Looking to open Independent Dealership

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Paul C.

Green Pea
Jun 17, 2018
4
7
First Name
Paul
#1
Hello,

I'm hoping that this might be a good place to post my plan and get feedback on it.

Firstly, I'm from DFW (Texas) I've been in IT for the last 20+ years and currently make a six figure salary. I'm 48 years old. That being said I feel dead, tired of working for someone else and hate my job. 10 years ago I would maybe think about starting an IT company but I've gotten to the point I'm not even interested in that. I do however want to open something where the work I put into it will be make me financially successful and I reap the benefits not someone else.

I have about 150k to start a independent dealership with. I love cars. I trade cars often. I've had 4 in the last year. I have owned about 45 cars in my lifetime and I'm familiar with the car industry to some extent.

My thoughts are this.

Use the 150 to do the following:

1. Find inexpensive place that I can set up as a office/storage area. $1200 month max.
2. Get dealer license and get set up with software etc
3. Put up Website
4. Purchase 4-5 cars initially and list online Ebay, Craigslist, Autotrader, cars.com etc.

My ideal would be to sell 2-3 cars per week initially using profits to increase inventory. Personally I'd like to specialize in the following vehicle types

1. Mid to high mileage luxury vehicles (50 -100k mileage) Audi, BMW, Lexus, Infiinity etc. selling in the 18 -25k range.

2. Lifted Jeeps and Trucks

These seem to sell well around the DFW area.

Questions are:

1. Recommendations on DMS software. I have a leaning towards cloud based software with a reputable company with integration into 3rd party offerings for future growth but open to any and all recommendations

2. Thoughts on purchasing on credit or floor planning? If I did this it would not be all cars but may 2-3 initially. Something I could handle w/out getting out of control. I have an 800 credit score so even w/out flooring I could secure a line of credit if I needed it. My thoughts on this it would help keep me liquid if I need to leverage it.

3. I would be using 50k of that cash to live on the first year. I would be trying to do this w/out making major changes to my current lifestyle mainly because my wife just wants me to get a job but I'm determined to start my own business and keeping income as close to normal as possible will help with keeping my lifestyle normal until I can get things going on the business side.

4. Not really wanting to tote the note because of the type of dealership I would want to open (low visibility mostly Internet sales) but again open to thoughts on this. Nothing is set in stone.

If someone is running a successful dealership in the DFW area and would be open to me buying them dinner or lunch or a short mentoring stint please let me know. I would learn a lot from something like this.

If this is not the place for these questions my apologies. I am also open to other forums where dealers might gather to discuss things. Thanks.
 
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#2
4. Purchase 4-5 cars initially and list online Ebay, Craigslist, Autotrader, cars.com etc.
Click to expand...

I'm not the expert on this stuff, although I did grow up in an independent dealership, but I can tell you that this is an area to be careful in.
This can sink or float the whole business based on who you go with, etc. Depending on your market, some might be more successful than others, so do your research on Cars.com, AutoTrader.com and CarGurus.com and figure out what makes the most sense before signing any contracts.

Paul C. said:
1. Recommendations on DMS software. I have a leaning towards cloud based software with a reputable company with integration into 3rd party offerings for future growth but open to any and all recommendations
Click to expand...
I'm a big fan of DealerBuilt DMS, but I believe I've seen a number of people recommend DealerMate or something like that.
Since you have a chance to start fresh, make sure you research this and pick the right vendor, especially focusing (as you said) on 3rd party integrations.

Paul C. said:
3. I would be using 50k of that cash to live on the first year. I would be trying to do this w/out making major changes to my current lifestyle mainly because my wife just wants me to get a job but I'm determined to start my own business and keeping income as close to normal as possible will help with keeping my lifestyle normal until I can get things going on the business side.
Click to expand...
Look into the tax implications and determine what makes the most sense as far as leaving money in your bank, putting it into the company and expensing more of your lifestyle, setting up a home office, etc.

Paul C. said:
4. Not really wanting to tote the note because of the type of dealership I would want to open (low visibility mostly Internet sales) but again open to thoughts on this. Nothing is set in stone.
Click to expand...
Get a good website that gives you the freedom to do what you want, but don't go paying $1000 a month when you're an independent.
A number of vendors offer lower level packages for independents and you should start there before going after the Ferrari of websites.
Your website is absolutely critical (as you've noted - mostly internet sales) so make sure you have something that gives you control to build up content, SEO, proper schema markup, etc.

Right out of the gate (once you have an address) you need to go ham on all the location stuff - @Alexander Lau can point you in the right direction on that.
For advice on things I know nothing about, maybe @Glen Dakan can chime in - this seems like something right up his alley.
 
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#3
IMO, make every attempt to crawl, walk, run. Avoid real estate until it's needed to make more *profits*. I like your game plan, but, be aware that your lack of experience is going to cost you time and money. Consider finding a Dealer Principal that YOU like and pitching your concept to them. You may find a mentor or an absentee partner :)
 
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#4
IMO, one of the most important things about this, your drive, determination and love for automotive retail. Without that, you'll never get anywhere.

