If you have dreams of being your own boss, youâ€™ve probably wondered how people get into the car business. How much knowledge is needed, and do you need a lot of money to start? Does it come with complex regulations and procedures?
If you have dreams of being your own boss, youâ€™ve probably wondered how people get into the car business. How much knowledge is needed, and do you need a lot of money to start? Does it come with complex regulations and procedures? This brief guide will provide the essential facts you need to get started.
Required Knowledge and Expertise
A car dealership may seem like a lucrative business, but if youâ€™re not very knowledgeable about cars, is it a bad idea? Going into an industry where you have little or no experience comes with higher risk, but a lot of entrepreneurs have been successful that way. For example, billionaire Richard Branson was not experienced in the airline industry, but he founded Virgin Atlantic, which is one of the worldâ€™s largest airlines today. If youâ€™re determined, you can acquire all the knowledge you need to get your business off the ground.
Once youâ€™re willing to do the research, the next question is whether or not you have enough available cash to launch an automobile business. Your startup cost can range anywhere from several thousand into the millions. The largest considerations are the size of your initial inventory and whether you are going to sell new cars or used cars.
You may also want to have a franchise with name recognition, but this also comes with additional startup cost. The average startup cost for a dealership is about $100,000, but if you are selling new cars with a service department it will easily climb up to several million before you sell your first car.
In any case, before you plop down your life savings, make sure you do some market research about the area in which you want to set up shop. Find out how many of each model of car is bought in the area and how many dealerships are selling those models, then plan to sell cars that are in demand without too much competition.
Create a business plan
As the old saying goes: â€œFailing to plan is planning to fail.â€ Once youâ€™ve done the research and found a location with high demand and/or low competition, the next step is to create a business plan. This is a very important step when starting a business for many reasons.
First of all, you need a business plan when approaching a lending institution for a business loan. Also, a business plan outlines all of your startup costs and what your month-to-month operating costs will be. This will help you determine how to set up your business to be more profitable. Your business plan is also crucial because it helps you develop how your business will operate more efficiently while staying in line with regulations.
There are specific requirements for opening an automobile dealership. You will need a dealerâ€™s license to sell unlimited numbers of cars per year, and your dealership should have a surety bond. This safeguards you during transactions with vehicle suppliers, vendors and wholesalers. Another important operating requirement for a dealership is insurance. Your business should be covered for vehicles, property damage and general liability.
Once you find an area with good potential, you need to choose a good location for your lot. The ideal location is visible to people driving down a main road and is even better if situated on a major intersection.
Once you have these steps taken care of, it comes down to managing your business well. If youâ€™re not great at sales, get some good salespeople on your team. Also, keep costs low, but make sure you maintain a good selection of inventory. If youâ€™ve done all the right steps to set up your business correctly, your ambitions of succeeding in the car business should become a reality.