I have a unique opportunity to invest in a new, but small, auto dealership. It's one of the three major Detroit brands. The endeavor has the full support of said brand. I would be an investor only and would not be involved with the daily duties as I have a business of my own to run. The other partner would be running the show mostly and has decades of experience. I would probably be putting about $50k in it at first, and am willing to take some losses for several months as long as it shows an uptrend.

It seems like a good opportunity, does anybody else have experience in dealerships? Will a well ran dealership be a reliable business long term?

Depends on the track history of the guys running it.  If they have a proven track history and there's market share to be had, I would consider it. What type of return are you expecting and can you do better elsewhere?

I wouldn't.    I don't see how they can compete with the mega dealerships.    

Also, I've been looking at Ford and GM stock lately.    They are very, very cheap, ~70% less than normal stock, based on P/E.  

And, they pay really high dividends.      The rest of the market is floating in the irrational exuberance stratosphere;   And US car stocks are languishing down in the dumps.  

Clearly, the market is predicting another AutoApocalypse.    I've been giving it some thought, because I'm probably going to be buying at least $20,000, but I'd love to buy even more, considering the dividends.   The Market probably sees rising interest rates as the death knell of BroTruck profits.    And rightly so.
Anyway, your $50g's are better wagered on Ford, or spread between 5 different bets.   Look into it.  Read all the financials, as much as you can find about All the manufacturers, and especially your target brand.  

-are you counting Dodge as one of the 3?   If so, then LoL, No.  just no.

- Don't use the phrase "unique opportunity". Even in your own mind.  Take it right out of your lexicon.    That's the phrase people use when they are trying to sell you something.   There are thousands of investment opportunities.  None, are truly unique.

As long as it is GM or Ford go for it. Multiple revenue streams I run a very successful dealership feel free to contact me with questions. Like everything this is a people business you have to have the right ones or it will be a poor investment.

I'm curious why you guys think so lowly of Dodge?

Would you guys put much stock in the fact the auto brand is fully behind and supportive of the location? I do not know much about auto sales admittingly, but I am pretty good at running a profitable business. Owning whole or part in several diverse businesses has been an ambition of mine for quite awhile, that is why I am intrigued. And I also trust my partner and his track record.

The return is not something I think about, I know that doesn't make sense. I am more interested in the potential of business growth. I am not one to get excited about dumping cash into an account and watch it grow on a computer screen, although I do have investments like that. i get more excited about business ventures that have a tremendous potential for growth and sustainability. So I can't or won't really put a number on what I expect in ROI. I will analyze the market and business plan to decide whether it is worth my time and money.

I am a mopar fan through and through. BUT today's dodge is not the one from yester year.

Right now being FCA is an issue.
If you look back they left several dealerships high and dry when they switched over from MB owning them.

Fiat is looking to off load them again, so the rumor mill has it.

I would be shocked if there isn't some truth to it.

While trucks and jeep are a big sales in their favor, they really don't have much that grabs attention in other markets.
Viper is going away. Sure the hellcat and demon are making noise, but how much does that really make them.

They have one month where they were the top pony car, but normally that is a ford or chevy title. And note it is only for a month not a year.

What other car do you hear about people flock to on their lots?

They are poorly run and don't have a soild direction yet.
That is why people are down on them.

You can use whatever buzzwords you want,  but you'll never get to your goal of owning a diverse array of businesses if you make it a habit to tossing 50 grand in the wind and hope it works out.  

I would say that this investment isnt worth messing with are this point,  bc you have literally no data to even begin to make a decision with and don't seem like the type to analyze data in any meaningful way.

That's not a bad thing,  im sure you have skills outside of analytics. Everyone has weak points and strong points.

And if you do go forward,  i would strongly advise you to discount anyone's advice that is based on generalities about a brand and their dislike of that brand. It means almost nothing.

Every single time I've bought a business i heard all that same stuff.  It is meaningless. It is an example of why most people not only dont succeed, they never even make an attempt.  Always a reason.

You'd get a kick out of some of the absolutely ridiculous things I've been told or asked in the past.

My last business we bought 6 months ago,  the number one question i got asked daily was "are you going to fire everyone when you take over,  to save money?"

People are that dense, they really thought we would fire every person that generates income to cut expense.

....i had to double check that I didn't post this in GD...

You have no idea what data I do or don't have. Im not here to get anyone's opinion on the numbers, I have the numbers. I want opinions on the broader idea from others that have been there, the human element. The numbers only get you so far, and I'm not throwing $50k to the wind.

