6 Tips for Starting a Car Dealership

Some industries are recession-proof. Regardless of the global situation, people will always purchase vehicles. They may change their budget or hold onto their existing car for longer, but there will always be a basic need for transportation.

Starting a car dealership is an excellent opportunity for those who have a passion for sales, knowledge of cars and the desire to own a business. Here are six essential tips for starting a car dealership.

Create a Business Plan

Start by creating a business plan. This document should outline everything from the types of vehicles you will sell (new, used, luxury, mid-line, etc.) to the financial requirements of starting up.

You should use this opportunity to conduct both primary and secondary market research. Conduct a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to evaluate the competition and identify how you can grab a slice of the market. It’s also important to set goals and outline how you plan to attain those goals in your business.

Invest in Education

You don’t need a specialized education to start a car dealership, but it helps. A dedication to lifelong learning and continued education is essential to thrive as an entrepreneur. Use a service like OnlineAutoDealerEd.com to take some courses covering licensing, merchandising, navigating vehicle trades, and so on.

If you don’t have a background in business, it’s also beneficial to take courses in basic bookkeeping and business management. While learning from experience will be invaluable as a business owner, having a strong foundation of knowledge will help protect your long-term interests.

Start Small and Scale

When you start a business, it can be difficult to contain your excitement and enthusiasm. As the expenses associated with a car dealership are quite high, it’s important to rein in your enthusiasm and start small to remain sustainable. Once you get your footing in the industry, you can begin to expand and grow as demand increases.

For example, rather than starting with a full lot of vehicles, you may choose to have a small lot with only 10 to 15 cars and run the business yourself. Five years from now, you could have three salespeople and a more considerable lot with up to 50 vehicles. Ten years from now, you might also have a service station as a part of your dealership.

By making small, incremental steps forward, you allow for ample buffer in your financing to get through challenging times.

Sort Out the Legalities

One of the first things you’ll need to address when starting a car dealership is your business’s legal structure. For this type of business, you’ll likely have the most luck with a corporation.

Beyond the basics, you’ll also need to investigate what’s legally required for you to run a dealership. Depending on your state, this could cover everything from insurance to your licensing and bonding. Take some time to research what you need to be in compliance with local regulations. Factor those costs into your business plan.

Find the Right People and Tools

The tools you use to operate your business will ultimately impact your time management, productivity, customer service and overall success. Take some time to determine which tools are right for your business, from inventory management to payroll processing.

When you decide it’s time to hire people, look outside your friend group and hire qualified, reliable employees who take their role seriously. Don’t hesitate to reach out to an HR consultant before hiring your first employee to better understand the process it entails.

Create an Engaging Marketing Plan

Finally, building a dealership won’t bring customers through the door; you need a marketing plan for that.

Outline a marketing plan that indicates your target demographic, how you’ll reach them, and any associated costs. It’s also worth identifying your success metrics to measure the return on investment for your marketing dollars.

With these six tips, you can start a dealership that has the potential to be profitable and enduring.

 

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