What does it take to start a dealership?

[Geronimo]

This message is mostly for those already running a dealership but any comments would be very helpful. I am probably 6 months away from losing my job due to corporate downsizing. I am set to get my Associates Degree in April 2008 in Business Management. Here in central Ohio there are only two or three other scooter dealerships that are strictly dedicated to scooters, none on my side of town. Can someone tell me what it would take to get one off the ground? How can I get a mechanic employed? How do I get a system going? With the cost of gas rising it only seems natural that more people will turn to scooters as an alternative method of travel. Your help is greatly appreciated.

[T W I S T E R]

most manufacturers require an ample inventory on hand, a store front with good location, credit history and money in the bank.

if you sell (2) brands you will need about $ 150,000 start up money. also, enough cash in the bank to operate about 18 to 24 months without much in the way of sales. That's rent-utilities-insurance-maintenance and repair. Your income has to come out of the total invested as well.

a good mechanic will probably not work for you because of having no history. they want a job that lasts.

not a pretty picture but can be done if you do everything right.

store front is super important as well as inventory and quality of the scoot. You have to look successful to be successful.

DO NOT FINANCE YOUR HOME to start a business. Put in in your wifes name before you start.

[kurt]

1) You need a business plan. Twister's right - you should figure on not seeing any personal income for two or three years. You should also figure on everything being WAY more expensive than you expect.

2) You need a mechanic. Try to get one to come into the business with you, or else you're going to be at a disadvantage when it comes to salary or hours. Your repair business will be small initially, but you won't be able to get away with not having someone available to do the work.

3) You need a shop with both a showroom and a repair facility. The DMV will require it, your vendors will require it, your banks will require it. DON'T figure you'll be able to get away with just a P.O. Box and a self-store garage!

4) You'll need to create your corporation (or whatever business form), get a bank account, rent a facility, get your business licenses, and get your DMV registration. Doing this will probably take from three to six months, and for at least half of that time you'll be paying rent on a facility you can't open to the public (you'll need the address for all the licenses, but can't open the doors until you get them!)

5) Somewhere along the line you'll need to create a website. You may figure you don't need one, but you'd be surprised at how many customers will check you out on the web before coming into your store!

6) Plan on spending LOTS of money on advertising - at least lots more than you'd expect! Put together a marketing plan with an advertising calendar to help keep your advertising costs under control (ha!)

7) Did I mention that you'll need signed dealer agreements with one or more manufacturers? You'll have a hard time getting them before all the licensing stuff is done, but you'll need them in order to get product to sell. Have fun researching which companies you should do business with!

8) You're going to need both general liability insurance and garage insurance (which covers customer vehicles in for repair). See if you can get insurance to cover test rides and/or rentals. (I haven't been able to get that, yet, but NY laws are different from most every other state.)

There's more, but these things should be enough to get you started!

[jdikov]

Hi Geronimo,
I really think you need to be more specific in what type of dealership you want to establish. Today there are many option available to you depending on how much of an investment you want to make, experience level, time commitment etc... I could give you a lot to think about if you would like to give me a call, I would have no problem speaking to you and sharing what I have learned in the last 4 years being in this biz. Feel free to call me at 203-500-0960. Just say you are responding to the forum on Scoot Dawg and I will know what you are talking about.
John Dikov
Valley Scooters

[daveb]

I'm going to agree to some of the advice above and disagree on some of the other advice.

If you are in central Ohio and have 2 or 3 dedicated scooter dealers in that general area and one across town from you, you must be in or real close to Columbus and that is a good bit of competition.

What brand or brands you decide to carry will determine your investment total and level of risk. It is a lot cheaper to start a Chinese scooter dealership than a big name brand dealership and the breakeven point with the low price brand is generally a lot lower. The big guys are pretty picky and startups are not really their cup of tea. Plus the initial investment can be pretty steep.

Your business plan should NOT assume that it will take several years to make money. If you do not have a real good feel for your volume, competition, profit margins, overhead AND expect some level of personal profit IN THE FIRST YEAR, you should pass on the idea and stay employed (or have a bunch of cash in the bank and aspirin on your desk).

