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Car Dealership icon Used Auto Sales Business Plan

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Integrity Auto Sales

Executive Summary

Auto Sales & Parts

Problem

There is a need in Lane County for a large selection of quality used cars, and Integrity Auto Sales will sell these top-quality used vehicles at a competitive price. The owner and sales manager have over 30 years of combined experience in new and used auto sales. We will continue to develop our excellent working relationship with local dealers and auctions to bring the savings to the customer.

Solution

We will create a purchasing environment that caters to the customer’s needs. We are selling a professional service and an experience in car buying that will bring customers back again, as well as referring friends and family. We estimate an optimistic gross margin over the industry average. We will be successful because of the excellent team we have assembled and the drive and determination of the owners.

Market

Almost everyone needs a car to get from point A to B. Many families have two or more cars. Due to the recent success of the new car market, there is a large inventory of used cars available for re-sale. New car sales have enjoyed the largest single month gain in October up 24%.

Competition

Used car dealers are notorious for unethical sales practices. Customers are inherently cautious and untrusting as a result. The more we can provide a high-quality sales experience, the more successful we will be. Our salesmen will provide a friendly and personal experience for the buyer. We will follow up and ensure customer satisfaction. We will rely on these customers for an excellent reference to other car buyers. This company will build an excellent working relationship with our suppliers and customers.

Why Us?

Integrity Auto Sales provides a unique car buying experience to the customers in the Willamette Valley. One that focuses on customer satisfaction first. We understand that vehicle purchasing is a necessary, but sometimes unpleasant experience. Our goal is to provide the customer with an enjoyable, honest service by satisfying individual customers practical transportation needs with a quality product.

We also believe it is important to have quality vehicles at a low cost, and will back each vehicle with a 30 day limited warranty. Our company will make a profit by generating sales. It will provide job satisfaction and fair compensation to its employees, and a fair return to its owners. Hard work and performance is rewarded through bonuses and commissions. Job satisfaction is very important for employees and owners, we will create a work environment that is enjoyable and profitable for all.

Expectations

Forecast

  1. Growth will be moderate to good, cash flows steady with several months of loss in the beginning
  2. Marketing will remain below 10% of sales. 
  3. The company will invest residual profits (10%) into financial markets and approximately 50% into company expansion for the first year.

Financial Highlights by Year

Chart visualizing the data for Financial Highlights by Year

Financing Needed

We need $130,000 funding to start. That includes a $100,000 loan. Jonathan will invest $20,000 and Don will invest $10,000. 

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Opportunity

Problem & Solution

Problem Worth Solving

There is a need in Lane County for a large selection of quality used cars, and Integrity Auto Sales will sell these top-quality used vehicles at a competitive price. The owner and sales manager have over 30 years of combined experience in new and used auto sales. We will continue to develop our excellent working relationship with local dealers and auctions to bring the savings to the customer.

Our Solution

Integrity Auto Sales provides a unique car buying experience to the customers in the Willamette Valley. One that focuses on customer satisfaction first. We understand that vehicle purchasing is a necessary, but sometimes unpleasant experience. Our goal is to provide the customer with an enjoyable, honest service by satisfying individual customers practical transportation needs with a quality product.

We also believe it is important to have quality vehicles at a low cost, and will back each vehicle with a 30 day limited warranty. Our company will make a profit by generating sales. It will provide job satisfaction and fair compensation to its employees, and a fair return to its owners. Hard work and performance is rewarded through bonuses and commissions. Job satisfaction is very important for employees and owners, we will create a work environment that is enjoyable and profitable for all.

Target Market

Market Size & Segments

 

Almost everyone needs a car to get from point A to B. Many families have two or more cars. Due to the recent success of the new car market, there is a large inventory of used cars available for re-sale. New car sales have enjoyed the largest single month gain in October 2001, up 24%.

4.1 Market Segmentation

Our market segmentation will consist of four basic segments; students, retired, families, and singles.

Competition

Current Alternatives

Our closest, similar competitors are AA Auto Sales, Big Apple Car Sales, Frank’s Auto Place, Guaranty, R & L Motors, and Sierra Truck, all on Hwy 99 between Eugene and Junction City.

  • The primary competitors will be those in and around Junction City. Guaranty is a large, well-established dealer, with approximately 75% of the local market share. Guaranty has a large operation with a well-trained sales staff. Our sales manager is a former Guaranty sales manager, who understands the competition’s operations very well.
  • Frank’s Auto Place offers a limited selection, and appears to be unorganized. Frank’s does not offer any competitive marketing and primarily focuses on the $1-2,000 vehicle.

