4 min read

Think Before You Act: The Top Things to Consider Before You Open a Car Dealership

Think Before You Act: The Top Things to Consider Before You Open a Car Dealership

There are currently more than 18,000 car dealerships throughout the U.S. Have you ever considered opening your own?

Opening and running your own car dealership provides you with new opportunities to build a brand and increase your income, and it allows you to be your own boss.

There are definitely plenty of perks that come with opening a car dealership, but it takes a lot of hard work, too. You need to make sure you’re up for the challenge before you commit and open a car dealership of your own.

Read on to learn some essential things everyone ought to know and consider before they decide to open a car dealership.

Are You the Right Person for the Job?

Before you go all in and decide to open a dealership, it’s important to assess your strengths and weaknesses and consider whether or not you’re the right person for this job.

Do you have what it takes to stay organized, keep a business running smoothly, and still find new ways to increase leads and make sufficient sales?

In order to run a successful car dealership, you’ll need strong sales skills and a solid background in the car sales business. Knowledge of the service side of things is helpful, too. Also, the more experience you have managing others, the better.

Understand the Costs

Opening a car dealership isn’t cheap. Make sure you thoroughly understand the costs of running a dealership before you decide to open one.

Some costs you’ll need to consider include:

  • Costs of inventory
  • Cost of the sales facility
  • Employee salaries and benefits
  • Costs of surety bonds with your state’s DMV

Don’t forget about the cost of insurance and the fees you’ll have to pay to other professionals, including lawyers, accountants, and bookkeepers.

Location, Location, Location

The location of your car dealership can have a huge impact on its success.

Do you want to open a dealership in your home state? Would you like to relocate and open a dealership in a state that’s known for being more profitable or having a better climate for business owners?

If you’re considering relocating to a more profitable state, remember that it can be more difficult to get your business set up there. You’ll have much more competition and it may be harder to make a name for yourself.

It might be better to get started in an area where there’s less competition and higher demand.

Choose the Type of Dealership You’ll Run

A lot of people make the mistake of not knowing what kind of dealership they want to open. They know they want to sell cars, but they don’t give much thought to the kind of cars they want to sell or who their target customer is.

Think carefully about these things before you get started.

Do you want to sell used or new cars? Do you want to sell luxury vehicles to high-income customers, or would you rather work with middle-income individuals?

Create a Business and Financial Plan

A solid business plan and financial plan is a must for anyone who wants to open and run a successful car dealership (or any type of business, frankly).

These plans help to provide you with guidelines to follow when starting your business and help you set specific short- and long-term goals.

You’ll also need to present a business and financial plan to your bank or credit union in order to secure funding. Any potential investors you meet with will want to see these documents, too.

Understand Licensing Requirements

Don’t forget that you’ll need several different licenses before you can open your car dealership. This includes a business license and a dealer’s license.

Every state has different requirements you’ll need to meet before you can obtain these licenses.

In most places, though, you’ll need to provide information regarding your lease, provide a copy of your franchise agreement (if you’re selling new cars), and pass a criminal background check.

You’ll need to have a thorough understanding of the dealer licensing and operating laws in your state, too.

Do plenty of research beforehand so that you can make sure you’re always in compliance with the law.

You’ll need to continue researching and learning about changes to the laws as well. If you’re not willing to do this, you could end up in serious trouble later on.

Remember that Credit Scores Matter

If you decide to pursue opening your own dealership, you’ll need to remember the importance of your business credit score. A high business credit score will make it easier for you to secure funding. It will also help you ensure you can renew bonds and licenses.

Make Plans for Your Inventory

Running your own car dealership is quite the balancing act. You’ll have to juggle tons of different responsibilities at once, including making sure you have plenty of inventory available at all times. Make sure you know how to track your sales and figure out when you need to restock.

Learn About Branding and Marketing

Finally, branding and marketing knowledge will be essential if you want people to know about and trust your dealership. It’s not enough just to be good at selling cars — you also have to get people in the door who are interested in buying cars.

Often, when dealerships fail, it’s because the owners didn’t know how to market them effectively. If you lack branding and marketing skills, you’ll definitely need to hire someone who has them.

Are You Ready to Open a Car Dealership?

After reading through all the things you need to know and consider before you open a car dealership, do you think you’re ready to take the plunge?

If you keep these guidelines in mind, you’ll have a much easier time getting things going and making sure your dealership is successful.

Remember, though, that preparation is key when it comes to starting any business venture, including opening a car dealership.

If you’re not fully ready to open your own dealership, sign up for one of our training courses today.

We offer executive training, management courses, sales process courses, and more. Contact us today to learn about your options or to get registered.