Nuts and Bolts of a Winning Car Dealership Business Plan
Starting a car dealership involves much more than simply placing for sale signs in the windows of a few cars parked in your driveway. Becoming a car dealer requires you to understand and meet your state’s legal requirements, obtain necessary permits, form an appropriate legal entity structure, find a location, and determine the types of vehicles you will offer. If you sell more than a couple of vehicles in a year, you will have to get a license from your state to legally operate your business. States that require auto dealer licenses also require you to obtain an auto dealer bond as a condition of getting a license.
A surety company will want to evaluate your business to determine its financial stability, level of experience, and reputation before it will agree to issue you a bond. To determine whether it will underwrite your bond, the surety company will likely ask to review a copy of your business plan.
Besides having something to present to a potential surety company, there are other good reasons why you should take the time to write a business plan for your dealership. Effective business leaders execute well-planned business strategies. The best way to plan your business strategies is to create a thorough plan for your dealership. While a business plan will not guarantee you will succeed, it can help to mitigate against the risks of failing. Here are the parts you should include in your business plan as a car dealer to help map out your strategies and create a path to success.
The executive summary of your dealership’s business plan provides a statement of what you envision when you achieve operational success and reach your goals. It is a summary of the vision you have for your dealership and describes your business’s identity, purpose, and how you will achieve your goals. Your executive summary should include your mission statement and validated statements about the business opportunity and the market.
This section should include a brief account of your business’s roots and how it started. While short, this section should provide insight into your company’s foundation and the direction it will go in the future.
In this section, you should describe the type of dealership you plan to operate. For example, you should explain whether you will sell new cars or used vehicles, or if you plan to operate an online dealership. You should also include any milestones your dealership has achieved and the plans you have for its future. You should also include information about the legal entity structure you have chosen for your dealership.
You should list the specific goals that your company wants to achieve. The goals you list should be measurable, specific, realistic achievable, and phased in terms of time. Each goal should include objectives and milestones to show the path for how it can be achieved. Your dealership’s goals can provide your team clarity about your vision and guidance for your operations.
The market analysis section is critically important for demonstrating that you understand the auto industry, your market, and consumer demand for what you are offering. To write this section, you should research to understand the preferences, whims, and behaviors of your target market. You should also demonstrate knowledge of successful marketing campaigns and describe the demographics and buying habits of consumers in your market.
Your business plan should address both your direct and indirect competitors. Your direct competitors will include other auto dealerships in your area. The indirect competitors will include other ways that people can purchase cars, including online auctions, private sellers, etc.
Discuss the key aspects of your direct competitors’ business models, including their customer base, the types of vehicles they sell, and their apparent strengths and weaknesses. Explaining how your dealership can fulfill a niche that your competitors aren’t providing is important.
In your marketing plan, you should make sure you provide the following information:
• Type of vehicles you offer
• Price range of the vehicles you offer
• Your dealership’s location and how it provides you with a steady stream of potential customers
• Methods you use to attract customers to your dealership (online ads, print ads, television commercials, social media advertisements, flyers, etc.)
In this section, make sure to be specific. You will need to sell your marketing plan to yourself, employees, potential investors, lending institutions, and customers. Make sure to show why your customers would want to purchase a vehicle from your dealership.
Include biographies of each of the key personnel in your dealership. The success of your business will depend on the talent of your executive players who will execute your business strategies. Highlight what each key member brings to your company and its goals.
In the strategic section of your business plan, you should include explicit details of your ideas and plans for success. Describe the methods you will use to achieve your goals. Your business strategies help to hold your business together and provide momentum as you react tactically to any contingency that might arise.
Your business plan should include a financial projections section that accounts for five years, including two years of comparative data and three years of projections based on your market demand and your ability to meet a portion of it.
Succession Plan/Exit Strategy
You need to include information on how your business will handle major changes such as if your business changes hands or loses a key stakeholder. Make sure to include plans for succession so that your business operations can continue even if an owner decides to sell their stake. You can also include an exit plan for investors to help minimize any financial risks of investing in your dealership.
In the financial section of your business plan, provide hard accounting numbers for your dealership. Include a profit and loss statement that states whether your business is currently making money. You should also include a balance sheet detailing your assets, liabilities, working capital, and other financial information. Finally, include a cash flow statement to detail how money flows into and out of your business.
Creating a business plan for your car dealership is a crucial step to take before you open your doors. A good business plan can provide a roadmap to success while also helping you to obtain important financing, surety bonds, and licensure. A business plan can also help to ensure that the members of your team understand your vision and goals and act accordingly.