How to Start a Modular Home Dealership

Last Updated on

Quick Reference

How to Start a Modular Home Dealership

Modular homes (also referred to as prefab homes or manufactured homes) are becoming increasingly popular due to their affordable price and speed of construction.  Opening a modular home dealership could be an excellent opportunity for you to cash in on the trend and have the freedom that having your own business allows.

Business Overview

A modular home dealership purchases the materials for modular homes and builds them to customers’ specifications to be placed on land that the customers own.  They also help to facilitate financing for customers by working with lenders.

Industry Summary

According to IBIS World, the manufactured home industry grew 2.5% annually over the last five years to reach $6.6 billion in 2021.  It did, however, experience a 10.2% decline in 2020 due to the economic slowdown that resulted from the pandemic.

Related Industries

Handyman Business

Industry Trends

According to Fortune Business Insights, the global modular construction market is expected to grow 6.1% annually through 2028.  The increased popularity of modular homes is due to factors such as their reduced waste, eco-friendliness, cost-effectiveness, and speed to build.

Target Market

Your target market will be people seeking cost-effective housing solutions.

Skills, Experience, and Education Useful in Running a Modular Home Dealership

There are several specific skills that you will need to open a modular home dealership.

  • Experience.  Experience working in a modular home dealership would be valuable.
  • Knowledge.  You’ll need to research construction materials and methods and hire experts to help you.
  • Business knowledge and experience.  You will need to have a basic understanding of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to build rapport with your customers so that you retain them as customers and keep them coming back.

Checklist for Starting a Modular Home Dealership

If you’re thinking about starting your own modular home dealership, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your modular home dealership should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, projecting sales and expenses, your value proposition to use for marketing, and more. You’ll also need to do some research to calculate exactly what your start-up expenses will be and what your ongoing costs will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.

Related: How to write a business plan

Step 2: Name the Business

Finding the perfect modular home dealership name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

When deciding on which business entity is best for a modular home dealership, it normally comes down to the sole proprietorship and Limited Liability Company.

A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay. The corporation can be a good choice because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.

That leaves the sole proprietorship and LLC.

The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.

Related: 3 steps to forming your LLC
 

Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular LLC formation services include:


IncFile - $0 plus state fees & free registered agent for 1 year!

IncAuthority - $0 plus state fees & free registered agent the first year!

ZenBusiness - $49 plus state fees & free registered agent for 1 year!

Step 4: Select your Location

You will need a location that offers sufficient property to have display homes, in addition to offices to consult with clients.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

You may need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the business is located. Check with your state for specific license and permit requirements for your modular home dealership.  Some other common local, state, and federal registrations a modular home dealership may need include a sales tax permit and an Employer Identification Number.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing but getting the funding to start a modular home dealership is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
 
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.

Step 8: Get your Marketing Plan in Place

A modular home dealership will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a modular home dealership include social media marketing and online advertising. Networking with realtors will also be beneficial as clients purchasing land may be looking for additional options for building.

Related: Low-cost ideas to market a new business

One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.

Step 9: Get Business Insurance

A modular home dealership needs several types of insurance for full coverage:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.
Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.
Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

The cost for insurance will vary based on several factors. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hire Employees

You will need employees to help you run your modular home dealership.  Make sure that you select people with appropriate experience and training.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your modular home dealership is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up the accounting for your business

The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:

- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.

Find bookkeepers in your local area or use a service like 800Accountant.

How profitable is a modular home dealership?

The profit margin on a modular home is around 9%, and the average sales price is about $72,000.  If you sell two homes per week at the average price, you will make $673,920 per year.

Are there grants to start a modular home dealership?

It’s extremely rare to find a grant to start a modular home dealership. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.

Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.

What is the NAICS code for a modular home dealership?

The NAICS code for a modular home dealership is 453930, which also includes mobile home dealers.

The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.

Related: What is a NAICS code and how to find yours

Subscribe Now to the 60-day Startup Challenge!

Subscribe Now to the 60-day Startup Challenge!