James Siebert is co-owner of F&S Motorsports, an import performance shop north of Detroit that focused on Mitsubishi Evo and DSM cars. In early 2017, when he talked with host Todd Earsley, the shop's brick-and-mortar location had been open for only a couple of months. James and his partner Scott had spent years doing side work out of their own driveways before they made the jump.
This was the first episode Todd hosted, and he set it up as a look at what it really takes to open a performance shop. James had served in the Army, worked in construction management, earned a finance and accounting degree, and worked in corporate finance roles at Fiat Chrysler and Dana before going full time in the shop.
The conversation covers how F&S raised cash without a business loan, what the first months' numbers looked like, how the partners split the work, how they picked their location, and the payment and hiring problems a new shop runs into.
From driveway side work to a real shop
James got his first car at about 15, an all-wheel-drive Eagle Talon his dad bought because it was cheap. He got his first Evo in 2005. He dropped out of high school, enlisted in the Army, and after his service spent five or six years in construction management at refineries through a military-to-civilian program. Then he decided to go back to school. The GI Bill paid for it. He started in mechanical engineering but switched to finance while working 40 to 50 hours a week, and graduated in 2015.
He met Scott at the Shootout in 2008. They already knew each other from forums. For years each worked on customer cars out of his own garage and driveway, calling each other for advice on jobs. The work kept growing, and the neighbors got tired of all the cars. Meanwhile customers called James at his day job every day, which became a problem at work. When he was laid off in 2016, he messaged Scott and said that if they didn't try it now, they would kick themselves later. After a short stint in another analyst job, he quit cold turkey to run the business full time.
I think if you don't go all-in on some of these things, you never really have the incentive to make things happen.
Funding the start with part-outs
F&S didn't take a business loan. Its early cash came from buying finished or nearly finished builds from owners who wanted out, then parting them out to the community. James gave an example of a car making 700 to 800 horsepower bought for $15,000 or $16,000. Before buying, he built a full spreadsheet on the car. It covered the margin on each part after shipping and the shop's fixed and variable costs to strip it. If the numbers made a decent case, they went and got the car.
They took out vehicle loans on the first two cars, sold the parts, paid the bank back, and kept the margin for the next purchase. Todd noted that the model needs a lot of cash up front.
Before the shop opened, the partners also worked with an established shop that supplied parts for their customers and shared part of the margin. That gave them a loyal customer list before they ever signed a lease.
The first months by the numbers
James had written a formal business plan with a monthly revenue forecast, and it changed almost right away. He expected about $10,000 in parts sales in November 2016, the first month in the building, and $20,000 to $30,000 in December. November came in at almost $50,000 in parts. December parts sales were slower, but labor carried over from November filled the gap.
The parts-to-labor mix moved a lot month to month. November was about 90 percent parts. December was about 70/30. James expected January to lean toward labor because several engine builds were going out. Todd urged shops to push labor revenue, where he said margins of 30 to 40 points are possible after overhead and wages.
James also showed how card fees hit parts margins. Processing ate about 3 percent of each sale. A part sold at 20 points of margin really made 17. A part sold at 5 points against a shop that discounted more made only 2.
The owners weren't paying themselves yet. All of November and December went back into the business, and they planned to start in January. The business had no loans and no debt, and James wanted to keep it that way to avoid the extra stress. Scott kept his day job, so only one partner's living depended on the shop.
Splitting the work and picking the spot
The partners split the shop into front and back. Scott ran the technical side and did most of the wrenching. James handled sales, vendor partnerships, market research and business operations, and he also assembled the engines.
F&S formed as a multi-member LLC. James said a plain partnership had some early tax advantages, but with 10 or 15 customer cars in the shop, they needed to protect themselves from the liability.
The location came from market research done for the business plan. Ann Arbor sat between the partners' homes, but real estate there was too expensive. North of Detroit, they found a landlord who was lenient on the lease and gave them a few incentives for the first months. Liberty's Gears, a transmission partner, was one exit away, and their machine shop was less than five minutes away. James said there was a gap of five or six hours' drive with no shop specializing in their cars. The catch was his commute. He lived on the Ohio border and drove an hour and a half each way, often leaving the shop at 11 or midnight.
Building relationships over big tickets
James said the reason they opened the shop was watching local customers get burned. A build quoted at $3,000 to $5,000 would leave the shop with a $10,000 bill and an angry owner. He would rather make $1,000 from a customer 20 times than $10,000 once.
He also stressed setting expectations up front. Customers asked for 1,000 horsepower that was streetable and reliable. James pointed out that at that power per cylinder, a V8 would be in near-Pro Mod territory, where owners pull the oil pan every five or ten passes.
Outsourcing, engines and hiring
James's action item was to know your strengths and find partners for the rest. F&S sent transmission work and machining to specialists, and when a car needed it, James paid an expert tuner on that ECU platform to tune it remotely. He said his job was to make sure every car left the shop right.
The one thing they pulled in-house was engine assembly. Their own race car had two catastrophic engine failures in about six months while they were outsourcing the builds. That pushed them to build engines themselves so they could control every step and learn from any failure directly. The new shop had two side-by-side offices, so one became a clean engine room and the other a customer area.
Hiring was next, and James found it hard. He wanted a technician and a full-time salesperson, and he already had one outside salesperson on commission. Good performance techs were hard to find and vet. Todd added that training a new hire takes weeks or months of the owner's time.
James also leaned on mentors, a handful of established shop owners he called with questions about margins, customers and competition.
Find somebody successful and surround yourself with them and people like them. I think by proxy you end up being successful yourself if you're around the right people.
New shops also ran into payment trouble. James said PayPal flagged accounts when the average transaction grew month over month and questioned made-to-order parts that didn't ship within a week or so. Todd said he had talked with about a dozen shops whose money had been held. His advice was to run web sales through a credit card processor.
Key takeaways
- Build a customer base on the side before you open, and keep a day job in the partnership if you can.
- Run the numbers on every big purchase. F&S priced each part-out car on a spreadsheet before buying it.
- Know how card fees and discounting cut into parts margin, and push labor revenue where the margin is better.
- Form an LLC once customer cars are on the property, and avoid debt while the shop finds its feet.
- Outsource what specialists do better, and bring work in-house when you need control over the result.
- Set expectations on high-horsepower builds up front, and value repeat customers over one big ticket.
Starting a performance shop with My Shop Assist
James ran punch lists, parts orders, invoices and budgets out of Excel, and he wished his accounting would pull the cost and sell price of each part automatically. My Shop Assist puts that on the job. Parts and purchase orders carry cost and sell price, technicians log time against each task so you can see what labor really earns, and finished jobs export to QuickBooks. You can text customers updates, take payments, and use progress billing on long builds. See how MSA works for performance and race shops.
If you're moving from the driveway to your first real shop, start a free 30-day trial.
