How to Write a Car Dealership Business Plan
Opening a car dealership showroom is more than just putting for sale signs on a few vehicles parked in your driveway. When planning such businesses, you must comprehend and adhere to your state’s legal requirements and receive the relevant licenses. Furthermore, you must establish a suitable legal business structure, select a location, and choose the kinds of automobiles you want to sell.
To operate your business without any legal complications, you must obtain a car dealer license each year from your state to sell vehicles commercially. An insurance firm assesses your company to determine its financial stability, experience, and reputation before agreeing to offer you a bond—moreover, requests to see your business plan to decide whether they’ll finance your business.
There are many benefits to developing a car dealership business plan. One significant advantage is to have something to show a potential investor. In this article, we will talk about the following:
- What is a car dealership business plan?
- Why is it crucial to have a car dealership business plan?
- What should you include in your business plan for a car dealership?
What Is a Business Plan for a Car Dealership?
A business plan outlines your five-year growth strategy and a current picture of your auto dealership business. It outlines your company’s objectives and your plan for achieving them. Furthermore, it includes market research to help you with your goals.
Why Do Car Dealerships Need a Business Plan?
A business plan includes setting goals and objectives, defining strategies, creating an operational system, and identifying your target market. Moreover, it determines the capital requirements for starting a car dealership. Also, it acts as a guide for the company’s future and helps the company in achieving its long-term objectives.
What Should You Include in a Car Dealership Business Plan?
Successful business owners carry out a well-planned corporate strategy. Making a comprehensive plan for your car dealership business is the most incredible method to organize your business strategies. It can help reduce the chances of failure and mitigate financial risks.
Here are the sections you must include in your car dealer business plan. These sections will assist you in laying out your strategies and establishing a winning strategy.
It offers a quick preview of your business plan that lenders and investors can review to assess business viability. Potential investors and financiers may lose interest if you do not give explicit, detailed, and easy-to-scan material.
The executive summary is the first and most crucial component. However, business plan writers prefer writing it in the end, and it is because it summarizes every section of the business plan.
In this section, you should describe the kind of auto dealership you are running. The reader should know if you’re an online dealership selling new or used cars. This section should also respond to the following queries:
- Why do you want to open the dealership?
- The legal makeup of your dealership;
- The accomplishments it aims to make;
- The objectives it has for the future.
List the precise objectives that your organization wishes to accomplish. Your list of objectives should be quantifiable, detailed, time-phased, and realistically achievable. Every goal should have objectives and checkpoints that outline the steps needed to attain it. The purposes of your dealership can help your employees understand your vision and give direction to your operations.
Goods & Services Your Auto Dealership Company Provides
Outlining your auto dealership business’s products and services is the following step. It’shelpful to consider the following issues while considering the goods and services you provide:
- What is the business about?
- What goods and services do you provide?
- Why do you offer these specific goods or services?
- How does your company differ from your competitors that offer comparable products?
- What promotional strategies will you use to advertise your goods and services?
You might choose to evaluate your business plan compared to nearby competitors or online reviews. You can learn what others like and dislike about them. Moreover, it allows you to improve or avoid failing product strategies.
You must include a summary of the automotive industry in this section. This has several benefits, even if it may appear needless.
First, you gain knowledge by investigating the automobile dealership sector, and you gain a better understanding of your industry’s market.
Second, market research can strengthen your approach, especially if it reveals market trends. For instance, ensuring your strategy includes many possibilities would be beneficial if there was a trend toward autos.
The third reason for conducting market research is to demonstrate to readers your industry knowledge. Conducting the study and presenting the findings in your strategy will help you accomplish it.
You must include the answers to the following inquiries in your industry analysis section.
- How much money is the auto dealership industry worth?
- Is there a decline or growth in the market?
- Which companies dominate the market?
- What trends are influencing the sector?
- Do you expect business growth over the following five to ten years?
- How much do you expect your car dealership business will grow in the following years?
- What is the size of the target market?
- How much potential does your car dealership business have?
You can calculate such a figure by estimating the market size throughout the entire country. Furthermore, you can apply that number to your local population.
Your business plan needs to address both your direct and indirect competitors. Your direct competition will be other vehicle dealerships in the area, and your indirect competitors will include individual dealers, online auctions, etc.
In this part, you should also review the critical elements of your primary competitors’ business models. The clients they serve, the types of cars they offer, and their advantages and disadvantages should be the main topics.
A thorough competition study is essential, and it could help you identify and meet customers’ needs or preferences that none of your competitors currently address. The following are a few of the questions you must respond to in this section:
- How many businesses are already operating where you wish to start your auto dealership?
