How to Start a Parking Lot Business

Starting a parking lot business can be profitable, especially in urban areas with plenty of automobile traffic and limited street parking. The best part about this lucrative business is that parking lots are always in demand and require little maintenance to keep them running.

If you have the resources, you can easily open a parking lot and make some profit. Here’s a step-by-step guide on how to start a parking business.

Plan your parking lot business

The first step is getting a clear and well-thought-out business plan, just as you would for any other business. This plan should cover the entire scope and sectors of your business, including the following:

• Marketing and operations
• Management and organization
• Financial projections
• Market analysis
• Products and services

It should also answer basic questions like:

• What is the proposed name of your business?
• What are the startup and ongoing costs?
• Who is the target market
• What is the cost of service? How much will customers pay for parking?

Marketing and Operations

Start by identifying the target market. Who will use your parking lot more? Will it be in a busy urban area with many commuters, tourists, or shoppers? Understanding your target market will help you better plan your marketing strategy.

Customers can be attracted by online ads, signage, partnerships with local businesses, or loyalty programs. Based on your resources, determine what would be best for your business and include it in the plan.

Management and organization

Define roles and responsibilities for your team members, including managers, attendants, and maintenance staff. Ensure your staff is well-trained in customer service, safety protocols, and handling various parking situations.

Establish clear protocols for handling customer inquiries, managing traffic flow, and addressing emergencies or security issues.

Financial projections

Create an estimate of the expenses in setting up your parking lot business, such as leasing or purchasing the property, equipment (ticket machines, barriers), permits, insurance, and initial marketing expenses.

Also, consider ongoing costs and recurring expenses like rent or mortgage payments, utilities, maintenance, payroll, and marketing. For an average small lot, ongoing expenses may cost up to $5,000 per month or more. Keep this in mind and include it in your plan.

Before starting the parking lot, try to find out from other parking lots or research how much revenue you expect to generate. Don’t charge unreasonably high prices outside the buying power of the audience. Remember to consider factors like occupancy rates, pricing strategy, and any additional revenue streams (e.g., valet services and advertising space).

Market analysis

During your market analysis, you must include factors such as population density, transportation infrastructure, competing parking facilities, and local events or attractions that may affect demand.

If there are nearby competitors, plan to find out what they offer and beat it.

Products and services

Determine the primary service you’ll offer: hourly parking, monthly subscriptions, or special event parking.

Also, determine if you would like to offer any additional services that could improve customer experience, such as valet parking, car wash/detailing services, electric vehicle charging stations, or enhanced security measures like surveillance cameras or on-site personnel.

When you’ve decided on these factors, make a detailed plan that explains the scope of your business and stick with it. With time, you can modify these factors and find out what works best for your business.

Choose the proper business structure

After setting up the business plan, you must consider the business structure you want—sole proprietorship, partnership, limited liability company, or corporation. We recommend starting a Limited Liability Company, LLC because it protects you from being held responsible if the business is sued.

An LLC, or Limited Liability Company, is a business structure that protects your personal assets from being used to pay business debts or legal claims like a corporation does. At the same time, it allows you to run the business more flexibly, like a partnership or sole proprietorship.

Registering your business as an LLC is easy. Visit the LLC website or hire an agent to handle the registration process. This process should take about seven to ten days and cost between $150 and $4000 for startup and maintenance costs, depending on your state.

Finding a site

When searching for a parking business location, there are many factors to consider if you want a successful business. You also need to find a suitable location for your parking lot. The site should be accessible, visible, and in a high-demand area. Here are some of the factors to consider:

• Traffic. Is there enough traffic to bring in good profits? Are there convention centers nearby?
• Convenience. Just how convenient is the location for customers?
• Does the zoning allow you to build a parking lot?
• Are there significant competitors around?
• Does the area need more parking?
• What are the land prices?

These are some of the questions and factors you must consider before choosing a site/location. You should also decide whether to lease or purchase the land based on your budget and long-term plans.

Parking lot construction/paving

Hire skilled professionals and invest in high-quality paving to give your parking lot a smooth asphalt surface. Before construction, verify and exceed your local government standards for parking lots. Also, proper drainage should be ensured to avoid flooding issues.

Design your parking lot entrance

Design your parking lot to maximize space efficiency and ease of use. Consider the flow of traffic, entry and exit points, and safety features. The entrance design depends on how you want customers to pay for parking. You could consider the following:

No gate

This is the cheapest option on this list, but it comes with high risks. Here. customers make payments based on how long they park. The problem here is that there’ll be a lot of cases of people using a space and not paying for it. Do you want that? No. If you can manage it effectively, then go for it. Else, try other options.

