How to Take Commercial Vehicle Dealership?

Commercial Vehicle Dealership - A Complete Guide

The transport and logistics market in India has always been a lucrative site of investment. It has only grown over the years and currently employs over fifty million people. Furthermore, this number is expected to grow as a recent Government of India report states that the transport business will grow at a rate of 5.9 per cent through the year 2021.

A large part of this booming sector involves the use of heavy-weight and commercial vehicles. These vehicles often form the backbone of many industries and hence, are indispensable for the functioning of any economy. Therefore, it is safe and also, a profitable venture for investment. However, the competition would be high, and you will have to plan your business structure and operation carefully. Here, we have listed a series of 10 steps you can take towards establishing a commercial vehicle dealership.

1. Research

The first step towards establishing a successful business is good research. Spend significant time to understand the industry and the scope of dealerships in your region. You can choose to become a dealer for multiple types of vehicles, so identify the kind of vehicle-based on your budget. Understanding the market and the operational requirements of your business will help you to navigate through the process smoothly. It is equally important to keep yourself informed about the legal procedures that have to be fulfilled to begin and run your venture.

2. Upgrade your skillset

Starting a business requires a lot of skills. You will have to be comfortable with bookkeeping, inventory management, accounting, management and marketing. There are several courses available online to brush up on these schools. You could also refer to specific books around commercial vehicle dealerships to build your business acumen.

3. Choose your location

After spending time to understand the vehicle dealership market, you need to choose the location of your business. Two main factors will determine this decision: (1) your personal constraints and (2) the current demand and supply patterns in a given geographical area. The location you choose will also determine the type and capacity of your vehicles. For example, if you choose to work in a hilly region, where the necessity is high, you will have to purchase vehicles that can work effectively in the terrain.

4. Choose your vehicle and dealership type

Once you have decided on the location, you must choose the type of vehicle. You could work with semi-trailers, trucks to transport goods, agricultural or vehicle carriers etc. After selecting the type of vehicle, you also need to identify your mode of dealership. You could operate in the commercial vehicle dealership business in multiple ways. For example, you could sell used vehicles, buy and sell wholesale vehicles based on your client needs or even invest in a franchise of an established commercial vehicle dealership.

5. Choose your business structure

Your business structure will determine the profits from your venture and also provide you with a corresponding financial safety net. If you opt for a sole proprietorship, you will retain complete autonomy over the decisions of your firm. However, it does not provide any financial security, and the losses will affect you personally. The second option is to enter into a general liability partnership, where you and your business partners will decide the roles, commitments and stakes of each individual. Another option is the LLC or limited liability company model, which offers you protection from any potential loss in the business.

6. Make Business Plan

The business plan is one of the most critical steps to maintaining a successful business. First, you will have to find a unique and apt name for your business. Next, draw up a list of all your available sources of credit. You could choose to self-finance your business, look out for investors, or obtain a loan from a bank. Be very specific of all the costs you could incur including rent, procurement of vehicles, licenses and permits, staff salaries etc. Do not forget to include insurance for your vehicles. Next, make a plan of the way you will operate. Some questions that will help you decide this are: What is the scope of your business? How many employees do you need? What kind of employees do you need? How will you market your business?

7. Get a Dealer License

Commercial vehicles have much more regulations on sale and operations as compared to smaller vehicles like cars or bikes. Ensure that you apply for all the licenses required. These permits also depend on the business model. For example, the process to get permits for interstate travel will be different from permits to travel within the state. If required, try to hire a legal counsel during the initial stages so that you complete all formalities.

8. Set up an Office Space and Hire Employees

Commercial vehicle dealerships involve a lot of operational procedures. Hence, it is best to rent/buy an office space of your own. You could also hire employees based on the number of vehicles and any additional services that you would be providing.

9. Build an Inventory

After setting up your business physically and financially, you can kickstart your business. However, study the patterns of your purchases and profits. Inventory management will help you identify the high and low points of your business, improve your cash flow, act as a regular audit and also provide direction to the future. For this, you need to study the needs of your clientele and forecast future requirements. Understanding this will help you make smart and profitable decisions backed by data.

Similarly, track both quantities and cost. If you notice large fluctuations in price, you could strike a better deal with your vendor or approach an alternative source to procure vehicles. Monitor the sales of your products to identify if there are any patterns in particular weeks or months. Tracking can help you make more informed decisions around new purchases as well as your marketing strategies.

10. Marketing

While word-of-mouth and personal referrals are undoubtedly indispensable in the initial stages, use digital marketing smartly as well. Online tracking and booking have become basic features in most dealerships. Create an attractive website for your company. It must provide all operational and contact information, as well as tracking and payment facilities for your customers. Reputation is built over trust, which can be gained only through consistent good service.

Business acumen is a skill that is acquired over time. While these steps provide you with a checklist to begin your venture, you will gain multiple perspectives over time. The key to any successful business is research and planning. Hence, as long as you are passionate and want to learn more, you always have immense growth potential!

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