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Old 05-01-2013, 01:32 PM   #16
XDCX
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Originally Posted by Lakeshow View Post
Thanks for taking the time to post Moshe, just curious what you would define as a small rural store? As far as new sales volume for a true small rural store, what kind of numbers are we talking yearly?
I'll send and email to Moshe to make sure he's aware of your question.

My guess is Moshe will be less concerned about volume and more concerned about net profit. He commented that the threshold seems to be about $200K/year on the pro-forma. With a small overhead a rural dealer could probably hit $200K/year on a light mix of new and used cars.
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Old 05-01-2013, 03:50 PM   #17
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I'll send and email to Moshe to make sure he's aware of your question.

My guess is Moshe will be less concerned about volume and more concerned about net profit. He commented that the threshold seems to be about $200K/year on the pro-forma. With a small overhead a rural dealer could probably hit $200K/year on a light mix of new and used cars.
The problem is that "small overhead" hardly exists anymore. Smaller dealers pay a disproportionate percentage of sales for all the fixed expenses compared to a larger volume store. All the insurance coverages base off a minimum charge that's the same regardless of total coverage, so the small dealer pays the same base charge as a metro store, then it's just a matter of how high a limit they carry...once you get past the first million, each added step goes down in cost per million. Health insurance is a HUGE cost to everyone, but the small dealer is again at a big disadvantage because "small group plans" ( less than 50 employees) are rated on an individual group basis and can be hit with a much higher premium if several employees have risk factors (heart condition/ back problem) whereas a large group can't be rated up...all employees pay same rate regardless of health history. The factory requires the small dealer to purchase the exact same special tools as the large store...he has to spread it out over 200 sales versus the metro store amortizing it over 1000 units...it's costing the little guy 5 times as much on a per unit sold basis. Small dealer pays the same for "unlimited long distance" as the big store. Expensive facility requirements, increasingly specific training requirements for service techs in order to apply for different warranty labor ops, two-tier pricing, factory stair-step dealer cash and other incentive programs are set up to favor the metro stores and are making it more and more difficult for the small town dealer to sell the same volume now that he was 10 years ago. Not saying it can't be done, but there are a lot of hoops to jump through that make it much harder than it was 20 years ago!
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Old 05-01-2013, 05:07 PM   #18
Moshe @ Performance Brokerage Services
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By definition, anything that is not urban is rural. But I am sure that you did not mean to ask that in your question.

We consider rural dealerships those who are located at least 30 minutes outside of an urban zone and/or urban cluster.

Those dealerships vary in size of course and typically located in towns with population under 10,000. Those dealerships typically represent domestic brands, are too far from being able to pump into the nearby urban zone and typically (depends on market size) sell less than 500 new vehicles per year. More accurately, they sell 300 to 500 new vehicles per year.

Surprisingly, we receive a rather large number of inquiries from buyers for such stores:
  • buyers who are looking to semi-retire
  • buyers who are looking for a life style dealership
  • buyers who can only afford the less expensive stores

A good rural dealership should do very well in the service department. A good dealer/owner gets involved in the community, takes care of his/her customers, sells 300-500 new units per year, and twice as many used vehicles, if possible.

With honest dealing and leveraging local relationships the dealer is able to maintain good grosses and therefore can make a great living with income that can range from as low as $200K to as high as $750K per year.

Moshe Stopnitzky

www.performancebrokerageservices.com
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Old 05-02-2013, 09:36 AM   #19
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Originally Posted by DealerEx View Post
The problem is that "small overhead" hardly exists anymore. Smaller dealers pay a disproportionate percentage of sales for all the fixed expenses compared to a larger volume store. All the insurance coverages base off a minimum charge that's the same regardless of total coverage, so the small dealer pays the same base charge as a metro store, then it's just a matter of how high a limit they carry...once you get past the first million, each added step goes down in cost per million. Health insurance is a HUGE cost to everyone, but the small dealer is again at a big disadvantage because "small group plans" ( less than 50 employees) are rated on an individual group basis and can be hit with a much higher premium if several employees have risk factors (heart condition/ back problem) whereas a large group can't be rated up...all employees pay same rate regardless of health history. The factory requires the small dealer to purchase the exact same special tools as the large store...he has to spread it out over 200 sales versus the metro store amortizing it over 1000 units...it's costing the little guy 5 times as much on a per unit sold basis. Small dealer pays the same for "unlimited long distance" as the big store. Expensive facility requirements, increasingly specific training requirements for service techs in order to apply for different warranty labor ops, two-tier pricing, factory stair-step dealer cash and other incentive programs are set up to favor the metro stores and are making it more and more difficult for the small town dealer to sell the same volume now that he was 10 years ago. Not saying it can't be done, but there are a lot of hoops to jump through that make it much harder than it was 20 years ago!
Great post - I agree with all of your points.

