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Buying A Smog Shop - Expert Tips From Smog Shop Brokers And Agents

How To Buy Smog Test Only Stations In California

California smog test only shops can be very lucrative small businesses and often can be purchased at a price the buyer will recover in just two years worth of discretionary income from the company. There is good security in this industry because most every California motorist needs to patronize a smog testing business every few years to get his or her vehicle checked out for compliance with state environmental laws.

Under rules established by the state legislature and supervised by California's Bureau of Auto Repair, each of the smog shops throughout California is required to comply with a number of regulations and can be frequently checked by the state agency to make sure they are in compliance. And while some smog shops are test only, some have been authorized to not only test vehicle for compliance with environmental laws but also to make whatever repairs or adjustments are needed so the car or truck will pass. Additionally, some auto repair businesses and service stations also operate smog testing facilities as a separate source of income.

This discussion focuses on the majority of businesses that provide this service: test only facilities unaffiliated with related commercial operations.

Most every person in California has seen these specialty shops, often located in a commercial or retail business area, and able to provide, in a few minutes, the complete test of the vehicles emission system and related functions and then, if the vehicle passes, to issue the smog certificate require by the DMV.

Most enterprises in this business operate one or more service bays in which the testing is conducted. In the bays are specialized equipment, including  a dynamometer (commonly called a (dyno) to test engine performance, an emission analysis system with a probe applied to the exhaust pipe to determine the level of contaminants, a timing gun that is used to check accuracy of the vehicle's fuel igniting system, and a device used to measure the amount of fuel vapor escaping from the gas cap. Staff ordinarily consists of a service writer--many owners assume this roll--and the licensed smog  technician who performs the tests. The total investment to equip a bay can run to tens of thousands of dollars, but when buying a shop, it is customary to take the equipment at depreciated value, which may be listed on the books at a fraction of the initial price tag.

Buyers may encounter what are called "star certified" smog shops. These businesses are examined more closely by the Bureau of Auto Repair than the majority of smog check companies which don't have the "star" designation. The "star" stations are required to use the most accurate equipment and to employ technicians who frequently have received extra training. Shops that can include "star" in their names are authorized to evaluate vehicles that have a history of not being able to meet standards necessary to pass the smog test. And the state randomly selects thousands of vehicles each year that will be required to undergo the more stringent testing before a smog certificate will be issued. The shop that has not been "star" certified will have to turn away owners who have been notified by DMV that they will need to obtain "star" certification in order to receive the smog clearance needed for registration. Only the "star" stations can handle those requirements.

Pricing And Profitability

While the state mandates that smog certificates can only be issued by authorized smog stations, it does not regulate the prices to be charged, but there is fairly common pricing that varies from $29.95 to $89.95 for a smog test and certification. That fee is in addition to the customer's payment of $8.25 charged by the state for the certificate. The pricing within that range depends on the county and market forces.

Most of the smog shops we have seen for sale have been profitable. As mentioned, there is constant demand for this service because of state laws, and the shop owner who has a good reputation and is able to manage operating costs will probably see his or her investment returned in two or three years. Often that return is realized more quickly.  A review of the information provided by smog shops for sale currently being promoted on this site shows that the owner's discretionary income is, in many cases, about 50% of gross revenues. It will likely be less than that if the owner is absentee and pays for someone to manage the business. An owner who is a trained and licensed technician and spends most of his or her time testing vehicles usually can look forward to discretionary income at, or approaching 50% of gross.

Typical expense items for many of these businesses we've examined include occupancy costs (rent, utilities and related expenses) which good operators are careful to keep under 15% of gross profit. Payroll and related expenses in successful shops will usually range between 15% and 20% of gross revenues. Overhead items--including advertising, banking and credit card fees, Government fees and permits, supplies and miscellaneous expenses--ordinarily add up to around 10% of gross revenues.

As mentioned, prices asked for this kind of business often use smaller multiples than those in many other industries. While buying a restaurant for example, will likely cost a multiple of two to three times the seller's average annual discretionary earnings, many smog shops have been sold at a multiple of one-and-a-half to two when calculated with the amount of money the owner collected from the business.

Compared to many small businesses the smog shop can be highly profitable in relation to what the buyer has invested. Add to that, with constant demand for the service and a pricing profile in the industry that is both competitive and profitable for owners, this type of business usually is much in demand. The good news for buyers is that there seem to be more of this type of business for sale than at any time in the recent past. That's largely due to the number of baby boomer owners preparing to retire and willing to turn their shops over, at a fair price, to a new owner.

More Information / Resources On Buying And Selling California Smog Test Only Shops:

All California Smog Test Only Shops For Sale & Wanted To Buy Requests:

All Business Brokers & Agents Who Assist With Buying And Selling Smog Test Only Services:

Smog Shop Resources To Asssist You With Consulting, Financing, Due Diligence:

More Articles & Blog Posts Regarding Buying And Selling A Smog Test Service:

One last thing . . .

Keep in touch - let me know if you need any assistance with either buying, searching for, or sell a California smog shop - I will point you in the right direction. If you have a specific question about buying and selling a smog test only station contact me and I will answer it for you.

About The Author:  Peter Siegel, MBA is the Founder of and the Director of the BizBen Network. If you are searching to buy a California preschool make sure you are a part of the BizBen ProBuy Program and get the word out about your search criteria to all business brokers and agents throughout California that sell smog shops.  If you have a question about the BizBen Network or's ProBuy or ProSell Programs please feel free to phone Peter Siegel direct at: 866-270-6278.

Categories: BizBen Blog Contributor, Business Valuation Issues, Buying A Business, How To Buy A Business, How To Sell A Business, Selling A Business

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