Investing in SMOG shop

[LounginMKL]

Does anyone have experience investing and managing SMOG shops? I love to hear your thoughts on the business. What are some pitfalls/stories you've experienced? I can see it producing stable cash flow but I'm also cognizant of the price sensitivity and long headwind (EV and more efficient vehicle) that would reduce the volume of the industry. Recently, new legislation passed where vehicles of 8 yrs (from 6 yrs) or less do not need SMOG test. As a result, revenue is lower this year and the opportunity is re-priced.

 

A few partners and I are thinking of acquiring an established one in CA. The cash-on-cash yield is decent but it's not an absentee business. (Then again, is there a true absentee business?) Part of the motivation is to gain some operating experience in my spare time.

[Parsad]

There won't be any smog as electric cars become more and more prevalent.  Also, the reason test shops are closing is because cars are getting to be extremely efficient and they tend to produce low emissions as they age, rather than burning oil...just better quality...which I don't see deteriorating going forward, but the exact opposite.  Cheers!

[JayGatsby]

A friend of a friend bought a few smog shops in CA. Did well from what I understand. Had some issues with one of the sellers, but nothing specific to the smog industry. From what I understand it was fairly passive.

 

It's basically a bet on regulations, for better or for worse. In CA I remember I had to get the test even for a fairly new car. In CO they have smog checks on the side of the road and the government charges you for it when you renew your registration. Doesn't seem like CA would totally eliminate them, so I guess you'd just want to be comfortable with thew new volume.

 

I dont see electric vehicles as a big threat personally. I just bought a new gas car. I don't see any benefit to electric cars. They cost more, are way less convenient, and arguable are no better for or worse for the environment. The only practical reason I've heard to buy them is government subsidies, and a lot of those have gone away.

[DooDiligence]

How about an idea with a larger addressable market?

 

DUI interlock devices.

[LounginMKL]

How about an idea with a larger addressable market?

 

DUI interlock devices.

 

@ DooDiligence- I just want to tend to my cash flow. =)

 

@ JayGatsby- How passive was it? I think we expect to visit the shop once a week at the beginning (for 6 hours), then eventually drop down to once 3-4 weeks. Not sure if this is the right expectation. From what I understand, no small business is really an absentee business, even though the broker markets it as such.

[JayGatsby]

@ JayGatsby- How passive was it? I think we expect to visit the shop once a week at the beginning (for 6 hours), then eventually drop down to once 3-4 weeks. Not sure if this is the right expectation. From what I understand, no small business is really an absentee business, even though the broker markets it as such.

I think a lot of businesses can be made to be very passive. It just depends on the skills required to run them and how hard it is to find someone with those skills. Any multi unit business has basically setup each location to run itself. The key is just the right people.

 

I'd make a list of all of the key tasks, who is going to do those, and which ones you're worried about.

[DooDiligence]

How about an idea with a larger addressable market?

 

DUI interlock devices.

 

@ DooDiligence- I just want to tend to my cash flow. =)

 

@ JayGatsby- How passive was it? I think we expect to visit the shop once a week at the beginning (for 6 hours), then eventually drop down to once 3-4 weeks. Not sure if this is the right expectation. From what I understand, no small business is really an absentee business, even though the broker markets it as such.

 

Seems like a pretty easy business to passively run.

 

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I had a DUI around 15 years ago (never again) & was required to have a DUI interlock device installed on my vehicle for 1 year after my license was reinstated.

 

This required a visit to a small garage facility once every month to have records downloaded from the device (how many times the vehicle was started & the results from every request for a breath test from the device).

 

The tech would also reset & calibrate the device.

 

The cost was around $90 US per month plus a one time installation & removal fee.

 

I had to drive an hour to the nearest shop (every month) & they had people wrapped around the building to get serviced.

 

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I looked at a few device manufacturers & have listed 1 below,

 

https://www.guardianinterlock.com/about-us/guardian-provider/

 

I was amazed at how many times a visitor being serviced would be told by the tech that they had blown a few positives & would be getting a notice from the probation officer of a violation of probation (people can be idiots).

 

Now that I've started thinking about this again, I am going to look into doing this in my area.

 

Not saying it'll happen but if I'm going to wind up playing in bars over the next few years, I will be meeting a lot of prospective clients.