There's part of me that's still very nostalgic toward the role of the rural dealer in his/her community and I'm reluctant to face the reality that smaller dealers face more challenges today than they did 20 years ago.

I still think a rural dealer can prosper, it just takes a more work and talent than it did in the past.
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Old 05-02-2013, 09:43 AM   #20
Lakeshow
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Originally Posted by Moshe @ Performance Brokerage Services View Post
More accurately, they sell 300 to 500 new vehicles per year.

Surprisingly, we receive a rather large number of inquiries from buyers for such stores:
  • buyers who are looking to semi-retire
  • buyers who are looking for a life style dealership
  • buyers who can only afford the less expensive stores

A good rural dealership should do very well in the service department. A good dealer/owner gets involved in the community, takes care of his/her customers, sells 300-500 new units per year, and twice as many used vehicles, if possible.

With honest dealing and leveraging local relationships the dealer is able to maintain good grosses and therefore can make a great living with income that can range from as low as $200K to as high as $750K per year.

Moshe Stopnitzky

www.performancebrokerageservices.com
Great answer, thanks so much! I ask because obviously we are a little different out here in the middle of nowhere. Your description fit us perfectly, except our new sales numbers were always 100-130 new units per year. I always considered us a rural dealer, but until the last few years there were "rural" dealer around here that sold less than 50 units per year. Glad to hear these dealerships values are on the rise, thanks for your input!
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Old 05-02-2013, 09:44 AM   #21
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Quote:
Originally Posted by Moshe @ Performance Brokerage Services View Post


Surprisingly, we receive a rather large number of inquiries from buyers for such stores:
  • buyers who are looking to semi-retire
  • buyers who are looking for a life style dealership
  • buyers who can only afford the less expensive stores
Thanks for the information - it's great to see that there's still a market for smaller/rural stores.

I liked the comment about a "life style" dealership. Over the years I've known Dealer Principals who were nearing retirement and they wanted to buy another dealership near the area they planned to retire so they would feel connected to the community. In fact, I believe one of Chrysler's Regional Managers bought a CJD store in Napa, CA after he retired for that exact reason.