But I agree with you, my decision to do it or not will never hinge on internet posts from strangers. However, I have found a few good nuggets over the years from this section and I want to gain some perspective.

What do you honestly want us to say then? This is a business forum. Business is numbers. You gave us no numbers or details of any kind so we gave you worthless opinions based on wild assumptions.

As with any business, your experience in it will depend on your capital, leadership skills, management skill, and luck (I hate to use the word luck. Chance maybe, how things line up, timing. If that makes sense). I'm sure you're a smart guy, you didn't need to make a thread to hear that. Ask vague questions, and we do the best we can.

Our opinion without numbers, is worthless. It's just personal preference. I don't personally enjoy the service industry. In fact, I hate it. But that's my experience and has a fairly low barrier of entry so that's where half of my time is spent.

I'm jaded, after managing a large service company and owning a few as well. I hate technicians. I hate salesman. I hate customers. I have only a mild dislike for vendors. Mostly people are crooked, dishonest, lazy, stupid and spend most of their time trying to squeeze you for money. That's what years in the service industry will do to you. I no longer have day to day involvement in that industry, and my life is much better for it. My experience was probably worse than most, because we worked in a 24/7 industry and operated in multiple states using rural workers that had very little ambition or skill.

If you have high standards and demand excellence, it will destroy you. I'm a numbers guy, so being basically a board member in charge of the finances is very enjoyable to me.

But, with anything, if you try to stay positive and lead your team, while not letting customers screw you, it can be a great experience.

The only thing I can provide with no details, is that as a rule of thumb from my experience you can plan on making around 100k in profit for a service dept with 2 techs, 200k for 3.5 techs, 400k for 5 to 6 techs. I know the margins on the vehicle sales side but I can' speak to overall net profit on that.

I would be doing a proper SWOT analysis and figure out your opportunity cost. Frankly, if you're turning to arfcom for advise on this issue; i don't think you have the acumen to make a prudent decision and you're more or less gambling.

Maybe I'm wrong and you're a lot more informed and experienced than you're leading us to believe.

I'm fishing. I'm not going to turn to ARFCOM for a go/no go here based on numbers, just wanted to chat a bit, maybe get a fresh look at the idea from an angle i havent before. I play things close to the vest, just the way I am, that's the real reason for no real details. Thank you for the advice, honestly.

The truth is stranger than fiction. No, I'm not turning to ARFCOM to make my mind up here. The dealership is completely new to me, but business is not. I will do all the things you have mentioned in due time. But yes, it is a gamble, isn't all of business? A guy could draft up the best business plan and have strategies for every contingency, and it could all be worthless in the first two months. Rarely do things go as planned. Business is a gamble, and yes, I'm willing to gamble. The chances of success when you don't try, are zero.

I didn't get in the position to "gamble" this amount of money by "not having the acumen."

Why make it sound like you don't have the numbers?  You know people would ask.  My big question is why you and why 50k?  Sound like you don't bring much to the table besides money and it's not that much money.  You could be easily replaced in this scenario so unless this guy is a friend or family my guess is he heard you had money and like glitter.  The small dealerships are selling out because they can't compete so you need a nitch or an isolated market.  Could be great but not enough to tell.  An example would be my boss has a business selling used luxury cars mostly online I think.  Does well at it but needed a ton of cash up front, I joked he would need 2 million for a large selection and he just said more.   Keeps competition to a minimum so his margins are great for the car market.

the business being managed by someone else would bother me, i would want to be more hands on in a business

Where most dealerships go wrong is in the leadership of the person in charge. Management usually only has experience and background in new car sales and have no clue about how to run parts and service. Long term parts and service is where the money is made. The sale of car or truck is where a relationship is made. The service you provide on the car truck is where the lifetime bond is made with the customer.

This is something i forgot to mention. Be careful.

50k is nothing for a new business, so he sees you as a mark, he just personally likes you, or you bring some other skill you didnt touch on.

I only read your first sentence but agree 200%. 

Around here the the dealers have turned into “high volume” dealers.  Massive facilities with thousands of cars, 30bay garages, paint and body on site along with automatic car washes.

im not sure how you can compete when going up against that. But I don’t know much about the industry. 

I've more than 50K in one session of craps at a casino so NO I wouldn't invest in a new start up car dealer. Too much risk go a LONG wait for any return.

OK i'll bite as you've gotten quite a bit of feedback but it's not resonating with you.

