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Small Dealer Needs Advice

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#12
More thoughts...

To clarify why I am coming to you guys...I think I know the answer to my own question, but I am a novice and the dollars are large enough that I am not comfortable rolling the dice based on my instincts alone.

My instincts tell me that I am not "right-sized". My overhead is reasonably low (say $3K a month all in) but my revenue and volume isn't enough to cover it. I am at capacity, man-power and car storage wise, so to just say I need to sell more cars means there must be an increase in manpower and facility, which of course would increase my overhead, and so on and so forth. But I think there is a sweet spot somewhere that makes sense for me as a small dealer. What does that sweet spot look like and what services should I offer to make it work?

At first blush, finding a car lot for rent seems like a good intermediate step before making the leap to buying/building my own place. But then I think of the $36,000 - $48,000 in rent per year...that would go a long way towards buying and building something.
 
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#15
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#16
Ron Wynn said:
Good morning All! I was very pleased when I found this forum this morning and I am hoping to get some great feedback.

I am a struggling small dealer trying to find the right formula to just make a profit. I've been in business two years and, not only did I not make money, I literally LOST money both years.

I am 59 years old and passionate about cars. I retired at the end of 2016 from a career in construction. I am independent financially, so I'm lucky from that regard. My retirement plan did however include that I would generate SOME small income from some venture. I always thought I would start a small dealership and that is what I did. I took $120,000 from my savings and started the business. If it weren't for the loss of money, I'd be having a blast because I love doing this.

I've been searching online for some type of service to help someone like me. A person or company with current used car business savvy that can look at what I'm doing and tell me where I'm falling short. I keep telling myself "its just buying and selling cars, how hard can this be?"

Real estate if very expensive here. Any lot worth having will cost about $3,000 a month. I currently rent a small warehouse where I keep my cars for $725. I rent a small office suite two blocks from my house as my business address but I can't display or store cars there. I show my cars by appointment only because I don't have a public car lot with regular hours.

I have accounts with Black Book, Carfax, CarGurus and Autotrader. These are very expensive. I have good insurance and it is also very expensive. I am a one man shop and I do everything myself (my wife helps too) including detailing the cars.

Last year, I sold about 40 cars. Not factoring in overhead, I averaged around 700 in profit for each car (that does account for direct expenses/repairs on the car). But 3.5 cars a month doesn't cover my overhead and I worked my butt off just to have the privilege to cover the loss.

Deals so far have all been cash deals. Not really interested in BHPH. I have started building relationships with a couple of lendors though.

I hate to close it down. I love doing it. I love keeping busy. I love the cars. I love meeting new people and dealing with customers. I have gotten very positive feedback on my personal attention to the customer. I can't justify continuing to lose money doing this. It is starting to feel like an expensive hobby.

I have an idea to buy a piece of commercial property and put a small metal building on it. It would be a physical location dealership, but small in scale. To make it work, I'd have to sell about 20 - 25 cars a month at a better profit (+/- $1,000). It will have to hire staff. To build the lot, I'm figuring around $500K (the land would cost $250K). I hesitate to go through with this plan given my profitability so far and my lack of experience in the car business, but on the other hand, I can always sell this building if things didn't work out. Still, not something to go into lightly.

It might be helpful to have a mentor or even a paid service to help guide me on what I need to do. Any comments or advice would be deeply appreciated.

Thanks.

Ron
Click to expand...
Jeff Kershner said:
Ron, that's one hell of a loaded question. Reading your post and reviewing your website, it's obvious that you're very passionate about this.

Reviewing your website, do you only have 4 cars in stock?
Click to expand...

Jeff/All - I believe there are probably many others out there like me. People who love cars and wanting to build a successful small business around their passion, but lacking in the practical experience. What would be really helpful is to have a mentor style relationship with a successful used car business person...someone to guide and to run ideas by. Does anyone know if there is a service (paid or pro bono) that connects eager upstarts like me with seasoned pros? Thanks everyone for your feedback so far. I really appreciate the community.
 
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#17
Ron,

As someone who has worked in the franchise world on the sales side, I opened up an independent dealer mid last year. I can say it is a very different game, and has been a learning curve of how to profit. The other side has been learning which cars sell better for me. There are going to be lots of variables based on your market.

One thing that I would suggest is to get some financing going. You are limited in who can sell cars to. And you are missing on profit potentials by selling auxiliary products and services. It does not have to be bhph. Make partnerships with credit unions if you don't want to do it in house.

I would recommend before you invest in more costs, make what you have work and get profitable. It sounds like you haven't found the strategy/mix. And be careful hiring someone to help your business, there are lots of sharks that will overcharge for thing out there ;-)
 
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#18
Hi Ron,

Here are my initial thoughts. First, it takes cars to sell cars meaning adding more available inventory to your business. Right now with only four cars in stock, it is more of a hobby of curbing cars that actually a used car dealership. To make the leap I do suggest more vehicles. To achieve that it can come from three ways. You can put on your website that you buy cars directly from people like Carvana your advantage is your size and start to advertise that everywhere. The second is to hit the auctions to try to find cars that fit your shopper desires. I am sure you already have a list of people that have told you what type of vehicle they are looking for so that might give you a starting point. I find dealerships that specialize tend to fair better when small. Meaning late model high-end vehicles, trucks, jeeps, cars under 10k, etc that trying to have something for everyone. Specializing can and will enable you to build your reputation faster and gain marketplace momentum. The third is the obvious trade-in and that will align with your specialization. Again people who want late model high-end sedans usually drive them already so working the trade-in needs to become part of your plan.

Next, your website is very basic you need to spin up the RON story. Why are you different, Why buy from you, why should I trust RON over the big guys. You are small, you deliver concierge service, etc. You need to find your marketplace voice to stand out amongst everyone else trying to sell cars.

You need a Google My Business page set up to start driving more traffic and get more eyeballs on you. Right now if I Google your business name Cargurus in #1 and AutoTrader are #2 they aren't your friend. They are taking your traffic. So you need to use the tools to fight back and get those eyeballs focused on you and your customer reviews.

Stop doing everything. I know it is fun to detail cars but it is a terrible use of your time. Hire someone part-time to do the bulk of it and you can just do the "Make it Perfect Work" afterward to make it front line ready. Time is money and I know you know that from construction.

This is the point you need to work on your business and not in it.

Work your customers for more customers. You need to create a steady stream of referrals to survive in this business and that should be a critical part of your sales process.

I hope that helps.

Todd
 
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