How to Write a Used Car Lot Business Plan
The used car lot industry has been growing continuously over the last several years. However, just in the last several months to a year, this industry has grown substantially, based on our business plan writer’s research and feedback from clients.
There are numerous reasons for the unexpected growth in the used car lot industry. The most pressing is the challenges use carmakers are having in obtaining microchips for their new products. Because of this hold-up in production, customers have been seeking out reliable used cars from local used car lots. As this trend continues, more and more used car lots will be opening up across the country. Regardless of your organization is an established used car lot or a new, used car lot, having a well-written used car lot business plan is a critical component to increase the likelihood of success. Because of this, our business plan writer has come up with some tips and tricks on how to write a used car lot business plan, used car lot funding requests, and used car lot financial projections.
Executive Summary for a Used Car Lot Business Plan.
The executive summary for a used car lot business plan should encapsulate and summarize all aspects of the business plan, including the organization funding request section, financial projections, and the organization's management and ownership position. Also, the executive summary should touch on one or two critical success factors for most used car lots like location or owner experience. By exploring either or both concepts in the executive summary, the business plan writer is able to quickly establish need and experience for the car lot. Both concepts are important to display when seeking funding.
In the company information and location section of the business plan for a used car lot, the business plan writer should provide significant details, disproportionately even, in relation to the car lot location. Let’s be honest, a used car lot in the middle of nowhere will have more difficulty in succeeding as compared to one on a corner of a large intersection. Because of the importance of location, our used car lot business plan writer likes to include map pictures of the proposed used car lot location, a discussion about why this location is strategically important, and identify major thoroughfare locations near the establishment. By thoroughly exploring the location, a used car lot owner is able to not only show the need for a used car lot in the area but also document possible successful location strategic advantages.
Service Description and Competitive Advantages
The service description section for a used car lot business plan should be pretty straightforward. In our experience, the service description section should explain the types of cars or trucks sold at your location. Some used car lot owners will focus on domestic and or foreign cars. Other car lot owners choose to specialize in low-priced vehicles. Further, even more, used car lots will seek out cars with the highest potential profit margins. Regardless of your strategic plan, discuss your envisioned vehicles in detail.
The target market section for your used car lot business plan should describe your perfect customer. Some used car lot business owners target individuals from 17 to 24 looking for their first car. Other lots may specialize in helping individuals with credit challenges. Also, some used car lots, like Carmax, target individuals seeking quality cars at value prices. As you can see, a target market is not just demographic but also may target buyer characteristics. So when you do your target market, don't limit yourself to demographics; envision the type of customer you wish to target and then create strategic actions to exploit this focus.
Industry research for a Used Car Lot Business Plan
The used car lot industry research section for your business plan should start with a national review of the used car lot industry, it’s growth trends, and customer trends as well. For example, in doing a real quick Google search of used car lot industry statistics, important information was found related to the used car lot industry. To illustrate, in the last 12 months, the used car light industry generated approximately $153 billion. The growth rate for revenues in the last five years was about 3.2% annually. However, industry experts anticipate this growth rate to fall to about 2.6% annually. Just keep in mind, the statistics are not including microchip new-car production delays, which may significantly drive up revenues for this industry. These are just some facts and statistics related to used car lots that may be helpful to use in your industry research.
The owner and management section for a used car lot business plan should first discuss the type of legal business structure the organization will embrace. Popular used car lot business structures would either be limited liability company or limited liability partnerships. Once this is established, then explore bios for the owner or owners. In the bios, make sure to explain work and educational histories related to the used car lot industry. Also, any sales and/or management experience should be documented as well. From this foundation, then discuss the different positions that will be held at the used car lot. Common positions may be receptionist, used car salesperson, manager, and finance person. Finally, make sure to include a visual aid, like a chart, showing the chain of command. This process helps the reader fully understand the ownership and business structure of the business.
Funding Request for a Used Car Lot Business Plan
The funding request section for a used car business plan should start with explicitly stating the dollar amount needed to start up the used car lot. Next, make sure to break up the funding dollar amount into specific categories like working capital, inventory purchase, lot renovations, and used car lot purchase. On a side note, an important funding aspect for a used car lot is inventory purchases. Some organizations may use lines of credit to ensure inventory funding. However, from our used car lot business plan writer experience, funding used car purchases in cash has helped increase profit margins. Once the categories are funded, then show a grand total dollar amount at the bottom, which should be identical to your initial funding amount requested. By following the strategy, used car lot owners are able to show a specific dollar amount needed to start operations and have some wiggle room by using categories for funding objectives.
And finally, the financials and financial projections section for a used car lot business plan! From our business writer's experience, we find that the financial projections section of the business plan should start with identifying, specifically, the number of vehicles the used car dealer anticipates selling the first month. Next, estimate the average price and variable costs of the vehicles sold. Once this is done, then simply subtracting the variable costs from the sales price average will give you the gross profit margin for your first month. The next step would be to deduct all fixed costs, like used-car lot lease payments, labor, sales commission, cleaning supplies, etc., from the gross profit margin. This will leave you with a net profit for your first month. This basic strategy will be a good starting point for creating a viable business model that not only will be able to be used in writing your business plan but also for projecting sales for the next several months and even the next several years.
Hopefully, these insightful tips and tricks for writing a business plan were helpful. As always, if you need help with a business plan or financial projections, just send us an email or give us a call.
Author: Paul Borosky, Doctoral Candidate, MBA., Author