On a different note, it's worth repeating that Chrysler's top volume retail dealership for several years was Dave Smith Motors in Kellogg, ID. Kellogg only has a population of 2,105 people...
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Old 05-02-2013, 12:52 PM   #22
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On a different note, it's worth repeating that Chrysler's top volume retail dealership for several years was Dave Smith Motors in Kellogg, ID. Kellogg only has a population of 2,105 people...
I'm not familiar with the Idaho store, but reminded me of a guy I went through GM's Dealer Candidate School with back in 1983, by the name of Frank Halvorson from Jackson CA, a small town on the western edge of the Sierra Nevada mountains in the old gold rush country about 60 miles southwest of Lake Tahoe. They were the largest volume Chevy dealership in the US at that time, handling many, many thousands of fleet deliveries for companies all over the country, out of an old "middle of downtown" 1950's building in a town of less than 3,000 population. As I recall, Frank said they had 80 employees that did nothing but paperwork, make readies, and transport for the fleet deliveries. Haven't talked to him in years, and seeing this thread I googled his store and was saddened to see that he had been forced to close down in December of 2008 when GMAC pulled his floorplan after he was 16 days late on his "FACILITY" payment. He had given in to pressure from GM to build a big new branded dealership 20 months prior to the credit crunch. As you can imagine, such a business model (thousands of units, at $200-300 net per unit, required a massive amount of floorplan capital to function, and he was unable to obtain another source at that time. His brother David is still in business in a Chevy store in Modesto, CA and said he was able to survive because he was in an older building that was paid for.
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Old 05-02-2013, 01:57 PM   #23
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Originally Posted by Lakeshow View Post
Great answer, thanks so much! I ask because obviously we are a little different out here in the middle of nowhere. Your description fit us perfectly, except our new sales numbers were always 100-130 new units per year. I always considered us a rural dealer, but until the last few years there were "rural" dealer around here that sold less than 50 units per year. Glad to hear these dealerships values are on the rise, thanks for your input!
Your numbers sound a lot more like what most of the small dealers in Texas sell...somewhere between 100-250. At a GM Regional Dealer meeting in Dallas, way back in 1985, the President of GM was addressing over 600 dealers from the Southwest region, and was asked the question: "What do you see as the future of the small GM dealer over the next 20 years?" He told us that personally, he would hate to try and survive as a small dealer (and he clarified that by saying he regarded anything less than 500 units as small), because he felt the "the costs to be a dealer", were going to increase so much, particularly in the technology area, that smaller volume dealers would be put in a non-competitive position relative to the large volume dealers. A bunch of us were talking about it in the bar later, and as best as we could calculate, that "less than 500 units" applied to about 70% of the dealers in that room. It made an impression on us...you had to figure he knew what he was talking about, and it turns out he did.
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Old 05-02-2013, 03:14 PM   #24
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I'm not familiar with the Idaho store, but reminded me of a guy I went through GM's Dealer Candidate School with back in 1983, by the name of Frank Halvorson from Jackson CA, a small town on the western edge of the Sierra Nevada mountains in the old gold rush country about 60 miles southwest of Lake Tahoe. They were the largest volume Chevy dealership in the US at that time, handling many, many thousands of fleet deliveries for companies all over the country, out of an old "middle of downtown" 1950's building in a town of less than 3,000 population. As I recall, Frank said they had 80 employees that did nothing but paperwork, make readies, and transport for the fleet deliveries. Haven't talked to him in years, and seeing this thread I googled his store and was saddened to see that he had been forced to close down in December of 2008 when GMAC pulled his floorplan after he was 16 days late on his "FACILITY" payment. He had given in to pressure from GM to build a big new branded dealership 20 months prior to the credit crunch. As you can imagine, such a business model (thousands of units, at $200-300 net per unit, required a massive amount of floorplan capital to function, and he was unable to obtain another source at that time. His brother David is still in business in a Chevy store in Modesto, CA and said he was able to survive because he was in an older building that was paid for.
https://www.youtube.com/watch?v=E1nwJZtWpdU

Watch this and tell me there should not be outrage. DealerEx I had to look for and find this, it made me cry that Sunday morning. Little did I know I would be with him, without a dealership, less than 6 months later.
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Old 05-03-2013, 08:56 AM   #25
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Your numbers sound a lot more like what most of the small dealers in Texas sell...somewhere between 100-250. At a GM Regional Dealer meeting in Dallas, way back in 1985, the President of GM was addressing over 600 dealers from the Southwest region, and was asked the question: "What do you see as the future of the small GM dealer over the next 20 years?" He told us that personally, he would hate to try and survive as a small dealer (and he clarified that by saying he regarded anything less than 500 units as small), because he felt the "the costs to be a dealer", were going to increase so much, particularly in the technology area, that smaller volume dealers would be put in a non-competitive position relative to the large volume dealers. A bunch of us were talking about it in the bar later, and as best as we could calculate, that "less than 500 units" applied to about 70% of the dealers in that room. It made an impression on us...you had to figure he knew what he was talking about, and it turns out he did.
I totally agree with this post and your previous one. It was getting harder and more expensive to stay a dealer. At the same time we were still able to make a great living, and support our community. It did just take more work and talent, but the benefits were still worth it.

By looking at the map of originally effected dealers in our state, GM wanted no dealers that were less than 500 units(the one exception is a former NADA president). That would have left 6-8 dealers in the nations fourth largest state, geographically. Any < 100 unit dealers were wiped out or quit on their own(with the exception of the guy that now has our franchises and sold 48 new units last year). And as we know they are working hard to get rid of the rest of the small guys. Too bad the mom and pop stores that help build and support these communities are being labeled as poor performers and cast aside.

