How to Start a Motorcycle Dealership
Are you passionate about motorcycles? If you are a motorcycle lover, you know how expensive they can be. Having your own motorcycle dealership could be a great opportunity for you to cash in, do what you love, and be your own boss.
A motorcycle dealer buys new motorcycles from manufacturers to sell at retail prices to customers. They may also buy and sell second-hand bikes. Some also offer maintenance and repairs. A motorcycle dealership also often sells ATVs. side-by-sides, snowmobiles, and other types of outdoor equipment.
Motorcycle Dealer Industry Summary
According to Statista, the motorcycle industry is expected to be over $109 million in 2021. It is expected to grow 7.93% per year through 2026. The largest market segment is on-road motorcycles.
Motorcycles are popular because they are fun to ride but also less expensive than cars and more fuel-efficient. The industry is very sensitive to economic fluctuations, with sales decreasing during economic downturns.
Your target market will be motorcycle enthusiasts.
Skills, experience, and Education Useful in Running a Motorcycle dealership
There are several specific skills that you will need to open a motorcycle dealership.
- Experience. Experience working in a motorcycle dealership would be valuable.
- Knowledge. Extensive knowledge of motorcycles is essential.
- Basic business skills. You will need to have at least some basic knowledge 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 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: 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 2: Name the Business
Finding the perfect motorcycle dealership name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, 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 motorcycle 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: Guide 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
An ideal motorcycle showroom will be located in an area that is convenient for customers, is located along a busy road, and has high visibility.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
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 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.
Additionally, a motorcycle dealership has general licensing requirements such as a sales tax permit and Employer Identification Number.
Step 6: Find Financing
Coming up with a good business idea and having the skills to run it are one thing but getting a small business loan to start a motorcycle 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 startup costs.
Floor plan pricing is critical in order to stock inventory during the slow months, so the dealership can be fully stocked when the weather turns warm. It’s important to ensure there is enough inventory at all times, as customers will likely go to another dealership if you are out of stock.
Step 7: Open a Business Bank Account
Keeping your small 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 motorcycle dealership will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a motorcycle dealership include social media marketing and online advertising. Developing a website can be a significant expense, but it can also give your motorcycle dealership greater visibility online.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a motorcycle dealership. A few of these include:
– 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.
– Bonding insurance (sometimes called an Auto Dealer Bond or Surety Bond) is one of the specific requirements motorcycle dealers must obtain before getting licensing in most states. The bond amounts will vary by state, but this insurance protects customers from fraud and the dealer from contract defaults with vendors, vehicle suppliers, and wholesalers.
The cost to insure a motorcycle dealership will vary depending 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.
Step 10: Hire Employees
You will need sales staff, mechanics, and customer service employees to help run your motorcycle 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 motorcycle 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.
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 much does it cost to start a motorcycle dealership?
Here are the typical costs you will face when you open a motorcycle dealership.
– Showroom space rental $1,500-$5,000 per month
– Office furniture and equipment $5,000-$10,000
– Initial inventory such as bikes, helmets, jackets, etc. $20,000 – $250,000
Franchise dealerships, motorcycle brands such as Honda, Yamaha, Suzuki, Harley Davidson, Indian Motorcycles, etc., 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.
How profitable is a motorcycle dealership?
If your profit margin is 10% and you can sell 10 motorcycles a week at an average of $10,000 each, you would make a profit of $520,000 per year. Adding repair services to your dealership would add more revenue.
In addition to motorcycle sales, most dealerships will also generate revenue through parts and repair services.
Are there grants to start a motorcycle dealership?
It’s extremely rare to find a grant to start a motorcycle dealership. If you search for small 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 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.