I'm from Ohio originally and you probably have realistically seven or eight months a year to make money. Since your job may end by about June of 2008, you should take your time, have your act together and have the business ready to go by March of 2009 and hope you can make enough during that first busy season to keep you going through the long late fall and winter months.

Don't rush and try to start up a new business right after your day job stops in June of 08. You will have a better chance of success if you take your time and set up correctly and be ready early on for the 2009 season.

[kurt]

I would LOVE to see a scooter business that has a physical location, meets state regulatory requirements, has units in stock, AND makes a profit within the first year AFTER covering the costs of facilities, utilities, advertising, payroll, taxes, and that inventory investment!

Sure, as a non-stocking (drop-shipping) dealer with only a website and a PO box you can make money selling scooters without any significant investment. It will be easier to be profitable, but harder to be successful.

Good luck!

[kitcarguy]

twister said:

most manufacturers require an ample inventory on hand, a store front with good location, credit history and money in the bank.

if you sell (2) brands you will need about $ 150,000 start up money. also, enough cash in the bank to operate about 18 to 24 months without much in the way of sales. That's rent-utilities-insurance-maintenance and repair. Your income has to come out of the total invested as well.

a good mechanic will probably not work for you because of having no history. they want a job that lasts.

not a pretty picture but can be done if you do everything right.

store front is super important as well as inventory and quality of the scoot. You have to look successful to be successful.

DO NOT FINANCE YOUR HOME to start a business. Put in in your wifes name before you start.

150k startup for 2 brands ? Seems like that is a very unrealistic number. That would be enough cash to fill up a small warehouse.

So lets say you sell Chinese scoots like tank and Roketa . Im sure you are aware of what a Dealer/Distributer pays per unit (50-250cc) and minimum orders needed. You can get started with Roketa for well, well below 75k .

I do not know of any local scoot shop that is sitting on that kind of inventory at any given time of the year. And most of the older shops in the area have been in biz for several years. And most also can call up there supplier and have 1 unit at a time shipped if needed.

I do agree that you need enough money in the bank to sustain your business at least a year (assume no sales) This would include Payroll, utilities, rent, advertising, etc.

[daveb]

kurt said:

I would LOVE to see a scooter business that has a physical location, meets state regulatory requirements, has units in stock, AND makes a profit within the first year AFTER covering the costs of facilities, utilities, advertising, payroll, taxes, and that inventory investment!

Sure, as a non-stocking (drop-shipping) dealer with only a website and a PO box you can make money selling scooters without any significant investment. It will be easier to be profitable, but harder to be successful.

Good luck!

Kurt,

Sure it is possible because I did it. The profit from my in-store sales paid the rent, the labor, utility bills and all other overhead and provided an income to me in the first year. I was also licensed and insured.

The key was the busness plan, the low overhead and the timing. Here is a short list of what made it work.

1. I avoided the high rent, high traffic locations and opened at the end of a dead end street in an industrial park. The traffic count on that street is and was about 10 cars a day. The rent was 1/3 that of a prime retail location but the building was brand new and I was the first tenant in the 1850 sf space. The space also adjoined an additional 3700 sf space that I operated another business from.

2. I used an experienced part time mechanic who worked a full time day job in the same industrial park and then came to work for me in the evenings after his full time job and on some Saturdays. His salary was $15 per hour and he worked about 10 hours a week.

3. We delivered scooters free in my pickup truick within 100 miles to anyone who bought one if they needed that service. BIG PLUS.

4. We kept our prices down to just over dropship level so customers had an alternative to buying online and doing their own prep.

5. I did no print advertising or local advertising. The only paid advertising was Google adwords aimed at prospective customers in cities and states within a 200-300 mile radius from our shop. Most of my business then and now comes from out of state and almost none is local (within 20 miles).

6. I started with one brand only for three months, then added another brand and then went back to one brand (the most popular in the forums) and only stocked three models. I watched the consumer forums regularly to see which brands and which models were being discussed most and then targeted my shop inventory and website for those models.

The whole business plan depended upon having a good website that generated a bunch of web site traffic and then advertised the low prices and free delivery (my truck). IT WORKED.

Dropshipping was added the last 6 months of that first year and that was also profitable but a pain in the neck. The dropshipping was mostly all gravy, but was not needed to make a profit.