X- Dave Smith is a very unique example of a large dealer in a small town. And a great example of what GM/Chrysler would let you get away with if you were pumping out that kind of volume, but I'll save that for a different thread.
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Old 05-03-2013, 12:54 PM   #26
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Originally Posted by steve_biegler View Post
https://www.youtube.com/watch?v=E1nwJZtWpdU

Watch this and tell me there should not be outrage. DealerEx I had to look for and find this, it made me cry that Sunday morning. Little did I know I would be with him, without a dealership, less than 6 months later.
Thanks for that link Steve! Watching that and reading some other articles, it appears that the Halvorsons had moved away from the huge fleet business they were doing back in the 1980's to a more traditional operation but he must have still been doing considerable volume given that he had 82 employees in a town that small. He had also added Toyota and Dodge/Chrysler/Jeep franchises at some point. Almost the whole town turned out for a "Save Prospect Motors" rally to try and influence GM, but to no avail. Listening to Frank's comments and those of the townspeople, it is clear that he was very well thought of and was involved in every facet of the community. 16 days overdue on his facility note to GM and they attacked like a rabid dog, and wiped out another long time dealer. I'd be willing to bet there's not a dealer alive that hasn't had to fight for months and months to get the factory to pay them money THEY owed.
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Old 05-07-2013, 01:53 PM   #27
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I'm not familiar with the Idaho store, but reminded me of a guy I went through GM's Dealer Candidate School with back in 1983, by the name of Frank Halvorson from Jackson CA, a small town on the western edge of the Sierra Nevada mountains in the old gold rush country about 60 miles southwest of Lake Tahoe. They were the largest volume Chevy dealership in the US at that time, handling many, many thousands of fleet deliveries for companies all over the country, out of an old "middle of downtown" 1950's building in a town of less than 3,000 population. As I recall, Frank said they had 80 employees that did nothing but paperwork, make readies, and transport for the fleet deliveries. Haven't talked to him in years, and seeing this thread I googled his store and was saddened to see that he had been forced to close down in December of 2008 when GMAC pulled his floorplan after he was 16 days late on his "FACILITY" payment. He had given in to pressure from GM to build a big new branded dealership 20 months prior to the credit crunch. As you can imagine, such a business model (thousands of units, at $200-300 net per unit, required a massive amount of floorplan capital to function, and he was unable to obtain another source at that time. His brother David is still in business in a Chevy store in Modesto, CA and said he was able to survive because he was in an older building that was paid for.
Quote:
Originally Posted by steve_biegler View Post
https://www.youtube.com/watch?v=E1nwJZtWpdU

Watch this and tell me there should not be outrage. DealerEx I had to look for and find this, it made me cry that Sunday morning. Little did I know I would be with him, without a dealership, less than 6 months later.
As soon as I watched the video that Steve linked I knew I remembered hearing about this dealership before. Here's a link to a thread on the forum discussing the closure of Prospect Motors back in December, 2008 - click here

I'll copy the above posts to the thread about Prospect Motors and continue the discussion there.
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Old 05-07-2013, 02:42 PM   #28
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Default Another small/rural GM Dealer Closes - Jason Black Chevrolet

Sadly, here's another example of a small/rural GM dealer who's decided to close his dealership because he cannot keep up with his OEM's facility demands and the increasing levels of governmental regulations.

Jason Black Chevrolet of Sharpsville, PA has closed down. Here's a link to the full report - click here
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Old 05-07-2013, 07:10 PM   #29
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Sad day for sure. Jason Black was a great partner when I was a Chevrolet dealer, did many dealer trades. He also was an great partner for AutoSoft he was a beta test dealer for many products. Since ASI is only 5 miles from his dealership.

I was reminded of a comment left on a newspaper article about my dealership closed...

"As the retail world changes, small rural car dealerships are fast becoming extinct. The massive capital requirements, facility requirements of the car companies, and the customer demand for large inventory have pushed out the small local businesses. Take a close look at those left for they have a very uncertain future."

Sad but true
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Old 05-08-2013, 10:11 AM   #30
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Sad day for sure. Jason Black was a great partner when I was a Chevrolet dealer, did many dealer trades. He also was an great partner for AutoSoft he was a beta test dealer for many products. Since ASI is only 5 miles from his dealership.
It really is sad that stores like Jason Black's are disappearing from the landscape. Mr. Black sound like a great guy and I thought it was interesting that he commented that he "had nothing bad to say about the bowtie" despite the fact that GM's facility demands likely played a role in his decision to close his store.

Quote:
Originally Posted by ohiobuckeyes View Post
I was reminded of a comment left on a newspaper article about my dealership closed...

"As the retail world changes, small rural car dealerships are fast becoming extinct. The massive capital requirements, facility requirements of the car companies, and the customer demand for large inventory have pushed out the small local businesses. Take a close look at those left for they have a very uncertain future."

Sad but true
That comment's probably almost two years old and it's just as relevant today as it was when it was written.

It's sad that some small/rural stores continue to struggle despite the fact the entire industry is recovering from the worst recession since the Great Depression.
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