How to Start a Motorcycle Dealership

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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.

Business Overview

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, and other types of outdoor equipment.

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.

Related Industries

Car Dealership

Industry Trends

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.

Target Market

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.

Costs 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 $5000 – $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 costs, royalties, marketing expenses, and a minimum amount of financial capital. and are not figured here.

Steps to Starting a Motorcycle Dealership

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.

How to write a business plan
Free sample business plans

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 a 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.

RelatedComparison of Business Entities

Step 4: Select your Location

An ideal motorcycle showroom will be located in an area that is convenient for customers and has high visibility and traffic.

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.

Related: Common business licenses, permits, and registrations by state

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.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the 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.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A motorcycle dealership needs several types of insurance for full coverage:

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.

Insurance policies will vary. 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.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You will need employees to help you 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.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Motorcycle Dealership?

If your profit margin is 10% and you can sell 10 motorcycles a week at an average of $3000 each, you would make a profit of $156,000 per year.  Adding repair services to your dealership would add more revenue.

Things to Consider Before Starting a Motorcycle Dealership

Running a motorcycle dealership or any business will have its challenges.  You need to be prepared, and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  Your business depends on first getting customers and then getting them to come back.

You will face competition, so you need to offer great products and be a great salesperson.

Talk to other entrepreneurs for tips on starting a business and do your homework to determine costs.  Research other motorcycle dealerships to see what they offer and what prices they charge.

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