, antifreeze, windshield washer fluid, air cleaners, transmission fluid, brake fluid, etc.), but also monthly costs like business insurance, marketing expense, rent, employees, etc.

Uses of Funds

Start off with a section for the Use of Funds to show the total cost of starting the oil change business.  List any costs you have already incurred and what still needs to be purchased.  You don’t need to itemize every little item like printers, phones, and stacks of paper, so combine the cost of all similar items and list them.  For example, printers, phones, and stacks of paper would be lumped into the general expense category of “Office Supplies.”

It’s important to have quotes for everything should the bank or lender request them, but only add quotes for the more expensive items such as renovations as attachments in the Appendix.

Total up the Uses of Funds to find the total cost of the project

Sources of Funds

The Sources of Funds section breaks out where the money is going to come from.  The owner’s investment is commonly listed first.  Most lenders are going to want to see the owner(s) put in between 15% – 25% for a new oil change business.

Other funding sources are listed next, such as bank loans, investor funds, etc. Learn more about finding financing for your oil change business.

The total amount in the Sources of Funds should match the Uses of Funds.

Financial Statements

There are three primary financial statements that a lender is going to look at for a start-up oil change business, which includes the cash flow statement, profit and loss statement, and balance sheet. The information provided previously in the narrative portion of the business plan must match the financial projections.

Cash Flow Statement – The projected cash flow statement is an important tool when starting a business. Similar to a checkbook register, the projected cash flow statement shows an estimate of the money coming into the business and expenses that will need to be paid.  The benefit of this statement is to see whether there is enough cash to sustain the business based on the assumptions.  Should this number be negative, the assumptions need to be reevaluated to see if sales can be increased, expenses reduced, or if more cash is needed to start the business.

The cash flow statement is typically structured to look at three years in the future, with the first year broken out by month and years two and three broken out by quarter.

Profit & Loss Statement – This statement (sometimes called a P&L statement or income statement), while similar to the cash flow statement, shows the annual income and expenses of the oil change.  The projected profit and loss statement is often displayed annually and takes a before-tax view of the financial results of the business.

Balance Sheet – The projected balance sheet statement is not requested by all banks when reviewing a new oil change business loan. A projected balance sheet shows the projected assets and liabilities for a business at start-up and then the end of each year.

Personal Financial Statement

If applying for bank financing, a personal financial statement will typically be needed for every person with a 20% or more ownership position in the business.   This statement is similar to one that is used to apply for a home or car loan.  Here is a link to a personal financial statement template.  The personal financial statement will show a borrower’s assets (checking & savings accounts, CD, IRA, 401K, valuables, home, vehicle, etc.) as well as assets (mortgages, credit card bills, installment accounts, etc.).

Conclusion

As we’ve established, the oil change business features many nuances, intricate investment planning, and careful attention to quality service, price flexibility, location selection, proximity to key markets, good reputation, and convenience, speed, and access. By documenting your plan, you’re proving your

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