Taking over or opening a car dealership: 5 steps to a successful entrepreneurial career

You've got a plan: to open a car dealership. So far, the idea is appealing, but very quickly you start wondering where to start, and also how much it might cost you...

Don't worry, here are 5 key steps to take to make sure you get your business off to a good start .

So, to get your project on the road to success, follow the guide!

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How do you 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 your own 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 additional services, etc. ;
• business management and accountancy: drawing up a budget, optimising cash flow, etc.

• Are you interested in taking over or starting your own business? You have two options:
• take over an existing car garage
• or become a dealer, by signing a dealership contract with a brand.

• Which legal status should you choose? You can choose between the following legal forms:
• as a company: create a SARL (the most common), or an SAS (a simplified joint stock company);
• as a sole trader ;
• as a micro-business.

This choice is very important: it will depend on your business model and your needs, as well as your initial investment and the financial risk involved.

☝️ 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 start-up project, this is necessary to ensure that your project will be well received by the market.

In this way, you can assess :

• the chances of success and sales of your offer,
• the best strategy to adopt, particularly to distinguish yourself from the competition.

If you do it yourself, make sure you analyse :

• the needs of your typicalcustomers (buyer persona): their profile, expectations, consumer habits, etc. ;
• your competitive environment: existing dealers, in which areas, how many cars are 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 specialist websites 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 going through 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 here to a crucial stage in the construction of your project to open a car dealership.

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 is 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 business, your background, experience and skills, your partners 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 customer base and the competitive environment;
  
  
• financial forecasts for 3 or 5 years: an estimate of sales, the margin achieved, all income and expenditure projections (overheads, staff, rent, tax, etc.), and your search for finance.

Zoom in on the costs of opening a car dealership

🤔 At this stage, 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 shopping centre or a city centre;
• thelayout of your premises: furniture for your offices, your sales areas or showroom, the repair workshop, the equipment required, etc. ;
• stock: new or used cars, as well as spare parts, tools and special vehicles;
• staff: the cost of recruiting skilled labour 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 the concept for your dealership

At this stage, you think 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 points to bear in mind:

Choosing the make

If you go for a major brand, such as Peugeot, Renault or Honda, you'll need to work harder to show the brand that your project is sound. Once the brand is convinced of your viability, you sign a dealership contract.

☝️ Note: a dealership is similar to a franchise, but there are a few differences: territorial exclusivity for the sale of products in a given sector, exclusivity of supply, a fixed (between 5 and 10 years) or open-ended contract duration, and generally no entry fees.

Choice of services

As well as reselling vehicles, you can offer additional services, such as maintenance, repairs, or the sale of products and spare parts, at competitive prices.

Ḗtape no. 4 - Know your regulatory obligations

This is the (perhaps) slightly less fun part: making sure that everything is up to scratch 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 lifts,
• the single document, etc.

There are also specific rules for second-hand sales, including

• 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 specialised tools

Getting your business off to a flying start? It's possible with the right tools!

Setting up and running a business 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 must appear on an invoice
• meeting the accounting obligations of self-employed entrepreneurs, 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.

Although it represents a certain initial investment, it will quickly become the essential all-round tool for managing all aspects of your car dealership business.

🛠 For example, Spider VO is a 100% web-based platform that digitises and optimises all your processes: fleet management, sales management, accounting management, task management and shared planning, etc.

One of its key differentiating features? The solution integrates all the key modules to ensure your long-term growth: a CRM to organise 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.

Acquiring it right from the start of your business is the best way to ensure that it lasts and keeps on going! 😉

See all software Automotive

To sum up 📝

You're now in the starting blocks, with the desire to launch your car dealership business. You know that you don't need any qualifications, 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;
• Drawing 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 the concept for your dealership, so you know which brands to partner with, and what additional services you will be offering;
• 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 devise a well-oiled strategy to put your vision into action... and make sure that everything runs smoothly!