1.0 Executive Summary
The purpose of this business plan is this is to secure $1 million of capital for the development of a used car dealer based in Montgomery County, Maryland. Deutsch Premium Auto Group LLC (“the Company”) was founded this year by Matthew Deutsch. The Company intends to undertake a nine months development plan so that the business can develop its dealership location while acquiring preowned vehicles for sale. To complement these operations, the Company will also provide minor on-site repairs of vehicles, which will be an important secondary stream of revenue for business.
Operations
Their primary revenue center for the company will come from the ongoing sale of vehicles from the Company’s dealership in Central Maryland. The Company will specialize in preowned vehicles that typically are between the age of 2 to 5 years old and have been driven no more than 12,000 miles per year. The Company will generate contribution margins of approximately 25% to 35% on each vehicle sold. For each vehicle, the Company will provide a limited warranty in order to foster a significant degree of trust with customers.
The Company will also provide minor repair vehicles as a secondary service. This is an important revenue stream, as it will provide highly predictable streams of income that will support the underlying operations of the business.
The third section of this used car dealer business plan will further discuss operations
The Financing
The $1 million in capital is expected to be acquired as a business loan. Matthew Deutsch will contribute $400,000 towards the venture. The funding will be principally used for the following:
• Location development
• Vehicle inventories
• Furniture, fixtures, and equipment
Given that the business deals in preowned vehicles, the Company may also seek a revolving credit facility that will allow the business to acquire a greater number of inventories from vehicle auctions as well as entities that are divesting large quantities of preowned vehicles.
The Future
The Company will continue to expand a scope of operations by acquiring additional in demand vehicles that can be quickly sold to clients throughout Central Maryland. The business will make ongoing expansions of the number of third-party channels used in order to market preowned vehicles that are available at the location.
Market Overview
Based on the target market size, the estimated annual demand for preowned vehicles in the Central Maryland market is $461 million per annum.
Revenue Forecasts
2.0 The Financing
2.1 Funds Required
The funding discussed in the executive summary will be allocated as follows:
2.2 Management and Investor Equity
Matthew Deutsch retains a 100% ownership interest in the business.
2.3 Exit Strategies
Given the multiple streams of revenue that will be produced by Deutsch Premium Auto Group, the business could easily be sold to a third-party. A potential buyer might include an existing preowned vehicle dealership network or an individual that is looking to get into this industry. Historically, preowned vehicle dealers typically have a price for earnings multiple of three to four times the prior year’s EBITDA. Based on this, Deutsch Premium Auto Group could achieve a sales price of $2 million by the fifth year of operation.
3.0 Operations
As noted in the executive summary, the Company will be actively involved with the acquisition and sale of quality, preowned vehicles from its location in Montgomery County. The Company will use numerous forms of inventory sourcing so that premium cars can be offered. The business will specialize in relatively new preowned vehicles that have been driven properly. This will establish Deutsch Premium Auto Group’s brand name as an honest and reputable dealer of quality preowned cars.
In regards to sales, it is expected that each vehicle will have a sales price of $10,000 to $50,000 depending on its making and model. The Company will work extensively with vehicle wholesalers in order to source vehicles that are in good condition.
The Company’s ability to provide onsite repairs is an incredibly important part of Deutsch Premium Auto Group’s operations. First, this will cost-effectively allow the business to make any needed repairs to any vehicle that is going to be sold through the dealership. This will significantly reduce costs in the long run and increase the profitability on a unit economic basis. Second, the Company’s ability to provide general repair services to the public will allow the business to produce a secondary stream of high margin revenue. The Company will recognize income from the sale of mechanical labor, as well as parts that are used during the course of repair.
4.0 Overview of the Organization
4.1 Registered Name
Deutsch Premium Auto Group LLC. The business is registered as a limited liability company in the State of Maryland.
4.2 Commencement of Operations
Deutsch Premium Auto Group will commence operations in the third quarter of next year.
4.3 Mission Statement
To provide quality, preowned vehicles on a cost-effective basis to clients in Central Maryland.
4.4 Vision Statement
To establish Deutsch Premium Auto Group as a premium car dealership in this market.
