A car dealership is almost a prototypical small business idea. It is a traditional SMB idea which has been featured in so many movies and TV shows that it has become almost the most traditional kind of business a person can open. However, is it a good idea? Can you make money with a car dealership in today’s economy? What are the considerations you need to make before starting such a business? How to do it?
Analyze the Market
Before you can do anything, you need to make sure someone will actually buy the cars you are selling. Depending on where you live and what the local economy is like, you will find out whether people prefer new cars or whether they purchase used cars.
You should analyze at least a few years back and try to discover what the purchasing habits are for cars in your area. Perhaps a certain make is more popular, perhaps your neighbors prefer trucks to cars. Maybe your area is going green and people are only purchasing electric cars? Perhaps they have stopped buying cars altogether and it won’t make much sense for you to open a dealership.
The important thing is that you do your market research and that you are certain you will be able to sell cars in your area.
Come up with a Business Plan
A business plan involves much more than just market research. A business plan dives deep into the ins and outs of running a business and your dealership needs to have a solid, bulletproof business plan behind it.
This is where you will have to think of every little thing that might affect your bottom line. For instance, how much will it cost to rent a space that you need to open your car dealership? How many people do you plan to employ? How much will you be spending on marketing? How much will you have to pay in taxes? How do you plan on procuring the vehicles that you will be selling? Can you afford to not sell a single car for two months straight?
It takes quite a bit to write up a solid business plan, but you should never go into any business without it. If you are not sure how to do it, talk to people, research it online and perhaps even hire a professional to do it for you.
Consider the Bureaucracy
One thing that you have to remember about opening a car dealership is that it involves far more bureaucracy than most other types of business. For every car that you purchase or sell, you will need to fill so much paperwork that you will start feeling like an accountant. Besides the more common licenses, there are also dealer bonds that car dealers need in most states. In addition to this, you will have to deal with various DMV paperwork requirements and whatnot.
The reason why we are mentioning this is that there are many people who are exceptionally averse to paperwork and they should realize that starting a car dealership business could get them under an avalanche of paperwork before they know it.
When you are opening up a car dealership, you can either go independent or franchising. Franchising entails selling cars of only one or a few makes and becoming an authorized dealer. While this may sound limiting, it is actually a very good idea, for a number of reasons.
For one, you are allowed to use promotional materials that are provide by the manufacturer and which are better than anything you can afford. Also, you often get to offer your buyers deals that are, once again, provided by the manufacturer. In addition to this, the manufacturers have ways to provide you with used cars at much lower prices, which in turn will help you ensure you always have the right vehicles in stock.
Make sure you understand your market and have a solid business plan. Think long and hard about whether you can take the bureaucracy and whether you want to go in it independently or as part of a franchise.
Other than that, it will all come down to how you feel about becoming a car dealership owner.
Author: James D. Burbank is the editor-in-chief at BizzMarkBlog.