You should weigh the pros and cons, the positives and negatives. Time is your enemy, you'll only have so much start-up capital to burn (and amount of shit you'll put up with from your wife) before you start making profit to keep the biz alive, avoiding the dead pool. Don't start a business unless you're willing to run the gauntlet.
  • DMS -- I wouldn't worry about anything super robust until you have more inventory, but plenty of threads and ratings here (unfortunately, the dealers that I have worked with had some fairly awful installations. I'd rather not mention or suggest those. I have ZERO experience with good ones.):
  • Credit / Physical Location -- sounds like you're in a good situation with an 800 credit score. However, living off of $50K ain't going to be easy, unless you've another source of income outside of this venture...? So, you've but $100K to set this all up? Are you going to be working full-time and attempting to run a used car lot? It's going to be compulsory to be on site, unless you have some car lot boy that will ping you per walk-in lead or add to CRM.
  • Automotive Classifieds / Listings -- I'm not so sure you should consider classified sites such as Autotrader, Cars.com, Edmunds or Car Gurus, etc., until you've a greater amount of units. The start-up costs are going to be too high. Plus, what works in one demographic might not in another (too risky for you now). I'd stick with paid CL listings, eBay motors and other online classified sites.
  • Website -- I wouldn't go crazy with such a low amount of units. You might find it challenging to get enough content to create a website that would be respected by the search engines. I would keep your website as usable and simple as possible.
  • Vehicles -- I would agree with your assessment on DFW vehicles (luxury sedans, trucks, suvs).
  • Local Listings / Local SEO -- I used to white label Vendasta (great company) and pitch to dealers. Their listing distribution service is great and push to the large aggregate groups @ https://www.vendasta.com/marketplace/listing-builder/business-listing-distribution (granted, there are many like this, but it takes into account automotive-centric 3rd party sites = fairly cheap, ask for Brendan King (CEO), tell him you know me he might give you a lower price, I gave him a lot of business previously).
Good Luck!
 
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#6
craigh said:
Let's be real here - hundreds of thousands of people live off $50k a year.
I'm pretty sure $50k is the median household income for the country.
Click to expand...
I was definitely assuming, but he mentioned Dallas–Fort Worth–Arlington, TX, that's not the cheapest place. Bootstrapping is smart, but not if it puts you in a hole. I'm guessing you make a lot more than that now..?
 
#8
Alexander Lau said:
I was definitely assuming, but he mentioned Dallas–Fort Worth–Arlington, TX, that's not the cheapest place. Bootstrapping is smart, but not if it puts you in a hole. I'm guessing you make a lot more than that now..?
Click to expand...

Thanks for your reply.

I wasn't very clear about the breakdown on my money. I make about $120k now. After you subtract out 401k, taxes, insurance, and about $800 dollars a month of discrecinary income I take out of my check now plus a $600 car payment I won't have to worry about, my checks come to about $4166 per month spendable cash which the 50k should cover for a year. Next, my wife also makes a 6 figure salary. Problem is we've lived up to that income :) but I have enough for a year to a year and a half with no additional income.
 
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#10
Alexander Lau said:
IMO, one of the most important things about this, your drive, determination and love for automotive retail. Without that, you'll never get anywhere.

You should weigh the pros and cons, the positives and negatives. Time is your enemy, you'll only have so much start-up capital to burn (and amount of shit you'll put up with from your wife) before you start making profit to keep yourself alive, avoiding the dead pool. Don't start a business unless you're willing to run the gauntlet.
  • DMS -- I wouldn't worry about anything super robust until you have more inventory, but plenty of threads and ratings here (unfortunately, the dealers that I have worked with had some fairly awful installations. I'd rather not mention or suggest those. I have ZERO experience with good ones.):
  • Credit / Physical Location -- sounds like you're in a good situation with an 800 credit score. However, living off of $50K ain't going to be easy, unless you've another source of income outside of this venture...? So, you've but $100K to set this all up? Are you going to be working full-time and attempting to run a used car lot? It's going to be compulsory to be on site, unless you have some car lot boy that will ping you per walk-in lead or add to CRM.
  • Automotive Classifieds / Listings -- I'm not so sure you should consider classified sites such as Autotrader, Cars.com, Edmunds or Car Gurus, etc., until you've a greater amount of units. The start-up costs are going to be too high. Plus, what works in one demographic might not in another (too risk for you now). I'd stick with paid CL listings, eBay motors and other online classified sites.
  • Website -- I wouldn't go crazy with such a low amount of units. You might find it a challenging to get enough content to create a website that would be respected by the search engines. I would keep your website as usable and simple as possible.
  • Vehicles -- I would agree with your assessment on DFW vehicles (luxury sedans, trucks, suvs).
  • Local Listings / Local SEO -- I used to white label Vendasta (great company) and pitch to dealers. Their listing distribution service is great and push to the large aggregate groups @ https://www.vendasta.com/marketplace/listing-builder/business-listing-distribution (granted, there are many like this, but it takes into account automotive-centric 3rd party sites = fairly cheap, ask for Brendan King (CEO), tell him you know me he might give you a lower price, I gave him a lot of business previously).
Good Luck!
Click to expand...


Thanks. I appreciate the time you put into this reply. I'll look at the links and info closely.
 
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