Business plan

[tbourner]

So we've been thinking about getting a second car cos the Accord is pretty expensive for commuting and shopping and stuff. Trouble is we can't really afford another car at the moment.

 

So I came up with a plan, which I was sort of looking at doing at some point anyway, and that's to become a driving instructor.

I'd only be doing it part time, so I'd keep my job as an Engineer. This is good because according to my calculations I'd only need to do 8 hours a week to pay for the loan on the second car (including everything required for driving tuition).

 

Problems I can see are:

1. I don't know much about advertising, gonna ask my dad (salesman) and my brother (marketing degree), I have no idea how to get students into the car.

2. If someone wants a lesson at 3pm, like when college finishes for example, I won't be able to, I'd only be able to do 5pm or weekends.

 

The biggest problem is obviously that it's a lot of money going into it, and if I don't get any customers I'm stuck trying to pay it off!!

 

So what does everyone think? There are loads of driving instructors around now cos of all the Red adverts!! But most work for BSM and Red and the AA, who all charge £20+ an hour, so if I'm charging £15 ph I should do alright?

[Havard]

Very competitive market..!!

 

Personally it's not something I would consider.....

 

H.

[Ace]

The following might be worth a look:-

 

http://training.go-red.co.uk/index.aspx

 

The phrase to note is "freedom to choose your own working hours" - fits the bill for you, precisely.

 

I know of a few people who have had lessons with Red instructors, and they were lucky enough to be taught by some honest, mild mannered people.

 

I rate you for thinking about it though - I can imagine you'll need the patience of a saint, and nerves of steel.

 

EDIT: ignore this completely, I was too busy trying to be helpful to read your original post correctly. My bad. The bit about patience and nerves is still true though.

[jacko]

I've thought about this quite a few times too

[ilicos]

You have to rememeber that even though your hours may be less, your Overheads will be much the same.

 

Consider this:

 

Insurance - Fixed cost

Loan repayments -Fixed costs

Servicing - Semi-variable depending on miles/Months

Fuel - Variable

Road Tax - Fixed

Professional subscription (if any) - fixed.

 

This basically means that you will have to work out the amount of hours that you will need to work before you have broken even. By reducing your charge-out rate that drastically you are only forcing yourself to work longer hours to reach that break even point.

 

If you need any more info or want me to put something together for you to get a better idea of what you should expect then drop me a pm.

 

Ilias

[tbourner]

The training side of it isn't the problem, I think I'd be good at it, it's whether I can actually get students into the car in the first place that worries me!

 

I've heard of a lot of 'red' employees who only manage to get about £14k a year full time, because there are so many people doing it now!! So I wouldn't do the training through them. Hence the idea to get my licence off my own back and get my own car and charge a better price and give a better service!

[tbourner]

You have to rememeber that even though your hours may be less, your Overheads will be much the same.

 

Consider this:

 

Insurance - Fixed cost

Loan repayments -Fixed costs

Servicing - Semi-variable depending on miles/Months

Fuel - Variable

Road Tax - Fixed

Professional subscription (if any) - fixed.

 

This basically means that you will have to work out the amount of hours that you will need to work before you have broken even. By reducing your charge-out rate that drastically you are only forcing yourself to work longer hours to reach that break even point.

 

If you need any more info or want me to put something together for you to get a better idea of what you should expect then drop me a pm.

 

Ilias

 

See what you think of the attached, I think I've covered everything in there.

 

I've put some cars on the 3rd sheet, and there are a couple of Macros that add the data into the 'data' sheet, and also a Macro that updates the 'margin' sheet with any new info.

 

Like I said, it suggests I'd need to do 8 hours a week to cover the loan repayments.