Our Advantages

Used car dealers are notorious for unethical sales practices. Customers are inherently cautious and untrusting as a result. The more we can provide a high-quality sales experience, the more successful we will be. Our salesmen will provide a friendly and personal experience for the buyer. We will follow up and ensure customer satisfaction. We will rely on these customers for an excellent reference to other car buyers. This company will build an excellent working relationship with our suppliers and customers.

Keys to Success

Keys to Success

To succeed in this business we must:

  • Put together a team of experienced professionals.
  • Secure an excellent high-traffic location.
  • Establish a network of suppliers, in order to buy and sell products that are of the highest reliability and quality, at a competitive price.
  • Ensure customer satisfaction by encouraging the two most important values, honor and integrity.
  • Create high morale by rewarding employee success with monetary compensation.
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Execution

Marketing & Sales

Marketing Plan

Our marketing strategy will focus on four segments. Those segments are described in the following subtopics. We will implement a strategy that treats customers as a community. This means our marketing resources will be centered around advertising both sales promotions (events) and personal sales (customer service, friendly atmosphere).

  • The marketing budget will not exceed $6,000 per year.
  • Marketing promotions will be consistent with the Mission Statement and support the following objectives:
    1. 100% customer satisfaction, measured through repeat customers, referrals and surveys.
    2. To achieve a respectable profit margin within the first three-years.
    3. To achieve a healthy net profit by year two.

Students will include high school and college age students who need a safe and economical car. This group is concerned with price, flashy looks, and being cool. These drivers tend to be less educated and will buy on impulse paying more for less car. They will also buy cars more often than others, on average every two to three years.

The retired group will focus on practicality. Cost may be less important than quality and features. This group wants comfortable, nicely equipped vehicles at a reasonable price. They will want a vehicle that will last for years.

Families will focus on safe, practical vehicles. Something that will last for years, can fetch groceries, carry the kids, and perform long trips. Many will be on a budget, and price may be a big factor. They will shop around and educate themselves on vehicles, shopping for a specific make or model.

The last group is the singles. They are similar to the students in that they want flashly cool cars, but may be a working professional who can afford to pay more for a higher-quality vehicle.

Sales Plan

Sales compensation is based on a percent of profits. We will invest adequate time and resources into training each member of the sales team and into good customer relations. Salesmen will be paid a portion of their salary based on commission. Good performance is rewarded with increased commission and bonuses. However integrity will not be sacrificed for sales. Customer satisfaction will continue to be a top priority. All potential sales will be attended to in a timely fashion and long-term salesperson-customer relationships will take precedence over sales closure.

Operations

Locations & Facilities

  • The company office is located at 12345 HWY 99, Junction City, OR 97666.
  • The office is approximately 1,000 square feet and has ample space for the first three years of growth.
  • The 20,000 square foot lot and building is leased from the principal owner.

Technology

Integrity Auto Sales sells top-quality used vehicles at a competitive price. Integrity buys pre-inspected vehicles wholesale from well known local car dealers, and auto auctions. Integrity continually maintains a diverse stock of vehicles, providing the widest selection for individual needs.

Vehicles are purchased weekly, to add to the current stock on hand. Each vehicle is thoroughly inspected by an ASE mechanic with over 25 years of experience. Only vehicles that pass this critical 26 point inspection are sold on-site.

Integrity Auto Sales sells all types of used vehicles, from sports cars to RVs. We cater to each customer individually, to satisfy their own practical needs.  We buy only the best used vehicles at or below wholesale in order to bring the savings to the customers. Each vehicle is thoroughly inspected by an ASE mechanic with over 25 years of experience. We also offer an auto finding service to customers. If we do not have the vehicle they want in stock, we will find one for them.

Milestones & Metrics

Milestones Table

Milestone Due Date
Q1 Review
Mar 06, 2020
Q2 Review
June 08, 2020
Q3 Review
June 11, 2020
Q4 Review
Dec 13, 2020

Key Metrics

Our key metrics are: 

  • # of facebook posts and pageviews 
  • # of tweets and retweets
  • # of reps that meet and excel their quotas. 
  • cogs of our most popular cars
  • website page views and shares 
  • Follow our customers figure out their favorite cars and features 
  •  

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Company

Overview

Ownership & Structure

Integrity Auto Sales is a privately held corporation. It will be registered as a Subchapter S, with ownership 60%-Jonathan Dinsmore, 40%-Don Mazzioti.

Team

Management Team

Integrity will start with four initial employees. The owner will manage over all operations and the sales manager will manage all buying and selling of inventory. A records clerk and lot attendant will also be hired initially.

Once the gross margin and cash flow will support it, we will hire an additional salesman and lot attendants (tentatively four to six months).

