Regardless what industry they’re in, business owners of all stripes are constantly thinking about two things:
If you can do both of these things at once, you’ll prime yourself for success.
Consider the owner of an HVAC company that serves the Las Vegas region of Nevada. This business owner is responsible for the upkeep and maintenance of more than fifteen utility vans that are constantly on the road, servicing customers, delivering much-needed equipment, and more.
Over time, these vehicles are going to inevitably require routine maintenance. Things like oil changes, belt replacements, and other preventative maintenance are a high priority for this company. Having even one of these vans out of commission could mean missed revenue.
Furthermore, these vans need to be cleaned out and disinfected on at least a weekly basis, adding yet more need for off-the-road downtime just to maintain operations.
So, at what point does it make sense for the business owner in this scenario to invest in an auto shop that can be used as a central HQ for the service and upkeep of his vehicles?
Let’s run some quick numbers to see just how good the business case is for this Nevada-based fleet owner to buy an auto shop of his own.
The average revenue produced every day by each one of his fifteen utility vans is $1,100. That’s $16,500 per day if all of his vans are in full operation.
The operating cost involved in running this fleet includes things like paying the leases on the vans, the salaries of the companies HVAC technicians, gas, insurance, and more. This all adds up to about $450 per day.
The gross profit, then, of this Nevada-based HVAC company, when operating at full steam with all utility vans on the road, is $9,750 per day. However, it’s virtually never going to be the case that all 15 of his vans are going to be in operation every single weekday.
Some are going to need service, eventually. And, this is where things get interesting as we consider the value that owning a dedicated auto shop can provide.
Even a one- or two-car garage with sufficient equipment can help to keep this fleet on the road for as many days out of the month as possible.
But, obviously, it’s going to cost money to build. Thankfully, steel buildings like those available from General Steel and other suppliers can be erected incredibly quickly, and the costs can be driven down even further by only selecting the most necessary building features (things like overhead doors, horizontal sliding windows, and more).
We’re going to use a construction estimate of $25,000 as the cost to build a well-appointed, two-car garage that will be outfitted for use as an auto service shop.
[We’re not going to dive too much into costs like mechanic salaries and utilities, as these costs are too variable for our exercise, here. Instead, it will suffice to say that a part-time mechanic and a fairly reasonable utility expense will be fairly easily absorbed by the HVAC company in question.]
If this business owner were to send his vans to a typical service shop for routine maintenance, detailing, and other services, he’d be looking at, at minimum, a full day off the road as well as an average expense of ~$350 per van, per day.
However, this expense could easily be reduced to about $125 if he used his own, dedicated auto service shop to meet the needs of his fleet.
So, at the end of the day, after having made an initial investment of $25,000, the business owner is going to realize a cost savings of $225 per van, per maintenance instance.
Considering the fact that each van needs maintenance at least twice a month, these cost savings add up to $6,750 per month.
At this rate, the business owner will more than have paid for his new steel building in as few as four months of operation.
That’s real savings thanks to steel!