Are you passionate about motorcycles? Starting a motorcycle dealership can be a fulfilling business opportunity for enthusiasts and entrepreneurs alike. It combines the thrill of motorcycles with the potential for business growth and success. Having your own motorcycle dealership could be a great opportunity for you to cash in, do what you love, and be your own boss.
Buckle up and let’s take a ride through the industry, steps to get started, and answers to common questions.
A motorcycle dealership is more than just a showroom of bikes. A motorcycle dealership revolves around buying and selling new or used motorcycles, scooters, ATVs, side-by-sides, snowmobiles, and other types of outdoor equipment. The business model also often includes selling parts, accessories, offering repair services, and sometimes even providing financing options for customers.
Individuals with a love for motorcycles, strong business acumen, excellent customer service, and a keen eye for quality products are best suited to thrive in this venture.
Motorcycle Dealer Industry Summary
The motorcycle dealership and repair industry has witnessed a slight decrease in demand, falling at an annual rate of 0.1% over the last five years to $33.4 billion. Nevertheless, the global motorcycle market remains robust. It was valued at $75.6 billion in 2022 and is projected to grow to $124 billion by 2028.
The motorcycle dealership industry comprises various players, including large-scale dealerships and smaller independent dealers. Some notable brands and manufacturers dominate the market, offering a wide range of motorcycles and establishing strong customer brand loyalty. These include companies such as Harley-Davidson, Honda, Yamaha, Kawasaki, and Suzuki. Dealerships often collaborate closely with these manufacturers to ensure a steady supply of quality motorcycles and parts.
The motorcycle dealership industry is witnessing several emerging trends that are shaping its future. Here’s a detailed look at some of these trends:
- E-Bikes: Electric motorcycles, also known as e-bikes are gaining popularity as consumers become more environmentally conscious. The push for green transportation options is driving this trend, making e-bikes a significant part of the motorcycle industry’s future.
- Advanced safety features: Modern motorcycles are being equipped with advanced safety features such as motorcycle stability control, anti-lock braking systems, and side-view assist. These features enhance rider safety and are becoming standard in new models.
- Technology integration: Technology is playing an increased role in the motorcycle industry. From digital displays to connectivity features, technology integration is becoming a standard in modern motorcycles. As we enter into 2023, the industry looks forward to unique opportunities and breakthrough technology.
In summary, the motorcycle dealership industry is evolving rapidly, driven by technological advancements, consumer demand for eco-friendly options, and market expansion. Dealerships need to stay abreast of these trends to remain competitive and cater to changing consumer preferences.
The target market for a motorcycle dealership is quite diverse and includes various segments. Here are some key groups:
- Enthusiasts and hobbyists: These individuals have a passion for motorcycles and often view them as more than just a mode of transportation. They may be interested in specific brands, styles, or customizations.
- Millennials: Many younger individuals are drawn to motorcycles for their sense of freedom, adventure, and the appeal of a unique lifestyle. They might be interested in sport bikes or entry-level models.
- Commuters: Some people view motorcycles as a practical solution for commuting, valuing fuel efficiency, ease of parking, and the ability to navigate through traffic.
- Specific brand enthusiasts: Certain brands, like Harley Davidson, have a dedicated fan base that can be targeted by dealerships selling those brands.
In conclusion, the target market for a motorcycle dealership can vary depending on the types of motorcycles sold, the location of the dealership, and the dealership’s marketing strategy. It’s essential for dealerships to understand their target market to effectively reach and engage their potential customers.
Checklist To Start A Motorcycle Dealership
If you’re thinking about starting a motorcycle dealership, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Assess the Market
Market research is crucial for any business, including a motorcycle dealership, because it helps identify potential customers, understand their needs, and assess the competition. This information allows you to determine whether there’s enough demand for your product or service before you invest significant time and money.’
Here are some tips for conducting market research for a motorcycle dealership:
Identify your target market: It’s vital to identify who your potential customers are. This could be millennials, commuters, or motorcycle enthusiasts in general. Understanding who you’re targeting will help you tailor your offerings and marketing strategies accordingly.
Websites like the U.S. Census Bureau or the Bureau of Labor Statistics provide free demographic and economic data that can be useful for market research. Your local Chamber of Commerce or economic development agency may also have resources or data available to help with market research.
Conduct surveys: Surveys are a cost-effective method to gauge interest in your dealership. You can use online platforms to reach a wide audience or speak directly to people in your community. Ask questions about respondents’ interest in motorcycles, their preferred brands, and how often they purchase new motorcycles.
Competitor analysis: Look at other motorcycle dealerships in your area and analyze their offerings, pricing, and customer reviews. This will help you understand what’s already available in the market and identify any gaps your dealership could fill.
Social media listening: Monitor social media platforms to understand what potential customers say about motorcycles. This can provide insights into what customers value and what they feel is missing in the current market.