4.5 Organizational Objectives
• Leverage numerous forms of online marketing through third-party platforms that specifically deal with preowned vehicles.
• Higher qualified sales staff that understand how to properly sell a preowned vehicle.
• Onboard trained mechanics that will be able to effectively render mechanic services to the general public.
• Establish Deutsch Premium Auto Group is an honest and reputable provider pre-owned vehicles and vehicle repair services.
• Potentially develop additional dealership locations within the greater Central Maryland market after the fifth year of operation.
• Providing a stable place of employment for the Company’s staff which rewards professionalism with appropriate financial compensation.
5.0 Market and Industry Analysis
5.1 External Environmental Analysis
This section of the used car dealer business plan will focus on the current economic climate, the customer profile, the competition, and the ongoing issues with the economy.
At this time, the economic climate with the United States is moderate. As a result of changing trade policies, there has been a significantly higher degree of inflation than what was expected. It should be noted that the Federal Reserve as well as major global central banks are taking appropriate measures to ensure that inflation rates remain in check.
However, the demand for preowned vehicles will continue to remain incredibly strong, even during challenging economic climates. As acquiring a preowned vehicle is less expensive than buying a new one, the demand among individuals to acquire preowned cars may increase in the coming years should the underlying cost of a new car continue to increase faster than wage growth.
5.2 Industry Analysis
There are 150,000 companies that are actively involved with the sale of preowned vehicles. These businesses generate $150 billion of revenue, and the industry employs 300,000 people.
One of the major trends within the industry is provide onsite financing either directly or in tandem with third-party financial services firms. In order to ensure that Deutsch Premium Auto Group’s clients can easily acquire preowned vehicles, the Company will work with a number of regional and national banks that can extend financing based on the credit quality of each buyer.
5.3 Customer Profile
The following demographic profile is noted:
• Household income ranging from $50,000 to $200,000
• Is seeking a preowned car with a value of $10,000 to $50,000
• Lives or works within 50 miles of the Deutsch Premium Auto Group location
5.4 Competitive Analysis
Given in demand for preowned vehicles and the immense population of the greater Montgomery County area, there is going to be a significant amount of competition for Deutsch Premium Auto Group. Most importantly, the Company will maintain a differentiating factor by not only selling preowned vehicle but also by providing automotive repair services.
6.0 Key Strategic Issues
6.1 Sustainable Operations
Deutsch Premium Auto Group will have sustainable operations as a result of the following:
• The Company will source its preowned vehicles from numerous wholesalers on a cost-effective basis.
• Exceptionally high gross margins from vehicle repair services.
• Significant demand for preowned vehicles, giving the evolving trade policies of the United States.
• An experienced Owner, Matthew Deutsch, will be able to properly develop the operations of Deutsch Premium Auto Group.
• The Company can scale operations as vehicles be marketed for numerous online channels.
6.2 Basis of Growth
The Company will expand via the following methods:
• Continued expansion of the preowned vehicle in inventories that are held by Deutsch Premium Auto Group.
• Expansion of the number of third-party channels that are used for marking vehicles for sale.
• Potential development of additional dealership locations in the Central Maryland market.
7.0 Marketing Plan
7.1 Marketing Objectives
• Source a highly visible dealership location where extensive signage can be seen from the road.
• Use third-party sales platforms to showcase vehicles that are available for sale.
• Establishing a significant online presence with a search engine optimized website for the Central Maryland market.
7.2 Revenue Forecasts
7.3 Revenue Assumptions
Year 1
• Deutsch Premium Auto Group will launch its operations in Montgomery County.
• Revenue from all facets of operation will reach $2.3 million.
Year 2
• The business will increase the number of vehicles in its inventories.
• Total revenue will reach $2.5 million.
Years 3-5
• By Year 5, the Company will generate $3.3 million.
• Gross profits will reach $1.6 million.
7.4 Marketing Strategies
Management will use a number of marketing strategies that will ensure a significant amount of visibility for Deutsch Premium Auto Group while also positioning the business as a reputable dealer of preowned vehicle vehicles. The Company is in the process of sourcing a highly visible location on a highly traffic road within the Montgomery County area. This dealership location will have most of its vehicles outside so passersby will understand the premium nature of the vehicles offered.
