Chris Delgado and Dave Donnals ran D3 Performance Engineering in Houston, Texas. In 2016 they joined host Reid Lunde to talk about starting a performance shop the second time around, after their first one failed. Chris handled tuning, wiring, the high-horsepower builds and the electronics side. Dave started as the fabricator and moved into product design and the business paperwork.
At the time, D3 was shifting from everyday service work toward product development and race cars. The two had already lived through a shop that had a big following and still made no money.
This article covers what they changed the second time and why they believed products scale better than service.
The first shop had customers and no plan
The two met in the Honda days. Dave saw a car Chris had tuned win at a street race and asked him to try a car that two other tuners had spent two weeks failing to sort out. Chris fixed it in 30 minutes and went to work for Dave.
Dave's shop was called Secret Services Auto. He said it started around 2007 in about 1,500 square feet with no electricity, hand tools and milk crates to sit on. He started it to pay for his racing. It ran three or four years, built a good name on Hondas and Supras, and got all its work by referral. Nobody made money. Dave said everyone was working themselves to death, missing family, and some were losing relationships. He burned out and sold half the business to a partner.
The new partner treated customers and staff badly. Chris went from tuning two or three cars a day to one every two weeks, and customers told him they would never bring a car to that shop again. Dave left, and the shop eventually closed. His lessons were to trust your gut when a deal feels wrong, and never to start a business only because you like the work.
Write the rules down before you open
When Chris pitched Dave on D3, he said they knew what worked now and should do it right. They sat down and agreed on how the shop would run before it opened. They would only take in a set number of cars. They would not do engine builds, because they did not want cars sitting for six months while a machine shop took its time. If anyone made a mistake, they would say so and cover it. If a tech hurt an engine, the shop paid for it and did not blame bad gas.
Agreeing on the rules up front prevented arguments later. They said a real business plan should answer the questions a lender or investor would ask, such as what vehicles you will work on and why, what problem you solve, your budget, how big a building you need, and where you see yourself in two, three and four years.
The plan paid off. Their new shop was only 5,000 square feet. The old one was 12,000 square feet with more parking. They said they made far more money in the smaller building and everything ran more smoothly.
Go deep on a few platforms
The long-term goal was product development and race cars. Until then, everyday service work with one service tech paid for a FARO arm, a 3D printer and stocking their own products.
Over time they moved from Civics and 2JZ swaps to Corvettes, Vipers and race cars. They said that when you work on anything that rolls in the door, you do not always know every component it takes to reach the result. When they got into the CTS-V market, they bought one, took it apart and learned it. They then offered packages from 500 to 1,000 horsepower and could turn a car around in two weeks. Chris still tuned many kinds of cars, but would not build a 600 horsepower Miata because he did not know what breaks on one.
Deposits qualify the customer
Chris described a build quote of about $170,000 for a customer with no set budget. He spent time on the phone with transmission, suspension and electronics suppliers to spec it out. A week after getting the full build sheet, the customer said another shop would do it for $60,000 less. That shop used D3's sheet as a road map.
If you're going to spend a lot of time quoting a project like that, get a down payment or some sort of fee for the consulting.
Their advice was to hold back the final build sheet until the customer pays. As they put it, a deposit qualifies the customer. Someone who will not put down a deposit on a $170,000 project probably was not going to do it anyway. They had started taking $100 to $150 tuning deposits after no-shows cost them dyno slots. The deposit came off the final bill, and the people who refused were usually the ones whose cars were not ready.
They also turned away customers who clearly lacked the budget to do the job right, because half-done work comes back on the shop.
Never take down the quality of work just to get the job.
Spend on what customers see, save on the rest
D3 could not find investors who knew them well enough. The partners funded it from personal savings, including money from a third partner, Evan. Chris said the first pool was about $50,000, budgeted line by line on paper. They spent it on what mattered to customers and staff, including painted floors and walls, air conditioning in the fab shop and service bay, a proper dyno cell and a nice waiting room. A detailer cleaned every car in the shop each week at no charge.
They saved everywhere else. The welder was from 1985, the drill press and lathe came from Evan's grandfather, and the lifts were used and repainted. They paid about $4,500 for a band saw that cost about $50,000 new, and chose a dyno that fit their needs over the biggest one available. Friends and past customers helped with painting and electrical. Without that help, they guessed, the build-out would have cost $150,000 to $200,000.
Their advice was to keep money back for slow months and for stocking products, which earn more over time than a fancy lift.
Watch the numbers, including your own time
Dave called himself the numbers man. Chris admitted he would knock a $400 charge down to $375 because he worried about upsetting the customer. Dave's view was to charge what your time is worth. The two days Chris spent on the $170,000 quote could have been four cars of tuning.
Dave's worst example came from the first shop. They sold turnkey Honda Civic turbo kits, installed and tuned, for about $5,000. When he finally ran the numbers, they were losing $3,000 to $4,000 on each one. He said not having a business plan and not watching the numbers were the two things that killed that business.
Chris also had to stop spending all day fixing non-tune problems on a dyno car and then charging $500. They allowed extra time only when it taught them something the next car would benefit from.
Why products scale and service does not
Service and tuning are capped by labor hours. Chris said the only way to make real money was to get more out of the people you have, which led them to products. They saw friends still swinging wrenches and living paycheck to paycheck after ten years. Reid called the problem whack-a-mole. With no barrier to entry, a cheaper garage shop pops up, steals five customers and closes, and then another one appears.
D3 set itself apart with motorsport-grade harnesses, complex engine management setups, fabrication, private-label product design and contract tuning as far away as the Middle East. Dave said the way to sell is to find a problem and solve it instead of copying someone else's product. The dream was for product sales to cover the shop's expenses so they could pick their builds and race their own cars.
Key takeaways
- Write a business plan with clear rules, including what work you will not take, before you open the doors.
- Pick a few platforms and learn them completely. Depth makes quotes accurate and turnaround fast.
- Charge for detailed build quotes, or hold back the full build sheet until a deposit is paid.
- Take deposits on appointments. They come off the bill and filter out no-shows.
- Run the numbers on every package you sell. A popular package can lose money on every sale.
- Products and specialized skills scale in ways that hourly service cannot.
Running a specialty performance shop with My Shop Assist
D3 was a My Shop Assist customer. Chris said they had been using it for four or five months, so customers could follow their builds at any time and get photo updates. He described a twin-turbo Lamborghini that came in from another shop. They logged existing damage in the software, along with every task and the tech assigned to it, and the customer could check it from anywhere.
The same tools cover the rest of what Chris and Dave talked about. Build detailed estimates with every part and task, take deposits and progress payments, track technician time against each task to see whether a package really makes money, and order parts on purchase orders. See how My Shop Assist works for performance and race shops, or start a free 30-day trial.
