For many people, owning a car dealership sounds like an entrepreneurial dream come true. You are doing what you like and earning good money. Or are you?
Well, getting the operations off the ground is a daunting task. To make it happen, it’s not enough to have a deep passion for automobiles and take a loan. After all, the costs of launching and running a dealership can be measured in millions of dollars.
Therefore, one must anchor big ideas in reality and cover all the bases. Here is a step-by-step guide to help you navigate the labyrinth of key decisions and considerations.
First off, be clear on the type of dealership you want to own. Namely, one of the main dilemmas is whether to line up new cars on your lot or sell used ones (or both).
This decision sets the pace for the rest of your entrepreneurial endeavor, so weigh your options carefully. It also determines the source of financing you are going to rely on, whether it’s personal savings or a bank loan. Naturally, running a used car dealership costs substantially less, while new cars give you much higher profit margins.
Beyond the lifeblood of your business, the vehicles, you need to figure out your business equipment, hiring policy and salaries, advertising budget, expenditures linked to maintaining and repairing the vehicles, as well as the budget for leasing or purchasing the premises. All of these elements must be included in your business plan.
So, do your homework and carry out a thorough market research. Assess customer needs and sales opportunities, and factor in the competition. Use facts and figures as building blocks for a solid business plan. This is the only way to really get your business up and running.
Furthermore, you need to sort out legal issues and obtain a dealer’s license. If you aspire to go full steam ahead, you are going to need a license to sell an unlimited number of vehicles annually. At the same time, work with your lawyer to ensure compliance with Customer Rights and Safety Laws.
Likewise, make an effort to find the best insurance coverage (general liability, lot coverage, property damage, and inventory loss) and a way to safeguard transactions with outside parties. In general, a surety bond is a great way to protect you from contract defaults when dealing with manufacturers, suppliers, vendors, and wholesalers.
Note that the location of your dealership is an aspect that can make or break your business. It has a profound impact on the customer traffic and all aspects of core operations. Thus, take into account the size and visibility of the location first. Of course, plenty of parking space for cars is paramount, but you don’t need something that is off the beaten track. On the contrary, a corner lot on a major intersection could really do the trick. Just keep an eye on the competition that could be present in the area.
Also, bear in mind that there are many things you can do to boost the visual appeal of your location. Use premium concrete sealers to give your dealership that dazzling showroom look and blow customers away, in addition to putting visible brand insignia and helpful signs across the dealership to make it easier for people to find their way to you.
Embrace a proactive approach. Predict when the best time to restock is and steer away from any inventory problems. Track your sales to identify patterns and potential issues with the turnaround of some models. Rank all vehicles based on popularity and purchase new ones as needed.
Finally, remember that at the end of the day, things come down to your salesman skills. Don’t be that kind of a sleazy, pushy salesman, but learn all the good tricks of the trade. Be open and honest with customers and they will appreciate it.
Resist the temptation of being misleading when talking about a vehicle’s condition and make only the promises you will be able to keep. Be very careful who represents your business to always maintain a good reputation.
There are various hurdles to overcome before you can start selling cars for profit. Start by deciding on the type of dealership that will help you translate your dreams into reality. Put everything in writing and work out a sound game plan.
Brace yourself for a long race: Learn the ropes and hone your skills. Make sure there is a demand for cars in the area and enough funds to fuel your operations. Handle regulatory requirements. It’s time to shift gears, become your own boss, and get on the fast tracks to success.