To further drive inventory turnover, the Company will use multiple third-party platforms that allow dealers to showcase vehicles for sale. The Company will have the ability to operate an ecommerce capacity when an individual wants to purchase a vehicle. In tandem with specialized logistics firms, the Company will be able to provide delivery of any sold vehicle to any location within the continental United States.
The business will maintain a proprietary website that showcases all vehicles that are available for sale. This website will also feature video content with walk-through tours of the dealership facilities as well as an interview with the Founder. This will foster substantial degree of trust with potential buyers. This platform will also showcase the automotive repair services that are available by the business.
In order further increase the brand profile of Deutsch Premium Auto Group, Matthew Deutsch will enroll in a number of business associations specific for the preowned vehicle dealership in industry.
8.0 Organizational Plan
8.1 Organizational Hierarchy
8.2 Personnel Costs
9.0 Financial Plan
9.1 Underlying Assumptions
• The Company will acquire $1 million a debt capital to develop its dealership location in Montgomery County.
• Matthew Deutsch will contribute $400,000 towards the development of this used car dealership.
• Deutsch Premium Auto Group will achieve an annual revenue growth rate of 9%.
9.2 Financial Highlights
• The vast majority of the capital required to launch the Company will be allocated towards tangible assets and vehicle inventories.
• The Company will achieve substantial contribution origins on its automotive repair services.
9.3 Sensitivity Analysis
The business’ revenues are relatively stable even during times of economic recession. As noted earlier, the demand for preowned vehicles tends to increase during economically challenging climates given that they are lower cost alternative to a new vehicle. This economic stability for Deutsch Premium Auto Group will be complemented by its ability to provide automotive repair services.
9.4 Source of Funds
9.5 Financial Proformas
A) Profit and Loss Statement
B) Common Size Income Statement
C) Cash Flow Analysis
D) Balance Sheet
9.6 Breakeven Analysis
9.7 Business Ratios
Appendix A – SWOT Analysis
Strengths
• The Company will have numerous sources for acquiring quality, preowned vehicles.
• Onsite automotive repair services will allow the business to provide direct repairs to vehicles that are being sold, as well as producing revenue when the general public requires the services.
• The Company will use multiple online platforms for her drive significant inventory turnover in the coming years.
Weaknesses
• General operational complexities as this business will have multiple facets of operation and is required to adhere to numerous laws and regulations.
• The sales of preowned vehicles is a highly competitive industry.
Opportunities
• Expansion of operations to include luxury preowned vehicles, which would carry a higher contribution margin for sale.
• Continued expansion of the Company’s automotive repair operations as it produces highly predictable income.
• Development of additional dealership locations within Central Maryland.
Threats
• Continued uncertainty with certain aspects of the economy could cause the underlying cost of the business to increase as well as making the cost of automotive financing more expensive.
Appendix B – Critical Risks
Development Risk – Low
The primary matter that needs to be addressed to securing the $1 million a capital sought in this document. Matthew Deutsch has already sourced the location that will be used for the dealership location.
Financing Risk – Low/Moderate
The vast majority of the funding discuss this used car dealer business plan will be specific for the development of the Company’s dealership location as well as the acquisition of tangible vehicle inventories. The numerous revenue streams discussed this document will reduce the financing risk.
Marketing Risk – Low/Moderate
Given a level of competition among preowned vehicle dealers, Company will use multiple forms of advertising marketing to create a well respected brand name.
Management Risk – Low
Matthew Deutsch is a highly experienced owned vehicle dealer entrepreneur will be able to properly establish the operations of Deutsch Premium Auto Group as a reputable dealer of vehicles in Montgomery County.
Valuation Risk – Low
The valuation risk is offset by:
• Highly predictable income from the sale of preowned vehicles.
• Substantial profits from automotive repair services that will complement vehicle sales.
• Significant demand for preowned vehicles given their lower cost.
Exit Risk – Low
Mr. Deutsch intends operate this business for a significant period of time. In the event that is necessary to do so, numerous business sales professionals will be retained in order to ensure that Deutsch Premium Auto Group can be sold for a fair market valuation.