Step 2: Write your Business Plan
After coming up with the idea, the next step in starting your motorcycle 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 startup expenses will be and what your ongoing expenses will be.
Not only will investors or banks require you to have a business plan if you need funding, 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 3: Source Funding
Starting a motorcycle dealership is an exciting venture, but it also requires substantial funding to get those wheels turning. Funding is the fuel that propels your business, and understanding the various avenues available can significantly impact how smoothly the engine runs. Let’s break down the most common funding options and what you can expect when seeking financing for a motorcycle dealership.
Personal savings: Many entrepreneurs start their journey by digging into their personal savings. The significant advantage of this route is the absence of loan payments, allowing you to focus on growing your business without immediate financial pressure.
Friends and family: Sometimes, those closest to you believe in your dream and are willing to invest. While this can provide essential funding, especially if personal savings don’t cover all costs, it’s important to put agreements in writing. Mixing business with personal relationships can lead to misunderstandings. Clear written terms preserve both financial clarity and valued relationships.
Bank loans: Banks are a traditional source of funding, and with a solid business plan and market research in hand, a loan may be within reach. However, lenders typically require borrowers to invest 15%-25% of their personal funds, have a credit score above 650, and possess sufficient collateral. If the bank considers the loan too risky, they may opt for a Small Business Administration (SBA) loan guarantee to reduce their exposure.
Floor plan financing: Floor plan financing is essentially a revolving line of credit that allows dealers to borrow against their inventory. The lender pays the manufacturers directly for the motorcycles, and the dealer repays the lender as the bikes are sold. This type of funding is designed to assist dealers in stocking their showrooms with various motorcycle models, providing the necessary capital to purchase inventory.
Investors: Although not as common for motorcycle dealerships, angel investors can be a source of funding. These are usually local individuals with a higher net worth who have an interest in your type of business. Getting investment can be challenging to secure as most are looking for high growth and scalable businesses, which might not always align with a traditional motorcycle dealership.
Step 4: Select a Location
Once you’ve secured funding the next significant step is acquiring a location for your business. The location is not just about the physical space; it’s also about how well it aligns with your target market, visibility, accessibility, and the potential for growth.
When scouting locations, look for an area that suits your target market. If your dealership specializes in high-end motorcycles, you may want to be in or near affluent neighborhoods. On the other hand, if you’re selling commuter bikes, being near major transport routes could be beneficial.
You can visit other successful motorcycle dealerships to get a sense of what works. Take note of their layout, size, and location. Don’t copy them, but use these visits can spark ideas for your layout, design, and customer flow.
After selecting the location, the next step is to prepare it for opening. This might include renovations or modifications to suit your business needs. For instance, you might need to install specific security measures like reinforced doors, security cameras, and alarm systems given the value of the inventory you’ll be holding. Also, take time to consider the showroom layout. It should be spacious enough to display your motorcycles attractively and allow customers to move around easily.
Before signing any contracts, make sure your funding is secured. Funding processes can sometimes take longer than anticipated, or you might face unexpected denials. Having your funding in place before committing to a lease or purchase agreement can save you from potential financial strain down the line.
Step 5: Register the Business
When starting a motorcycle dealership, there are a number of steps to complete it’s properly registered and legal.
Each state may have different regulations and procedures, but here is a general overview.
Forming a business structure: When it comes to setting up your motorcycle dealership, selecting the right business structure (also referred to as a business entity) is essential. The four main types of structures are:
– Sole proprietorship: This is the simplest structure, often preferred for its ease of startup and lower cost. It’s suitable for single-owner businesses but offers no liability protection.
– Partnership: Similar to sole proprietorships, but they involve two or more people sharing business responsibilities and profits.
– Limited Liability Company (LLC): An LLC offers liability protection similar to a corporation but with more flexibility in taxation. It’s a common choice for small to medium-sized businesses.
– Corporation: Typically used by larger businesses, corporations offer strong liability protection but can be complex and costly to set up.
Related: Comparison of business structures
Business name registration: After registering the business structure, you may need to register your business name. This process will vary depending on what business structure you pick. Sole proprietors and partnerships will often be required to register a “Doing Business As” (DBA), while corporations and LLCs register with the state during the formation process
During this time, it’s also a good idea to check if the name you want is available as a web domain, even if you’re not ready to set up a website yet.
Dealer license: A motorcycle dealer will need to obtain a dealer license before opening. This license is typically through the state’s Department of Motor Vehicles or Department of Licensing. States typically require the business to have a location secured with the proper zoning, bonding insurance, and any business licenses approved before they can apply for a motorcycle dealer license.
Motorcycle dealers have additional guidelines to follow. One is the Federal Trade Commission (FTC) guidelines under the Used Car Rule and the Consumer Rights and Safety Laws. The FTC Used Car Rule requires each dealership to have a Buyers Guide to reduce miscommunication between the business and consumers.
