Are You Considering Opening a New Location?
Are you considering expanding your outdoor power equipment business by opening a new dealership location?
Whether you’re opening your second dealership location, or your tenth, it can be a daunting task! There are many important factors to consider before taking the plunge, and it often feels overwhelming.
To help you determine if it’s the right next step for growing your dealership, we’ve teamed up with Sara Hey to identify 6 key questions you need to ask yourself before you decide to expand. So, if you’re considering expanding your business, keep reading!
Questions to ask yourself:
Question One: Can you walk away from your dealership for six weeks at season and have it operating as if you’re still there?
Yes, that’s right – 6 full weeks at season! Opening a new location will require you to be very hands-on at that new dealership, so you need to make sure that your current location can run smoothly in your absence.
If you can rely on your service, sales and parts department to maintain the sales trajectory at the first location, then you’re in a good position to move forward with a new location.
To help make sure that your departmental managers can stay on track of all their tasks, consider customizing the Parts Managers and Service Managers checklists for your dealership. If you and your management team aren’t quite ready for that step, you may want to focus on streamlining processes before moving forward.
Question Two: Can you cash flow a second location without pulling cash from the first one?
When deciding to open a new location, it’s easy to get caught up in the excitement of expansion! However, before taking any steps, you must ask yourself if you have a clear plan for how you can cover expenses and generate profits without dipping into the profits from the first location.
If your business is not set up in a way where the new location could be self-sufficient, you might not be ready.
Question Three: Will a second location take away any customers from your current location?
Here’s the thing: we assume the customers for our new location will be the same type of customers as our current location. However, this is not necessarily true. When entering a new geographic area, there is an entirely new dynamic that must be considered.
To make sure you understand the customer of your new location, you must ask yourself:
- Who are these new customers?
- What do they need from us?
- Are they currently shopping at our first location?
While having some overlap isn’t a big problem, you want to make sure that your locations are servicing different customer groups, so you don’t cannibalize your first locations’ sales.
Before you continue with this process, sit down and make sure you have answers to the questions above so you know exactly what customers at your new location expect.
Question Four: Will you be able to take all your lines from your first location and take them to your new location?
If your answer to this is no, it doesn’t mean stop, just pause. Adding new lines or new manufacturers will take up your time & money, resources which always seem to be scarce during an expansion! It’s also important to consider how taking on new lines will impact the relationship you have with your current manufacturers. In this inventory environment, the importance of loyalty cannot be overstated.
The last thing to keep in mind with regards to additional lines is how willing you are to handle additional business complexity. Bringing on an additional line also means developing a co-op plan, understanding the warranty process, and ensuring you’re able to secure the appropriate parts.
Now, when discussing the move with manufacturers, you may find they encourage the new location because you have “market shareability”. While this might be correct, it’s important that you make the right decision for your dealership. External parties may not have visibility into your internal processes or structure, which are both important factors when considering expansion.
Question Five: Do you have sufficient floorplan to accommodate inventory?
Right now, most dealers would likely say yes because they don’t have any inventory! However, when considering a new location, it’s important to think about your inventory plan for the next 6, 9, 12 + months.
Question Six: Do you have the option to extend additional credit if needed?
Cash flow is king when you are deciding to open an additional location! To make sure that you’re able to finance your new location, make sure that you have the ability to extend additional credit, just in case an emergency comes up.
If you do make the decision to proceed, your new location will take more time and energy than even your first one did. As an owner, you’ll need to make big decisions about your new location while ensuring that you maintain the same exceptional level of service across both. To do so, it’s important to have the right processes and technology to support these processes in place.
One of the best ways to make sure both locations are operating efficiently is to hire a general manager for your first location. By training someone to keep an eye on that location, you can dedicate more of your time to the new location and be confident that you are not compromising your existing sales.
Feeling overwhelmed? Don’t worry, it gets easier with each additional location. If you’re expanding to your second location, chances are that you don’t have established processes for handing off your existing location and taking over a new one. And the more locations you build, the less involved in the process you need to be and the more refined it will become.
To hear more tips for increasing revenue and growing your dealership from Sara, watch her Earn More Revenue Using Your Dealership Management Software vlog series.
About Sara Hey:
Sara’s journey working with dealerships started when she was young by providing child labor packing VHS training tapes for dealers across the country. In college, she studied psychology, which has been a huge benefit working in her family’s business as well as with family-owned dealerships over the last 10+ years. Now, Sara spends her time speaking at conferences around the world and working with both manufacturers and dealers to achieve success.