Taking over or opening a car dealership: 5 steps to a successful entrepreneurial turn
You've got a plan: to open a car dealership. So far, the idea is appealing, but very quickly you're wondering where to start, and also, how much it might cost you...
Rest assured, here are 5 key steps to take, to ensure you get off to a flying start .
So, to get your project on the road to success, follow the guide!
How to open a car dealership? The prerequisites
Before you get your hands dirty (so to speak), here are the first questions to ask yourself:
- What qualifications do you need to open a dealership? The good news is that no specific qualifications are required, but professional experience in the field will be very useful. Otherwise, we recommend that you acquire or consolidate the following skills:
- mechanics: changing and repairing vehicle parts, etc. ;
- sales and negotiation: knowing how to negotiate, advise a customer, offer complementary services, etc. ;
- business management and accounting: drawing up a budget, optimizing cash flow, etc.
- Are you interested in taking over or starting your own business? You have two options:
- take over an existing automotive garage,
- or become a dealer, by signing a dealership contract with a brand.
- Which legal form should you choose? You can choose between the following legal forms:
- as a company: set up a SARL (the most common), or an SAS;
- as a sole proprietorship ;
- as a micro-business.
The choice you make depends on your business model and needs, as well as your initial investment and financial risk.
☝️ Please note: the legal status you choose will have a direct impact on your administrative obligations, your tax regime and the taxation of your business.
Ḗtape no. 1 - Conduct market research
Once these prerequisites are clear to you, get down to carrying out an in-depth study of your market, in the geographical area where you want to set up.
As with any business creation project, this is necessary to ensure that your project will be well received by the market.
In this way, you can assess :
- your offer'schances of success and sales,
- the best strategy to adopt, particularly to stand out from the competition.
If you do it yourself, be sure to analyze :
- the needs of your typicalclientele (buyer persona): their profile, expectations, consumption habits, etc. ;
- your competitive environment: existing dealers, in which zones, how many cars sold each year, etc,
- the identified demand for your services (including repair and maintenance): is it already there and sufficient for what you intend to offer?
To find out more, don't hesitate to pick up all our useful tips in our dedicated article on how to build a market study that holds up.
💡 To gain an in-depth understanding of what's at stake in your market, don't hesitate to consult specialized sites for information on the automotive market and its trends in 2021-2022.
For example, the Comité Français des Constructeurs Automobiles informs us that the car dealership market is experiencing a slowdown phase at the end of 2021, but that used car sales are doing well.
Ḗtape no. 2 - Drawing up a business plan
Let's move on to a crucial stage in the construction of your car dealership opening project.
Whether you want to open or take over a dealership, the business plan is a decisive document for demonstrating the soundness, coherence and profitability of your project.
It's also an ideal way of convincing future investors to support and finance your project.
The main parts of your business plan
👉 Here are the main stages you can follow:
- your personal presentation as founder of the company, your background, experience and skills, your associates and your vision ;
- presentation of your project: your offer (sale of new or used vehicles or both?), its strengths and weaknesses, the results of your market survey, a description of your clientele and the competitive environment;
- financial forecasts for 3 or 5 years: estimated sales, margin, projected income and expenses (overheads, staff, rent, taxes, etc.), and your search for financing.
Zoom in on the costs of opening a car dealership
🤔 At this point, you're probably wondering (and rightly so): "But, how much does it cost to open a car dealership?".
To give you an initial order of magnitude, here are the key elements to include in your calculation:
- location: prices will vary depending on whether you're in a commercial zone or in the heart of the city;
- thelayout of your premises: furniture for your offices, your sales areas or showroom, the repair workshop, the equipment required, etc. ;
- inventory: new or used cars, but also spare parts, tools and special vehicles;
- personnel: the cost of recruiting qualified staff to run your business, such as a sales team, technicians, administrative and marketing staff;
- communication: you'll need to spend money on different channels (posters, emailing, website, events, etc.) to start making yourself known and attracting customers;
- administrative formalities: depending on your status, registration will not cost the same.
Ḗtape 3 - Choosing your dealership concept
At this stage, you're thinking about what will form the core of your business. Do you want to partner with one brand or several, and which ones? What other services will you offer? Will you sell new or used vehicles (or both)?
🚦 Here are a few guidelines to keep in mind:
Brand choice
If you're going for a major brand, such as Peugeot, Renault or Honda, you'll need to work harder to demonstrate to the brand that your project is sound. Once the brand is convinced of your viability, you sign a dealership contract.
☝️ Please note: a dealership is similar to a franchise, but with a few distinctions: territorial exclusivity for the sale of products in a given sector, exclusivity of supply, a fixed (between 5 and 10 years) or indefinite contract duration, and generally no entry fees.
Choice of services
In addition to vehicle resale, you can offer complementary services, such as maintenance, repair, or the sale of products and spare parts, at competitive prices.
Ḗtape no. 4 - Know your regulatory obligations
This is the part that's (perhaps) a little less fun: making sure that everything is up to code in terms of regulations.
In terms of safety, from the moment you open, your establishment must comply with the requirements for ERP (establishments open to the public), to prevent risks to your business, your customers and your employees. These include
- electrical installations
- automatic doors
- vehicle elevators,
- single document, etc.
There are also a number of rules specific to second-hand sales:
- registration formalities: to be carried out at the Centre de Formalité des Entreprises (CFE) of the CCI (Chamber of Commerce and Industry) or at the clerk's office of the commercial court on which your business depends;
- keeping an automobile police book.
Ḗtape 5 - Equip yourself with specialized tools
Getting your business off to a flying start? It's possible with the right tools!
Business creation and management with Excel
You can use the following resources to help you develop your project (free advice and templates):
- create a balance sheet forecast;
- draw up a financing plan;
- draw up a cash flow plan ;
- find out what information must appear on an invoice;
- complying with auto-entrepreneur accounting obligations, etc.
Complete management of your dealership with dedicated software
Even better than spreadsheets? DMS software, specially designed to meet the needs of car dealers, repair shops, auto garages and used-vehicle distributors.
While it represents a certain initial investment, it will quickly become the indispensable all-round tool for managing all aspects of your car dealership business.
🛠 For example, Spider VO is a 100% web-based platform that digitizes and optimizes all your processes: fleet management, sales management, accounting management, task management and shared planning, etc.
Among its differentiating features? The solution integrates all the key modules to ensure your long-term growth: a CRM to organize your customer relations, a lead manager and marketing automation tools, and finally an automotive CMS to create your website and put you on a par with your online competitors.
Acquire it right from the start of your business, and you'll be sure to make it last and thrive! 😉
In a nutshell 📝
You're now in the starting blocks, ready to launch your car dealership business. You know you don't need a diploma, but you do need a strong interest in mechanics!
Here's a summary of the 5 key steps to a successful launch:
- Carry out a market study, to validate the feasibility of your project;
- Draw up a business plan, to lay the foundations of your project, establish your vision over 3 to 5 years and convince investors to finance you;
- Choosing your dealership concept, so you know which brands to partner with, and what complementary services to offer;
- Find out about your regulatory obligations as an ERP, particularly in terms of safety;
- Acquire the right tools, especially dedicated software, to support the management and development of your new and used car business.
All that's left is to develop a well-oiled strategy to put your vision into motion... and make sure everything runs smoothly!
Article translated from French