Also, states have legislation for used motorcycle dealers known as lemon laws, which mandate the dealer is upfront about the vehicle’s condition.
Obtain business licenses and permits: Depending on your location, there will likely be a variety of general licenses or permits needed before opening. This could include a business license, seller’s permit, and Employer Identification Number (EIN).
Step 6: Purchase Inventory & Supplies
Up to this point, there has been a lot of work, though it may not seem like there isn’t a lot to show for it. But now, we get to one of the more fun steps, which is purchasing inventory and supplies.
Starting a motorcycle dealership means identifying the types of motorcycles and accessories your customers are likely to seek. It’s crucial to build relationships with manufacturers and distributors that align with your business vision. If you’re buying directly from manufacturers, you might get better pricing, but be aware that they often require larger volume commitments. Distributors may allow you to order smaller quantities and offer more flexibility.
Your inventory should include a mix of new and used motorcycles and parts and accessories that cater to various customer needs. New motorcycles could range from cruisers and sportbikes to touring bikes, while used bikes may attract budget-conscious buyers. Remember to stock essential motorcycle parts and accessories, as these can significantly boost your sales.
Step 7: Hire Employees
Hiring employees is an essential part of running a motorcycle dealership and is next in our guide to starting a motorcycle dealership. The right team can help you create a thriving business that serves your customers effectively. From sales representatives who understand the ins and outs of motorcycles to skilled mechanics who can provide top-notch service, the people you hire will play a critical role in your dealership’s success.
Understanding both the types of employees you’ll need and the legal requirements for hiring is key to building a strong and compliant team.
Before you can start hiring, there are legal requirements to fulfill:
Employer Identification Number (EIN): Obtain an EIN from the IRS, which you’ll use when reporting taxes.
State Requirements: Check with your state’s labor department for specific registration and reporting requirements.
Verify Work Eligibility: Use Form I-9 to verify the legal status of employees to work in the United States.
Compliance with Labor Laws: Familiarize yourself with federal and state labor laws concerning minimum wage, overtime, safety, and discrimination.
Workers’ Compensation Insurance: Depending on your state, you may need to obtain this insurance to cover potential workplace injuries.
Step 8: Create the Marketing Plan
With the opening of the dealership close, finalize a marketing plan is the next step. Marketing your motorcycle dealership is an essential step in letting customers know the dealership is open. The techniques you choose will likely encompass a blend of online and traditional marketing strategies.
Starting off, a well-designed and user-friendly website that showcases your inventory, services, and offers can be a great place to begin. Social media platforms such as Facebook, Instagram, and Twitter allow you to share engaging content such as photos, videos, and promotions to attract and interact with potential customers.
Search Engine Optimization (SEO) ensures that potential customers find your dealership when searching online. Alongside this, claiming your Google Business Profile and other free business directories like Bing Places, Yelp, and Yellow Pages as listing your dealership can broaden your reach.
Even in an online-dominated environment, traditional marketing strategies retain their value. Newspaper and magazine ads, billboards, and radio spots can still reach a broad audience.
Joining the local Chamber of Commerce can provide networking opportunities and raise your profile within the community. In addition, hosting or participating in local events, bike shows, and community fairs is another way to engage with potential customers on a personal level.
Step 9: Prepare to Open!
As we conclude our guidance for starting a motorcycle dealership, there are some final yet significant steps. While we’ve covered many crucial steps so far, it’s essential to recognize that each business’s needs will be different. Some of these steps include:
Business insurance: Protecting your investment with adequate business insurance is vital. Different policies such as liability insurance, property insurance, or even specialized motorcycle dealership insurance should be considered based on your specific needs and potential risks.
Setting up bookkeeping: Managing your finances efficiently will be central to your business’s success. Hiring a professional accountant or using accounting software like Wave Accounting (FREE) or Quickbooks can help you keep track of expenses, revenue, taxes, and other financial matters.
Opening a bank account: A dedicated business bank account is necessary to manage your finances separately from personal accounts. It helps in tracking business-related transactions and simplifies tax preparation.
Setting up management software: Utilizing specialized software can streamline operations. Examples include Lightspeed, DealerClick, and Blackpurl, which offer inventory management, sales tracking, and customer relationship management tailored to motorcycle dealerships.
Accepting credit cards: Establishing credit card processing is essential, given the widespread use of credit and debit cards for purchases. Work with a payment processor that offers competitive rates and support tailored to your business needs.
Preparing for the grand opening: Planning and promoting a grand opening event can generate buzz and draw in potential customers. Consider special promotions, engaging with local motorcycle enthusiasts, or partnering with nearby businesses to make the event a success.
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Common Questions When Starting A Motorcycle Dealership
How much does it cost to start a motorcycle dealership?