I see the Chinese scooter market changing quickly right now and I don't like what I see and hear. Right now I am phasing out the retail sale of scooters and switching to another type vehicle. We will continue to service and repair what we have sold the last 2.5 years. The same business plan will be effect for the new line. Ask me this time next year how it works out.

[oldog1984]

I would like to see a Chinese scooter dealer here in Columbus. not everybody can afford the higher end scooters. where is the closest Chinese b&m shop to Columbus,Ohio?

[ringo]

What type of vehicle are we talk Dave? Some of us loyal customer want to know.
I hope you will still be supporting us with parts and service.
I think your new Lance scooter line looks interesting. I assume they have better quality and dealer support than Tank?
Bottom line... PLEASE dont leave us Dave!!! You're one of the few 'good guys' out there.

Richard/Ringo

[kurt]

Dave,

I also started with one brand. In the first three months THEY RAN OUT OF SCOOTERS! (This was Tank earlier this year.)

I picked up a second brand (EVT) just because I wanted to carry a street-legal electric. Only one sale so far, but the cost of carrying the brand is pretty low, and they are a good source of online traffic and phone calls.

Because Tank ran out I added a third line - Schwinn. Much better product and support, but more expensive.

My target market is primarily local. I sell parts online, but not the scooters. My shop is located in the heart of the city, in a transition neighborhood with relatively low rents and improving amenities. I do a moderate amount of local advertising, but next to no online advertising.

Scooters are quite seasonal here, more seasonal than I had expected. Tank's running out of product in the middle of my peak selling season this year threw a major wrench in my plans - which is one of the things you have to be prepared for!

My business plan is written to cover the first three years, but my planning actually looks out ten years.

A lot of this is new to me, but that's part of why I did it! Keep learning new stuff and you'll never grow old!

[Jacine]

I would think the cost will depend on the brand. Some of the brands require a certain amount of square footage display/repair/storage parts. All broken down into sq. feet. Then they require a certain amount of parts on hand, and a certain amount for order of bikes. The automatic motorcycles are starting to gain recognition, are are in direct competition with scooters. On this line you might consider going with CFMOTO V3/v5 or Qlink Sapero. Between one or the other, since they are basically the same bikes, you might be able to cut a deal in floor space. I wouldn't get any bikes below 150cc on hand originally, the larger the cc the better since as you note everyone seems to upgrade.

The biggest problem cost is advertising. Typically in a major brand they do the advertising in a big way, but on the Chinese bikes, you do not see any advertising per say, so that becomes your cost.

Try to carry something good and different from what the other 3 shops have in. It will create less competition and might provide you with a more select market.

If you want to get more technical you can to a WOTS analysis and several other evaluations to try to create your strategic analysis.

[eggman]

Howdy,

Geronimo: Good luck to you if you want to start a scoot bidness. One would think that high gass prices would drive people toward the world of two wheels. Time will tell. Also, good luck with your Dealim; mine is great.

Eggman

[medman1952]

On the other side of this question, what should the demographics of your area be. How much population, what age group, do you need a nearby college, if you are in a town of 50,000 - 100,000 people, how many other motorcycle/scooter dealers can you compete against.

[daveb]

medman1952 said:

On the other side of this question, what should the demographics of your area be. How much population, what age group, do you need a nearby college, if you are in a town of 50,000 - 100,000 people, how many other motorcycle/scooter dealers can you compete against.

Here are some statistics that I have seen recently. I think the sales numbers sound about right, but have no way of really knowing the accuracy of the articles.

1.. The US population is now at 303,000,000

2. In 2006 approximately 125,000 scooters were sold in the US and that number is down slightly in 2007.

3. Approx. half of the scooters sold were name brands and approx half were Chinese brands.

4. Using just raw numbers like that, the expected number of scooters sold of all brands in a extended metro area with 100,000 total population would be about 41 scooters per year.

I would guess that if the population consisted of a lot of college students, then the numbers would be better.

The average age of the customers who purchased from our shop over the past 2.5 years has been well over 50 years old with many in their 60's and 70's. One guy in his 90's wanted a 150cc and I talked him out of it.

[jspencer]

daveb said:

Here are some statistics that I have seen recently. I think the sales numbers sound about right, but have no way of really knowing the accuracy of the articles.

