Opening a panelbeating business
Provided by Business Partners Ltd, South Africa's leading investor in SMEs
Before taking this big step, the entrepreneur must weigh his options in terms of buying an independent business and taking on all the risk, or buying into a franchise with an established brand and support from the franchisor.
In some cases, it is easier to get finance for a franchise and endorsement from insurers. But there are also initial and on-going fees, and rules to follow, when owning a franchise.
Research must be done to figure out what the best option is for the entrepreneur, his pocket and his goals.
The panelbeating business is highly technical and the entrepreneur should have both the training and experience needed to run a successful panelbeating business, especially if he is going to do most of the work himself.
He will probably end up managing other skilled people, but the best way to build a quality business is to know first-hand what needs to be done. This will stem from years of experience working in a panelbeating workshop.
A panelbeater must know the motor vehicle industry well, be enthusiastic about cars and fixing them. It is important for him to keep up with new techniques, equipment and paints, so he must be a keen and quick learner. He will also have to:
- Communicate well with a wide range of people - from staff to suppliers, to a prospective customer.
- Be customer-focused, to explain how a job is to be done, and to justify the cost estimates to customers.
He must have a good head for figures, as he must be able to assess how much damage has been caused to a vehicle and what it will cost to repair. The quote will need to include the new parts, the materials and the amount of labour needed.
It can be a difficult and expensive business to establish and the entrepreneur may not 'break even' for some time. He must be determined to succeed and willing to persevere when trying to get contracts from large fleet managers and insurance companies.
The entrepreneur‘s integrity as a craftsman and fair dealer will be vital to his success.
Location of the business is key. As part of his market research, the entrepreneur must establish what it will cost to rent premises in the chosen area and whether he can afford it. The workshop must be within easy reach and clearly visible to a high concentration of vehicles, as much of his business will come from passers-by.
Besides having adequate room to work, there must also be a place where all the tools, machinery, spare parts (and the vehicles) can be stored. If there is a lot of renovating and upgrading to be done before the entrepreneur can start operating, then perhaps he should consider finding another workshop space.
The entrepreneur must make sure that the premises is zoned for business usage. The landlord should have a zoning certificate or one can contact the local municipality.
The biggest expense when setting up a panelbeating shop is the premises and the equipment.
The premises must be large enough for one or two vehicle bays with good roof height to enable the use of a car lift. The entrepreneur must consult with the landlord and the local authority if he is going to make changes to the building.
Standard body shop equipment will include anything from vehicle lifts and jacks, to spray-painting equipment. Protective equipment and clothing will be needed to make the workshop as safe as possible. This will include facemasks, respiratory masks, safety goggles, protective gloves, overalls, ear protection and hard-capped boots.
Office equipment will include a computer and printer for estimating, invoicing, correspondence and generally keeping track of the accounts. The entrepreneur may also consider buying specialised software for estimating vehicle repair costs.
Finding employees with the relevant skills is very difficult in this industry. Much of the work is specialised and needs employees with both expertise and experience. This skilled labour comes at a price and makes staff remuneration the biggest monthly overhead the business will have.
Minimum wages for the industry, labour issues or disputes are handled by the Motor Industry Bargaining Council (MIBCO). There are also social security funds to which both employers and employees must contribute. More info: www.mibco.org.za
IMPORTANT NOTE: All certified body and paint technicians should undergo training on a regular basis to ensure that their skills and knowledge of new technology/processes is kept current. Customers also feel more assured when they see the staff’s credentials mounted on the walls in the reception area.
Regulations, licenses and permits
Regulations the business must comply with include, but are not limited to the following:
Licensing and Registration: The business must be registered with the District Municipality. The licensing department requires reports from the health and fire department and town planning, who will check that the business meets health and fire regulations and that the proposed premises are in an area zoned for business.
Permits: If the property is being leased, the Local Municipality will require a letter of consent from the owner, giving the lessee permission to trade from the property. Road signs are approved by the Facility Signs Committee in the Provincial Department of Transport for secondary roads; Local Municipal Engineer for local roads.