- Are they independent or franchised businesses?
- Do they collaborate with particular automakers?
- What kinds of cars (luxury, affordable, pre-owned, brand-new, etc.) do they offer?
- What is the typical pricing range of the autos they sell?
- How many workers do they employ?
- Do they provide maintenance and repairs?
- Do your competitors offer buybacks on the vehicles they’ve previously sold to customers?
- What deals and promotions do they use to attract potential customers?
- How many automobiles or other vehicles do they typically sell each month?
In this section, you talk about your target customers, and customer satisfaction. Does your dealership cater to used car and luxury automobile buyers? Are clients with bad credit your target market? Here are some details to include in your customer description:
- the cars they are looking for
Consumer research will give you specifics about your target market.
Product, Pricing, Place, and Promotion are the four Ps that traditionally make up a marketing strategy. Your marketing strategy for a car dealership should contain the following:
- Product: In the product section, you should restate the kind of auto dealership you described in your business plan. Secondly, go into depth about the particular things you’ll be selling. For instance, will you provide leasing alternatives along with new car sales?
- Price: List the prices you’ll be willing to provide and how they stack up against your competitors. With your marketing plan, you essentially present the inventory you will have on hand and the price ranges in the product and cost sub-sections.
- Place: It refers to your vehicle dealership’s location. Include your location and explain the importance of that particular area on the success of your business. Consider whether your auto dealership is near a busy shopping area, on a major road, etc. Talk about how your business might attract a regular flow of customers.
- Promotions: The section on promotions is the last in your marketing strategy for your auto business. Here, you will outline your marketing and social media plan for attracting clients to your business.
A solid management staff is crucial to proving your vehicle dealership’s capacity for commercial success. Many small firms collapse as a result of poor management.
Having a capable management team is essential. You will emphasize your unique qualifications for managing your dealership here. The sales managers you hire to run your auto dealership should have experience and a degree, so highlight those elements.
Explain each person’s responsibilities, roles, and tasks. Likewise, highlight their prior experience and discuss how they were successful in those positions. Include the leading executives from the management group of your dealership as well.
Here, you give your step by step breakdown of your 5-year financial statement. It should be subdivided into quarterly or monthly segments for the initial year and then annually for a comprehensive overview of your financial plans. Your cash flow, income, and balance statements comprise your financial information.
A profit and loss statement, called P&L, displays your revenue before deducting your expenses to determine your profitability rate.
It would help if you created projections when creating your income statement. Will you, for instance, sell ten cars every week and service 15? Do you expect a 2% or 10% annual growth in sales? The financial estimates for your company will have a significant impact on the assumptions you choose.
Try to establish your assumptions based on reality by conducting research to the greatest extent possible.
You can see your liabilities and assets on the balance sheets. While balance sheets may contain many details, try synthesizing them to address the most critical points. For instance, spending $50,000 to outfit a used vehicle store won’t result in profits.
Instead, consider it an investment that should bring you income for many years. In the same way, you do not have to immediately return a $50,000 check that a lender writes you. Instead, that is a debt you will eventually have to settle.
Cash Flow Statement
Your cash flow statement estimates how much cash you’ll need for your firm and ensure you never run out. Most business owners and entrepreneurs are unaware of the possibility of making a profit while running out of funds.
Include a few of the significant expenses required for your car business while preparing your financial report and balance sheets:
- Inventory and office supply costs;
- payroll or salaries paid to employees;
- business insurance;
- other expenses (if your company is a new one), such as license fees and permits, and computer software and equipment
This concludes the business strategy for your auto dealership. This section includes information about the kinds of vehicles your business offers, who buys them, and their price. Moreover, it discusses your marketing approach, travel plans, and means of transportation. Therefore, when writing this section, you must respond to the following questions:
- How much money do you require?
- What financial instrument(s) are necessary: ownership, debt, or even a governmental grant for free money?
- For how long is this cash available?
- What are other sources available to raise funds?
- Where does the remaining investment come from? If you apply for an SBA loan, is it your own money or investors in the private sector?
The Bottom Line
It is essential to conduct research before beginning any business. One of the most important things you should do before starting your auto dealership is to write a business plan. It can serve as a road map for achievement. Moreover, it can assist you in obtaining crucial funding, surety bonds, and licenses.
A business plan can ensure that your team members comprehend and execute your objectives and vision appropriately. Nevertheless, a vehicle dealership may be a potentially profitable and satisfying business with the proper marketing and promotion strategies and top-notch customer service. Additionally, a business strategy can be helpful for companies of all shapes and sizes. This paperwork will be crucial to getting your firm off the ground but will also help manage it in the long run.