A gate with a cashier

In this option, the cashier remains at the gate and collects parking payment. It is more expensive than other options, but it is more flexible and efficient at handling problems.

An Automated Payment System

The final option is using an automated payment system which works by printing a bar-coded ticket with the date and time of entry. The parking fee is calculated based on the entry time, and automated pay stations can scan the ticket and display it.

Suppose you are afraid of ticket fraud and customers not paying for their space. In that case, you can use a license plate recognition API that can identify and document license plate numbers with advanced OCR (optical character recognition) technology.

Tax Registration

You also need to register your business for taxes. This includes several state and federal taxes that every business needs to pay. To register for taxes, you must apply for an Employer Identification Number (EIN).

You can get the EIN for free through the IRS website. After getting your EIN, register for the taxes that apply to your business. This process may take between a day and two weeks, depending on your means of application.

Open a Bank Account

You don’t want to get your personal and business accounts mixed, as it may become a problem if your business gets sued. Having separate bank accounts also helps to make accounting and tax filing significantly easier.

Another benefit of separate credit accounts is that you can keep all your business expenses in one place and build your company’s credit history for when you need to raise money in the future.

So you need to have a dedicated business bank account and credit cards.

Set up accounting for your business

Document all business expenses and income sources. This will help you track finances and understand how your business is doing overall. Keeping accurate and detailed accounts can also simplify the annual tax filing process.

Get necessary permits and licenses

You don’t want to be caught operating without the required licenses, so you need to apply for and get them. Failure to do so can result in hefty fines and may even shut down your business. Some permits you may need are the following:

• Parking lot permit
• Occupancy permit,
• Garage permit or building license, if your parking spaces are covered
• Zoning permit for parking spaces located on private property

These permits may differ for each state, so check for federal and state licenses/permits that apply to your business activities and location, and get them. 

Get business insurance

It doesn’t just end with permits and licenses. Your business also needs insurance to function legally. Insurance ensures your business’s financial well-being regarding accidents or losses. 

What insurance does your parking business need? 

There are several policies, and if you don’t know which one to pick, you can start with General Liability Insurance or Worker’s compensation insurance. These are good choices, especially for small businesses with employees.

After choosing your preferred insurance provider, you can ask for advice on which policy best suits your parking business. Pay more attention to the value provided and not the cost. If you can get some benefits and quality service from the insurance provider, the price doesn’t matter.

Branding and Marketing

After setting up everything, you need to focus on your business branding. You need something that speaks volumes about your business and will help you stand out from competitors.

Here are some steps to follow:

• Design a logo and make sure it aligns with your business
• Create a QR code to add to business cards or publications. Several websites let you do this for free.
• Give out discount coupons to attract new customers
• Create a loyalty reward program to encourage regular customers
• Create awareness by having a parking lot attendant at the entrance waving to passing cars.

Create your Parking Business Website

According to Forbes, at least 71% of businesses have a website in 2023.  With a website, you can:

• Reach out to a larger audience
• Get more customers
• Make payment easier
• Allow customers to reserve and pay for parking spaces online and more.

There’s absolutely nothing to lose with setting up your business website and everything to gain. And no, facebook pages and LinkedIn business profiles aren’t enough.

Getting a website is not as difficult as you think. If you don’t want to spend time and money on developers or designers, use Website builder tools like Yola, WIx, GoDaddy, Shopify, WordPress, etc.

Set up your Business Phone System

Remember to set up your business phone system as well. With a phone system, you can keep your personal life separate from work, making it easier for customers to find and contact you.

Staffing and security

You need to put a lot of thought into staffing and security if you want to set up a large-scale parking lot. For example, you need more than an up-front cashier. You need a:

• Parking attendant
• Security personnel
• Maintenance workers
• Cashiers
• Valet attendants, if you want to offer valet parking
• Supervisors/managers
• Customer service representatives

You can also consider getting a closed-circuit television and good lighting for maximum security. Another option is license plate recognition technology from companies like Vehicle Databases to identify all customers’ license plates and easily spot defaulters.

Starting a parking lot business requires careful planning and execution, and this guide clearly shows the basics. Proper planning, finding a site, getting money for construction, and working on your publicity will do just fine, and your business will do just fine.