Taxes: If the business is registered as a CC or company, the business has to pay tax on its profits. The employer must also deduct Standard Income Tax on Employees (SITE) and Pay As You Earn (PAYE) from his employees’ salaries, and pay this to the South African Revenue Services (SARS).
Labour Laws: The entrepreneur must be registered as an employer with the Department of Labour, and make contributions on behalf of his employees for Unemployment Insurance (UIF) and Workmen’s Compensation. As an employer, he has to comply with the Basic Conditions of Employment Act (see www.labour.gov.za), which regulates working hours, overtime, leave, deductions, etc.
Occupational Health and Safety: The Occupational Health and Safety Act dictates that the workplace be both safe and healthy for workers. This is extremely important in a panelbeating business where employees are operating heavy machinery and dangerous tools, and are exposed to harmful chemicals.
Staff must receive safety training on a regular basis (e.g. first aid, how to use the fire extinguisher, where to shut the electricity mains off) and be provided with all the necessary safety equipment and clothes. There should be a policy on how chemicals are to be used, labelled and stored. The shop should also have a functioning eye-wash station in case of emergency.
Renting Business Premises
Most small panelbeaters will rent their workshop space. Leases usually come in a standard format and are geared towards protecting the landlord’s interests. The entrepreneur should, therefore, read the terms and conditions carefully and challenge any provisions he consider to be unfair or prejudicial to himself.
Signing a commercial lease is a major financial commitment and getting into a bad agreement can be crippling.
There is a lot of liability in running a panelbeating workshop, so having the right insurance is very important. The relevant insurances include (but are not limited to):
- General or public liability insurance is what most businesses use as protection from being sued if bad things happen to a customer while on the premises.
- Employer’s Liability provides a pay-out in the event that an employee is hurt or incapacitated on the job.
- Commercial property insurance will cover losses or damage from weather, fire, vandalism and theft.
- Building contents should be insured, especially the expensive equipment crucial to daily operations.
- Machinery breakdown will cover damage to equipment due to staff negligence or short circuits.
- Theft cover insures the business contents against loss or damage after forcible entry/exit to the building, including in the event of an armed robbery.
- Loss of business insurance is specifically designed to help recoup losses of sales due to a specific cause, e.g. machinery breakdown.
- Money cover that insures cash contained on the premises during business hours, after hours and while the cash is being transported to the bank.
- Employers must contribute to the UIF and Workmen’s Compensation Fund.
- Comprehensive vehicle insurance is a must for company vehicles.
Panelbeating businesses without an established track record will have to do aggressive marketing or promotions to attract customers. He needs to promote his business directly to consumers, including insurance companies, car companies and vehicle retailers.
The business should be registered in as many online databases (e.g. the Yellow Pages online) as possible, as this is how many consumers search for services they need. There are even service or repair-related directories where one can be listed, e.g. www.panelbeatersdirectory.co.za, www.assist247.co.za and www.easyinfo.co.za.
The entrepreneur can try advertising in the local paper, leave business cards with prospective customers and at servicing garages and spares shops. Getting involved with local community events also makes the business more visible to potential customers.
An important part of the marketing strategy should be to reach the standards set by the South African Motor Body Repair Association (http://www.sambra.co.za/) so that he can apply for accreditation under their National Grading and Certification System.
Panelbeating is an industry where there is a demand as long as there are cars on the road. Having said that, competition in the industry is fierce and it is very difficult to compete on price. So the entrepreneur will have to ensure that:
- His work is impeccable and the customer leaves happy with what was done
- Customer service is excellent
- He stays up to date with current trends, new machinery and new ways of doing things
- He knows what his competitors are doing
- Has good relationships with a number of reliable suppliers who will get him what he needs quickly, at reasonable prices and grant him payment terms
An entrepreneur who is passionate about what he does is already halfway to running a successful business.
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