Personnel Table

2020 2021 2022
Sales Associates (1.33) $42,840 $131,091
Owner/Manager $45,600 $46,512 $47,442
Sales $42,000 $42,840 $43,697
Records Admin $36,000 $36,720 $37,454
Lot Attendant $31,200 $31,824 $32,460
Accountant $36,000 $36,720 $37,454
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Financial Plan

Forecast

Key Assumptions

We will accept credit cards and trade-ins of any value. Credit cards will have a negative affect on cash flow in that we may not be paid for several days. Trade-ins will also impact cash flow in that they are an asset and have no real value until sold. We will have to limit the number of credit transactions, and only take in quality trades at a wholesale price to facilitate turning a quick profit. The personnel burden is very low because benefits are not paid to part-timers. And the short-term interest rate is extraordinarily low because of current market rates.

We also assume conservative earnings from selling loans and extended warranties will be made.

The other assumption is that current market conditions will remain for the next two to three years. Low rates will have a positive impact on sales and lending for the short term.

Our cash forecast is extremely unrealistic at the far end of the forecast. We leave it like that knowing that we will revise over time. We call it a cushion, and reassurance, not an accurate forecast. 

Revenue by Month

Chart visualizing the data for Revenue by Month

Expenses by Month

Chart visualizing the data for Expenses by Month

Net Profit (or Loss) by Year

Chart visualizing the data for Net Profit (or Loss) by Year

Financing

Use of Funds

Almost 90% of start-up costs will go to assets. Start-up costs will be financed through a combination of owner’s investment, short-term loans (VA business loan), and long-term borrowing. The start-up chart shows the distribution of financing.

Other miscellaneous expenses include:

  • Legal fees for business establishment (ownership, and no sell agreement).
  • Stationary, office supplies.
  • Marketing/advertising fees.
  • Initial consultation to establish records with an accountant.
  • Rent for lot and office.
  • Establish a Web page for advertising.
  • Expensed equipment (two computers, two desk, Fax/copier, phone lines, and office furniture).
  • One month initial start-up investment in vehicles.

Sources of Funds

We will be needing $130,000 to start. $100,000 will be a long term business loan. Jonathan will give $20,000 and Don will give $10,000. 

Statements

Projected Profit & Loss

2020 2021 2022
Gross Margin $1,512,350 $2,211,110 $2,868,419
Operating Expenses
Salaries & Wages $190,800 $194,616 $198,507
Employee Related Expenses $38,160 $38,923 $39,702
Leased equipment $1,200 $1,200 $1,200
Utilities $6,000 $6,000 $6,000
Insurance $4,800 $4,800 $4,800
Rent $48,000 $48,000 $48,000
Interest Incurred $4,960 $2,604 $373
Depreciation and Amortization
Gain or Loss from Sale of Assets
Income Taxes $182,764 $287,246 $385,475
Total Expenses $5,589,834 $8,285,779 $11,091,537
Net Profit $1,035,666 $1,627,721 $2,184,363

Projected Balance Sheet

Starting Balances 2020 2021 2022
Cash $67,800 $987,635 $2,502,599 $4,749,528
Accounts Receivable $0 $0 $0
Inventory $50,000 $628,850 $864,920 $864,920
Other Current Assets
Total Current Assets $117,800 $1,616,485 $3,367,519 $5,614,448
Long-Term Assets
Accumulated Depreciation
Total Long-Term Assets
Accounts Payable $447,538 $593,423 $652,440
Income Taxes Payable $53,697 $71,698 $96,458
Sales Taxes Payable $0 $0 $0
Short-Term Debt $38,216 $40,573 $21,212
Prepaid Revenue
Total Current Liabilities $38,216 $541,807 $686,332 $748,898
Long-Term Debt $61,784 $21,212 $0 $0
Long-Term Liabilities $61,784 $21,212 $0 $0
Paid-In Capital $30,000 $30,000 $30,000 $30,000
Retained Earnings ($12,200) ($12,200) $1,023,466 $2,651,187
Earnings $1,035,666 $1,627,721 $2,184,363

Projected Cash Flow Statement

2020 2021 2022
Net Cash Flow from Operations
Net Profit $1,035,666 $1,627,721 $2,184,363
Depreciation & Amortization
Change in Accounts Receivable $0 $0 $0
Change in Inventory ($578,850) ($236,070) $0
Change in Accounts Payable $447,538 $145,885 $59,018
Change in Income Tax Payable $53,697 $18,001 $24,760
Change in Sales Tax Payable $0 $0 $0
Change in Prepaid Revenue
Investing & Financing
Assets Purchased or Sold
Investments Received
Dividends & Distributions
Change in Short-Term Debt $2,357 ($19,361) ($21,212)
Change in Long-Term Debt ($40,573) ($21,212) $0
Cash at Beginning of Period $67,800 $987,635 $2,502,599
Net Change in Cash $919,835 $1,514,965 $2,246,929
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