Starting a new motorcycle dealership is a substantial investment that requires careful planning and budgeting. The total costs to start this type of business can range from $250,000 to over $1,000,000, depending on various factors such as location, size, and inventory.
Here’s a rough breakdown of the costs involved:
Lease or purchase of property: Expect to pay anywhere from $50,000 to $500,000 for a suitable location. This cost varies greatly depending on the area and property size.
Construction or renovations: Depending on the property’s condition, renovations and setting up the showroom can cost around $20,000 to $500,000.
Inventory costs: The initial stock of motorcycles, parts, and accessories can range from $50,000 to $150,000, depending on the brands and models chosen.
Licensing and permits: Expect these legal necessities to cost around $1,000 to $3,000.
Insurance: General liability and property insurance can cost between $2,000 to $4,000 initially.
Franchise costs: If you choose to open a franchise dealership, there may be additional costs involved. Franchise motorcycle brands such as Honda, Yamaha, Suzuki, Harley Davidson, and others have an exclusive territory to sell the franchised brand. A motorcycle brand comes at a higher cost with initial franchise fees, royalties, marketing expenses, and a minimum amount of financial capital and are not figured here.
Initial marketing campaign: Launching your business with print advertising, social media promotion, and website development can range from $5,000 to $15,000.
Point-of-Sale systems, computers, etc.: Necessary technology and equipment costs can be around $10,000 to $20,000.
After considering all the costs, it’s a good idea to also have three to six months of operating expenses on hand as a buffer. This cushion ensures that the business can weather any unexpected challenges, seasonal variations, or slower-than-expected sales in the beginning.
Please note that the costs above can vary widely and are only an estimate. Factors like location, the size of the dealership, inventory requirements, the types of motorcycles and accessories you plan to carry, renovation or construction costs, and local regulations can greatly influence the initial expenses. Moreover, unexpected costs can arise during the setup phase.
How profitable is a motorcycle dealership?
The profitability of a motorcycle dealership can vary widely based on factors such as location, brand representation, marketing effectiveness, and management practices. Typically, motorcycle dealerships work on a profit margin ranging from 15% to 25% for new bikes and slightly higher for used ones.
Here’s an illustrative example using industry data:
Revenue: Let’s consider a dealership that sells 100 new bikes a year, with an average sale price of $10,000, and 50 used bikes with an average sale price of $6,000. That would result in revenue of $1,000,000 from new bikes (100 x $10,000) and $300,000 from used bikes (50 x $6,000).
Additionally, parts, accessories, and service might contribute another $200,000. The total revenue for the year would be $1,500,000.
Expenses: Typical operational expenses, including salaries, rent, utilities, marketing, insurance, etc., might account for 60% to 70% of the revenue. Taking 65% as a median figure, the expenses would amount to $975,000 (65% of $1,500,000).
Profit: The final profit, after subtracting expenses from revenue, would be $525,000 ($1,500,000 – $975,000).
Keep in mind that this is a simplified example and can differ based on various internal and external factors. Some dealerships might see higher profit margins from efficient operations, while others might face challenges affecting their bottom line. Consulting with a financial advisor who has experience in the motorcycle dealership industry is advisable to understand the specific dynamics of the particular market you’re entering.
What skills are needed to run a motorcycle dealership?
Running a motorcycle dealership is a complex operation that requires a mix of skills. Here’s a comprehensive look at the essential abilities you’ll need to successfully navigate this business:
Knowledge of motorcycles: A deep understanding of motorcycles, their parts, accessories, and the technology associated with them. This knowledge extends to different brands, specifications, and what sets various models apart.
Sales and marketing skills: The ability to sell motorcycles, accessories, and services. It includes understanding customers’ needs, building rapport, and promoting products effectively through various channels both online and offline.
Customer service skills: Offering exceptional service to customers before, during, and after a sale is crucial. This involves answering queries, resolving issues, and ensuring customer satisfaction.
Financial management: Managing finances effectively is key. You need to set budgets, manage cash flow, analyze financial statements, and ensure profitability. Skills in pricing strategies and negotiation with suppliers also fall into this category.
Inventory management: You’ll need to oversee inventory levels, manage orders, and organize the storage of motorcycles, parts, and accessories. Being able to predict demand and manage stock effectively can make a significant difference in your bottom line.
Leadership and Management Skills: Leading and managing a team is vital. This includes hiring, training, motivating, and evaluating staff. Setting goals, developing strategies, and ensuring that everyone works together efficiently is part of this skill set.
Technical aptitude: Understanding the repair and maintenance aspects of motorcycles. Even if you’re not doing the work yourself, this understanding will help you oversee service departments or work with technicians.
What is the NAICS code for a motorcycle dealership?
The NAICS code for a motorcycle dealership is 441228.
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.