[Dozymare]

I'm sure you've already looked but this lot do info packs

 

http://www.driving.org/

 

So it's £80 for the ADI test plus annual renewal. Motor insurance will be pricey, some kind of public liability insurance, costs of training to get through the test and possibly retests (apprently the pass rate is 32%). I can't think you'll get much change out of £2000 all in excluding the car. At £15 (less tax of course) that's 167 lessons. You can only do evenings and weekends so assuming you want to have at least one night a week off you could do maybe 7 lessons a week. That's 5 months just to recoup your qualifying fees not allowing for the time needed to build the buisiness up so probably more like 8-12 months and you haven't even started paying towards the new car.....and you need to add on advertising costs - yellow pages charge around £500 a year for example and it's where most people look. And accountants fees, around £300 for your annual tax return.

And we are entering a particularly viscious recession.

 

There you go - instant business plan!

 

And if I were you I wouldn't do it.

[Ace]

And if I were you I wouldn't do it.

 

That sounds like a business plan all in itself

[tbourner]

That's 5 months just to recoup your qualifying fees not allowing for the time needed to build the buisiness up so probably more like 8-12 months and you haven't even started paying towards the new car

 

Yes, but this is primarily to pay for our second car, not to build up a business! Using the second car will also advertise the school if I put vinyls on the side.

If the business does work and I make some profit on top then great.

[Dozymare]

By build the business up I mean get up to 7 pupils a week that can fit into your hours!

 

Another point, I know the days are getting longer again now but your plan covers 5winters. Do you really think an absolute learner and adverse weather/night driving is a good mix? This could limit your earnings between October and March each year.

[Mike]

Would an 'L sign for roof' really set you back £100? is that the going rate? why not cut costs by fashioning one out of wood?

[ilicos]

See what you think of the attached, I think I've covered everything in there.

 

I've put some cars on the 3rd sheet, and there are a couple of Macros that add the data into the 'data' sheet, and also a Macro that updates the 'margin' sheet with any new info.

 

Like I said, it suggests I'd need to do 8 hours a week to cover the loan repayments.

 

This is more of a cashflow budget rather than a profit and loss budget. By charging £18 ph, estimating you mpg at 40 mpg which is slightly more realistic, charging £50 pm advertising, considering 1 month holidays, ignoring the loan repayment and only taking into consideration the interest and then ignorining tax and NI, you are looking at breaking even every month cash-wise with £135 pm profit. (This will be eaten up by loan capital repayment and Tax and NI.)

[tbourner]

Another point, I know the days are getting longer again now but your plan covers 5winters. Do you really think an absolute learner and adverse weather/night driving is a good mix? This could limit your earnings between October and March each year.

Hadn't thought about the seasonality of it really, but I would think people want lessons no matter what the weather. It's not the kind of thing you really know in advance apart from an average condition. I know I learnt in January and February.

 

Would an 'L sign for roof' really set you back £100? is that the going rate? why not cut costs by fashioning one out of wood?

I've overestimated everything I can, in the hope that it gives me some margin.

[michael]

What car are you considering?

 

Might be worth looking at something that's fashionable like a Fiat 500, that in itself might be enough to get people knocking on your door rather than going to people with generic learner cars. A lot of people would pick a company just because they have a cool car and if you are driving it every day with stickers on that's a bit of instant marketing that the bland competition won't get.

 

Pick your colour wisely too, get a car that your taget audience desire in a colour they would like.

[tbourner]

This is more of a cashflow budget rather than a profit and loss budget. By charging £18 ph, estimating you mpg at 40 mpg which is slightly more realistic, charging £50 pm advertising, considering 1 month holidays, ignoring the loan repayment and only taking into consideration the interest and then ignorining tax and NI, you are looking at breaking even every month cash-wise with £135 pm profit. (This will be eaten up by loan capital repayment and Tax and NI.)

 

Maybe I need to get a financialist on my team before I start!

 

 

Basically everyone agrees that it could work, but it's a big risk with lots of factors!

 

What car are you considering?

 

Might be worth looking at something that's fashionable like a Fiat 500, that in itself might be enough to get people knocking on your door rather than going to people with generic learner cars. A lot of people would pick a company just because they have a cool car and if you are driving it every day with stickers on that's a bit of instant marketing that the bland competition won't get.

