How to Start a Used Tire Business

Every vehicle needs tires, and new ones can be expensive. That’s why more and more people are opting to buy used, which cost half as much. You could source from junkyards and tire dealers, start your own used tire business and provide a much-needed product while making good money in a steadily growing $35 billion US industry. 

But before you jump into the junkyard to start digging for gold, you’ll need to know how to launch and market your business, and to learn some financial aspects of business as well. Luckily, this step-by-step guide has you covered with all the information you need to launch a successful used tire business. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a used tire business has pros and cons to consider before deciding if it’s right for you.

Used tire industry trends

Industry size and growth

• Industry size and past growth – The US tire dealers industry is worth $35 billion after modest growth during the previous five years.((https://www.ibisworld.com/united-states/market-research-reports/tire-dealers-industry/)) 
• Growth forecast – The US tire dealers industry is projected to continue to grow for the next five years. 
• Number of businesses – In 2022, 31,895 tire dealers are operating in the US.
• Number of people employed – In 2022, the US tire dealers industry employs 170,753 people.

Trends and challenges

Trends in the used tire industry include:

• People are getting back out as the pandemic winds down, and putting more miles on their tires, which should boost the used tire industry.
• Inflation has people seeking to cut costs, which means more people are likely to opt for used tires instead of new ones.

Challenges in the used tire industry include:

• Used tires that fail quickly are a potential liability for used tire businesses.
• Labor shortages are making it difficult for used tire businesses to find workers.

Demand hotspots

• Most popular states –  The most popular states for tire technicians are Iowa, North Dakota, and Oklahoma.((https://www.zippia.com/tire-technician-jobs/best-states/))
• Least popular states – The least popular states for tire technicians are Utah, Massachusetts, and Colorado.

What kind of people work in used tires?

• Gender –  3.5% of tire technicians are female, while 96.5% are male.((https://www.zippia.com/tire-technician-jobs/demographics/))
• Average level of education – The average tire technician is high school educated.
• Average age -The average tire technician in the US is 35.7 years old.

How much does it cost to start a used tire business?

Startup costs for a used tire business range from $50,000 to $100,000 or more. Costs include a garage rental, equipment, inventory, and an operating budget. 

You can take online courses and become certified as a tire technician through the Tire Industry Association. Courses are self-study and cost about $1,000 in total.

You’ll need a handful of items to successfully launch your used tire business, including: 

• Floor jacks
• Air impact gun
• Sockets
• Screwdrivers
• Tire spreader
• Wheel balancer

How much can you earn from a used tire business?

The average cost of a used tire is about $90 and scrap tires will generally cost much less, especially if you’re able to partner with a junkyard. Your profit margin after rent and labor should be about 30%. 

In your first year or two, you could sell 50 tires a week bringing in $234,000 in annual revenue. This would mean $70,000 in profit, assuming that 30% margin. As your shop gains recognition, sales could climb to 200 tires a week. With annual revenue of $936,000, you’d make an outstanding profit of more than $280,000.

What barriers to entry are there?

There are a few barriers to entry for a used tire business. Your biggest challenges will be:

• Funding the startup costs of your tire inventory and operating budget
• Standing out and drawing business in a crowded market

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a used tire business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Why? Identify an opportunity

Research used tire businesses in your area to examine their products/services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a business that recycles old tires or shredded tires, or a used tire business that also offers automotive repair services.

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as a certain tire brand, or used tires with more than the required tread depth.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

If you have the skills, in addition to selling and installing used tires, you could offer automotive repair. You could also sell new tires, tire rims, and other car products.

How much should you charge for used tires?

Prices for used tires are generally about 50% of their original cost. After all your costs, you should aim for a profit margin of about 30%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be broad, so you should spread out your marketing to TikTok, Instagram, Facebook, and even LinkedIn.

Where? Choose your business premises

You’ll need to rent out a shop and garage space. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “tires” or “used tires”, boosts SEO
• Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
• Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
• Product and Services: Describe your offerings in detail.
• Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
• Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
• Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
• Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
• Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
• Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
• Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to used tire businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your used tire business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a used tire business. 

Step 8: Apply for Licenses/Permits

Starting a used tire business requires obtaining a number of licenses and permits from local, state, and federal governments.

Most states have tread depth requirements as well as condition requirements for used tires. Check with your state to make sure the tires you sell are in compliance.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your used tire business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Shopmonkey, ARI, or Mitchell1, to manage your scheduling, inventory, workflows, and invoicing. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Some of your business will come from the casual passerby or online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

• Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
• Instagram: Same benefits as Facebook but with different target audiences.
• Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Now.” This can sharply increase purchases. 
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

Kickstart Marketing

Take advantage of your website, social media presence, and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include: 

• Signage – Put up eye-catching signage at your shop and website. 
• Start a blog – Start a blog and post regularly. Change up your content and share it on multiple sites.
• Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
• Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
• Make a podcast – This allows you to make a personal connection with your customers.
• Do a webinar – Share your used tire expertise online with a video seminar.
• Testimonials – Share customer testimonials about how your used tires helped them.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your used tire business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your used tire business could be:

• Reliable used tires for less
• Same-day used tire repair and installation
• We bring great used tires to you, fast 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a used tire business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in used tires for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in used tires. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a used tire business include:

• Tire Technicians – install used tires
• General Manager – scheduling, ordering accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

Used tires are big business, with the industry worth $35 billion and expected to continue to grow in the next decade. By opening your own used tire business, you could make quite a good living. You can easily learn to be a tire technician, and with a bit of an investment, you could build a great company. It will take hard work, and a passion to serve your customers, but you can be very successful while providing a valuable service at the same time.

You’ve got the business part down now, so it’s time to get your lucrative used tire business up and running!