Diyers and car audio enthusiasts can dream about owning their own business? But what are the realities? We spoke with a variety of owners to discover what it takes to open your own mobile electronics business.
The Setup
We've broken down four basic types of shops: Retail-driven businesses rely upon selling merchandise. These shops do less custom work and more OE swaps. They're competing against bigger chains that can sell and install products at cheaper prices. The custom shop takes care of everything you'd need whether it would be custom or a simple speaker swap. Sounds Good Stereo in Woodland Hills, CA, does installs that average between $6,000 and $6,500. Owner Isaac Goren says his clients are, "people who value good workmanship. They expect very high customer service."
Taking another route are the niche outfits, which cater to a specific group, such as Jeff Smith's Audio Designs of Atlanta in Stockbridge, GA. In addition to doing OE-style installations, he does a good deal of custom work as well. "We also have created a niche for custom fabrication and SQ competition cars." He explains that, "Other shops in our area don't have the desire and skill to offer an alternative to the normal deck and four with a prefab box."
At the top of the heap are those high-end stores, the ones whose clients have lots of money and are willing to spend it. "Ninety percent of my clientele are athletes, celebrities, rappers, singers, producers, all kinds of stuff. An average price would probably be between $10,000 to $15,000," says Raul Becerril of 405 Automotive Group in West Los Angeles, CA.
Raiding Your Piggy Bank
Try to imagine all the factors that go into opening your own place. You'll be surprised by all the hidden costs. "Employee tax wasn't something I expected to be so high. It's 22 to 26 percent. Workers' comp was cheaper - only $1.26 per employee," reveals Jason Kranitz of KingPin Car Audio and Motoring in Portland, OR. "Your basic utilities - your phone, your heat - business costs are three times as high." Kranitz half-jokes that he could write a book about all the expenses you have to consider. Do your research, he advises.
Different business owners have different opinions about what you'll need and how much it will cost to get started. "It's important to know what you have for the initial investment. You need to spend at least 50 percent toward the shop, the layout, the equipment, the tools. Twenty-five percent should be spent on the security, phone systems, convenience, stock rooms, the last 25 percent should be spent on the showroom," states Goren. He suggests that you would need around $60,000 to $100,000, definitely no less than $50,000.
Another estimate comes from Eric Holdaway of SpeakerWorks in Orange, CA. "To be properly capitalized, you should have at least $350,000 lined up. It is very hard to succeed without the proper capital backing your endeavor." In today's market, it can be difficult to start a shop from the ground up. If you can afford it, Goren suggests buying or becoming a partner in an existing shop whose owner wants to get out of the business.
Getting Gear
Stocking merchandise should be easy enough, right? "Find the companies that offer the brands you want and call them," Holdaway says. Unfortunately, "you will find that all of the cool brands are taken, and you will need to get in line, so get in line." Al Patel, a rep with Pacific Coast Marketing, offers more insight. "A larger company will not take a chance with you even if you pay up front because they want to see what's going to happen in the first year of your store ... The first two years are the most volatile years."
Instead, you'll have to become a dealer for smaller brands. "Primarily, all manufacturers have their minimums to become a dealer and they're usually anywhere from say 3,000 to 10,000 depending upon how big the brand is," Patel reveals. He and others suggest selling a house brand and supplementing that brand with a variety of products from authorized distributors.
At the same time, don't focus too much on stocking up on inventory. You shouldn't spend all your money on product. Goren advises spending 75 percent of your budget on installation material as well as accessories and 25 percent on actual product. Budgeting is very important, but the chief thing to remember, Patel says, is to focus on the services you provide. "Don't sell the brand because ultimately if you try to sell the brand, the cheapest place will win."