1.. The US population is now at 303,000,000

2. In 2006 approximately 125,000 scooters were sold in the US and that number is down slightly in 2007.

3. Approx. half of the scooters sold were name brands and approx half were Chinese brands.

4. Using just raw numbers like that, the expected number of scooters sold of all brands in a extended metro area with 100,000 total population would be about 41 scooters per year.

I would guess that if the population consisted of a lot of college students, then the numbers would be better.

The average age of the customers who purchased from our shop over the past 2.5 years has been well over 50 years old with many in their 60's and 70's. One guy in his 90's wanted a 150cc and I talked him out of it.

Dave --

My totally unscientific observations of what I see here in the Boston area are a little different from your experience. In the warmer months I see lots of scooters around the various colleges. I would guess that the vast majority are 49cc since almost none have license plates, even though I'm sure most of them don't meet Massachusetts' requirements for operating without insurance/registration. But the Boston police don't seem to care.

Most non-student scooterists are young professionals. With some exceptions, these folks tend to buy larger scooters -- 150cc and up, and frequently maxi-scooters. So far I am one of the very few scooterists in this area who qualify as an old fart, but I'm beginning to see a few more of us. I would love to start a scooter shop aimed at older riders, but I would have to have much more resources and patience than I have because I would have to create the market.

And of course, here in Boston we have to garage our scooters for the 4 months or so each year that we get snow and ice (6 months for those who can't stand the cold), which makes the sales job even more difficult.

Jon

[okie34]

I'm watching this thread as well. Located where I'm at though, it's more rural than most. We do have to minor and one major university within 45 miles though.

We did have a Baron/CF Moto dealer here for about a year. Unfortunately the owner died and with him, went the business. I would love to pick up where he left off. He never advertised, and I don't think he moved a whole lot of inventory. I personally think that getting something started and hitting the college towns real heavy in advertising may be a good way to go.

I just don't know what kind of overhead I would need. I can probably get the mechanic that worked for the defunct dealer to work at least on a part-time basis. I know if I were to do this, it would be initially on a part-time basis for me as well.

Anyone with any advice, (already dealers) would certainly be appreciated.

[stealth89]

Hi im new and ive been watching this post for a while. I too want to start my own store but have my doubts. In the last 2 years i have seen two local scooter stores go out of business, one located in a prime retail area and the other next to a major university. I just keep wondering if it was the overhead that killed these guys or something else. I dont want to fall victim to the same failures as these guys, but i want more advice before i venture out on my own.

[seadog213]

well its not a sin to go with the chinese scooters the manufactors are willing to help. A web site is a plus to help you out find a small garage where you can put them together and do small work youself (you can't sell all the time) make sure you have a trailer hitch and put a scooter holder on it so you can deliver within 100 miles. start it as a weekend bisness and see if you like it .wwwrusspowersports.com just remember to not lie and tell your costomers the truth of your product you will always have complainers just keep talking

[Jacine]

Somehow I don't think now is the time to necessarily to venture into a new business. There should be some fallout from NEW EPA and very stringent REGS due in 2010, so things should start happening next year. Honda didn't bother upgrading their line for 08 and discontinued most of their bikes, so they are taking it very seriously. Their 09 line promises to be totally redeveloped and high tech. Inside news has it that 50cc bikes will eventually vanish from the streets and be relegated to Motocross. All the manufacturers are opting for larger and/or more powerful engines. I don't expect to see anything below 125ccs of any real value very soon.

[okie34]

I've been doing a little bit of research and to start up a decent dealership that SUPPORTS what it sells, is going to be quite an undertaking. I've contacted about five different distributors and heard back from two. Most aren't willing to tell you much until you have all the ducks in a row (location, all paperwork and licenses, etc.).

The money tally keeps getting a little higher as I continue to research what it may take in my particular area. Obviously, this isn't something that one simply jumps off and takes on. If one is going to do this right, there's no "easy button". Time, cash and commitment are all paramount. Enthusiasm and the belief in your product are essential.

Maybe a couple of months, I'll be able to get this all sussed out. It ain't easy though.

[stealth89]

your link (wwwrusspowersports.com) didnt work.

[seadog213]

sorry www.russpowersports.com