 

Pick your colour wisely too, get a car that your taget audience desire in a colour they would like.

I considered this angle too, I've looked at the normal learner cars like Ford Fiesta and Peugeot 207 mainly because I know they build dual controls for them, I'd have to find out about other cars. I liked the idea of the Toyota IQ, and we looked at Fiat 500s and Mini Ones as well - Minis are a bit thirsty and high powered, and the 500 and IQ are too costly to start with really. Question was would I get enough extra business from the cool car to cover the extra costs?

 

So top of the list at the moment is Seat Ibiza Diesel I think, pretty cool and can get a decent one for around £7k. I'd obviously need to change the car every 2 or 3 years as well, so that's a major point in the initial cost decision.

[Dozymare]

Just done some sensitivity on your spreadsheet and it looks like if your fixed costs are more than £21 more annually than you predicted you're into a loss. That's a bit scary - especially as your tax return & advertising is likely to swallow that up. If all other costs are as predicted then fuel can go up to 128.5ppl before you're into a loss which is probably OK, I know they were around that last year though. As I think you mentioned, you need a mimimum of 10 pupils per week right from the start on the numbers you have, any less gives you a loss you will need to make up.

[michael]

So top of the list at the moment is Seat Ibiza Diesel I think, pretty cool and can get a decent one for around £7k. I'd obviously need to change the car every 2 or 3 years as well, so that's a major point in the initial cost decision.

 

Isn't the rear visibility a bit pants in the Seat?

 

I guess it would mean people would be learning with you longer because they can't get the hang of reversing but it might also cause extra repair bills while they practice

[ilicos]

Just done some sensitivity on your spreadsheet and it looks like if your fixed costs are more than £21 more annually than you predicted you're into a loss. That's a bit scary - especially as your tax return & advertising is likely to swallow that up. If all other costs are as predicted then fuel can go up to 128.5ppl before you're into a loss which is probably OK, I know they were around that last year though. As I think you mentioned, you need a mimimum of 10 pupils per week right from the start on the numbers you have, any less gives you a loss you will need to make up.

 

Spreadsheet is not great. My I ask where you got that from tbourner?

[tbourner]

Just done some sensitivity on your spreadsheet and it looks like if your fixed costs are more than £21 more annually than you predicted you're into a loss. That's a bit scary - especially as your tax return & advertising is likely to swallow that up. If all other costs are as predicted then fuel can go up to 128.5ppl before you're into a loss which is probably OK, I know they were around that last year though. As I think you mentioned, you need a mimimum of 10 pupils per week right from the start on the numbers you have, any less gives you a loss you will need to make up.

Bearing in mind that most people have a 2 hour lesson each time, I only really need 5 pupils each week.

 

Isn't the rear visibility a bit pants in the Seat?

Don't know I haven't driven it yet! this venture is a good excuse for test drives at least.

 

Spreadsheet is not great. My I ask where you got that from tbourner?

Just something I knocked up, I'm sure there are better ways but I've only been planning this idea for less than a week! I don't even know anything about working self employed, I don't know anything about how VAT and income tax is paid etc.

[ilicos]

Bearing in mind that most people have a 2 hour lesson each time, I only really need 5 pupils each week.

 

 

Don't know I haven't driven it yet! this venture is a good excuse for test drives at least.

 

 

Just something I knocked up, I'm sure there are better ways but I've only been planning this idea for less than a week! I don't even know anything about working self employed, I don't know anything about how VAT and income tax is paid etc.

 

I am an accountant. Any help you need just ask.

[Mike]

oh, he needs help

[ilicos]

oh, he needs help

 

I am only qualified to prepare accounts and give tax and business advice. Anything else and he needs to speak to Robsheffield.

 

lol:p

[Mike]

[med]

One thing i thought of that you may have forgotton, is that if your customers book their driving test before 5pm, you need to be available for them to take their test in your car. that may cause a problem...