Parking lot businesses, especially in big cities, are very profitable. Here you will find a comprehensive guide on how to develop a parking lot and operate it on a profit basis.
Before planning for the business you should exactly know how to start a parking lot business and it requires contacting a lawyer to find out about the laws and zonal regulations required to operate a parking lot business.
There are three different ways in which parking lots operate, these are as follows:
- Management Contract.
- Lease Agreement.
- Property Ownership.
It is quite a lucrative business and the data produced by Statista shows that by 2024, the parking lot business market would be around $ 11.27 billion.
If you are new to this, then we suggest that you should make a start in a small town to gain experience and improve your brand recognition and then expand nationally.
A step-by-step plan to develop a parking lot business
To start your parking lot business plan, you must follow these steps.
Do some research about your potential customers
Conduct a demographic and psychographic composition study to know more about your target audience who are likely to avail of your parking service. This customer base includes both males and females who are 18 years and above and have the financial resources to own their automobiles.
Level of competition
You must find out about your main competitors and try to ensure that your services are better than theirs to attract more people to avail of your parking services. Some of the top parking lot companies in America include the following.
- SP Plus
- ABM Industries
- USA Parking System Inc
- Park Go Fly USA
- Luxe Valet and more
What is the initial cost?
When you are planning to start your parking lot business, then you have the option to either invest in the franchise of a well-known parking lot company or you can build your own from scratch. Both have their pros and cons. You must make a careful calculation of which one of the above two modes is best for you. The initial cost you have to pay to start your own parking lot business will depend upon a lot of things like the purchase or rental of the lot, outright by or lease of equipment such as lift gates, security cameras, and transaction machines.
If you are looking for a covered Garage, then it would cost more. However, if you are trying to develop a small outdoor parking lot in a smaller city in the US, then you would need $10,000 as start-up capital. However, in the cities, big undercover garages with multiple levels can cost upward of millions of dollars based on their size and location.
How much would it cost to operate a parking lot business?
Parking lots and garages are comparatively low-maintenance businesses. If you want to make your business a success, then you have to carefully analyze the operational cost of running a parking lot. You must do your cost analysis properly so that your venture is economically viable. The average monthly expenditure for a small open parking lot in a small city would be somewhere around $5000 per month. It includes the following.
- The average mortgage or rent payment is an average of $ 2000 per month (it is a $0.5 per square foot rate).
- Parking lot attendants’ wages are $2240 per month ($10 per hour and 56 hours per week). If you want to keep your parking lot open at night also, then you should double this amount.
- Employer’s portion of taxes to be paid for employees is on an average $336 per month.
- Utilities that include lighting are around $200 per month.
- Insurance is approximately $100 per month.
- Supplies approximately $100 per month.
Plan for the best suitable legal entity (C Corp, LLC, or S Corp)
If you are planning to run a small parking lot business, then sole proprietorship is ideal for you. You will need minimum start-up capital which is great for a small neighborhood. However, if you plan to expand after a few years, then sole proprietorship is not an option for you. Then you have to register your company either as an LLC or a general partnership.
Find an attractive business name
The name of a company plays an important role in its recognition. You should get a catchy business name that would help you to create a positive perception of your business in the mind of your target audience. Make sure that the name you choose is easy to pronounce and remember.
Get the best insurance policies
To operate a parking lot business, you would need insurance to safeguard your financial interests in case of an accident or other eventualities. You must create a budget for your insurance premium after you consult an insurance broker to get the best insurance policies specific to your business. Some of the insurance policies related to the parking lot business in the USA include the following:
- General insurance.
- Liability insurance.
- Workers’ compensation.
- Overhead expenses and disability insurance.
- Payment protection insurance.
- Health insurance.
- Risk insurance.
- Building/property insurance.
- Business owner’s policy group insurance.
Know about the legal documents you would need to operate
To run a parking business, you have to get some legal documents. You should get your lawyer to get these legal documents for you. Some of these legal documents include the following.
- Federal Taxpayer’s ID
- Business and Liability Insurance
- Certificate of Incorporation
- Business License
- State Permit
- Business Plan
- Operating Agreement for LLCs
- Insurance Policy
- Employment Agreement (offer letters)
- Company Bylaws
- Memorandum of Understanding (MOU)
Choosing Suitable Location
Choosing the right location for your business is also important for its success. Therefore, when you are looking for a site keep in mind these factors:
- How much traffic is in that area?
- Is the area close to the downtown shopping center?
- Does the zoning law allow you to create a parking lot there?
- Does your target audience find the place convenient to use for parking?
- The land price.
- How much area do you need to build your parking lot? And more.
Raise start-up capital
You would need start-up capital for buying customized software apps, business licenses, tags, wages for your workers, and so on. If you have a workable business plan document, then you will find it quite easy to convince your bank or investors to lend you money to start your business.
In addition to all of the above, you also have to hire employees, create an effective marketing strategy, work out reasonable pricing for the services you are providing, and so on.
A detailed business plan would help you to figure out how much start-up capital you will need, what legal documents you have to apply for, the challenges you will face from your competitors as well as the business environment. Therefore, you should hire an expert in this field to create a workable business plan that would allow you to go to your investors and convince them to invest their capital in your venture and earn profit.
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