If I was in your shoes, there would be two scenarios/questions I'd be running:

1)$50,000 investment relation to my cash positions, net worth and cash flow from all sources:
If I am worth $5,000,000, I wouldn't sneeze at investing $50k as losing it would be a great story. If I am worth $500,000 and liquid, ok, I might pause and run some analysis. If I only have $50-100k and am putting $50k in to play at the hands of someone else's discretion, probably not.

2) $50k isn't going to even dent the real amount of money required to make this car dealership even viable. That would barely be enough to cover engineers/architect fees to do a remodel of an existing building. Why would they need my cash as successful people at this level surely don't need peanuts but need big stacks of liquid or lines of credit. $50k, my equity would be TINY compared to the overall haul of the project. This one smells and wouldn't sit well with me unless there is something not right about the deal. In my mind, if someone was doing it the right way, they would be looking for $500k not $50k. Now we are talking about setting the stage for success and a solid ROI.

For this situation, the downside is too heavy and the upside is too small for this to be a valid investment but more of a long shot gamble.

ymmv.

My Father owned very successful Ford, Nissan, Subaru, BMW, and Volvo Dealerships.
I was a GSM for many years.

$50K wont cover 1/2 of payroll for 1 month, at any of those franchises.

If its a Big 3 brand, $50k is small potatoes, and how many other people are investing?
Back in the early 2000's, Ford basically went in to the smaller towns and shuttered the
smaller dealers, and refocused the new build allocation the larger dealers.

Something is fucky, and I'd take my $50k and invest it other avenues.

No way would I screw with that. You're wanting a positive result in a few months. I don't see that happening with a venture like this, but that's just me.

This was my 1st thought, $50k is nothing to a dealership.  I see dealership financials for a bank, when you look at the capital needs of a dealership I am talking floor plan, payroll and such, it is a drop in the bucket.  If it is FCA, does he have Ram in addition to Chrysler?  Are they moving into an established facility, if so, what happened to the prior tenant.  Will he own the r/e?  

I think for a small dealer it could be quite a bit though.

I have 2 repair shops in small towns.  We are the quick turnaround, high cost shops. The only good shop in each of those towns.

The Ford dealer my brother worked for had about 15 new pickups, 8 used, owner was the salesmen,  and 2 auto techs. That wouldn't take much to buy out.

I wanted to buy him out and that shop,  move the dealership to our new shop but the whole thing is tied up in a trust.  2 old parents and 4 siblings.

The shop we bought that he runs now we put less than 50 in cash down on a 350k price because its a small town and guys make deals just to offload things.

So I am a managing partner of a Ford Dealership and my question to you would be why in the hell is this guy either wanting you or letting you invest 50K into it. Honestly I think you are full of shit.  I am a small dealership in the grand scheme of things.  I am not the smallest but I am way behind the big guys.  We have 40 employees and 50k will not cover Pay-Roll nor would it be enough capital to keep the dealership running for more than a week.  So I ask again why would he want you or let you invest such a small amount.  I normally would start this post by offering to have you PM me and I would give you some advice but this is so far out of the realm I don't see the need.   I know the last opportunity I was offered was from a good friend of mine that is in the business offered me a shot to go into a Dodge dealership into a new market and it would have cost me 500K plus enough assets to cover a million dollar loan. Also I would be Leary of any one that would let you put 50k into a new car franchise.  You are about to get taken for a ride.  Also if you have already saw the numbers on the store what is the Net Cash Over Under, Service Absorption, and Profit Before Income Tax for this year.  I can tell you from those 3 numbers whether you should run and hide or put alot more in.

Something doesn't sound right to me.

I think he mentioned it was a small dealership. The one my brother worked at had 3 employees not counting the husband and wife owner.

Thats a small dealership. Id consider 40 a big dealer, just not mega like some of the huge operators.

3 months ago I became what is called a select dealer which means that I no longer have a rep come into my store. Before the change I was a small fish in a big pond trying to compete against all of the big name stores. Now that I am a select dealer I am a big fish in a small pond. My store sells about 750 total cars and trucks a year which makes me a small to average dealer. I would consider a big dealership to be a store that sells 1,000 plus vehicles a year. So I guess its just all in perspective. A store with less than 5 employees would be a micro store which there are still quite a few of those but still even 50k wouldn't go very far in a store that size considering the Cash requirement's of a car dealership. I still think the guy is full of shit and until I am proven otherwise I will stand behind it. If he isn't full of shit he is about to get taken for one hell of a ride. When you are selling a product with a average price of 35,000 you can't get very far with a 50k investment.

Only $50k and would be a completely silent partner.

Yeah, sounds like a good way to light $50k on fire.  It doesn't pass the sniff test at all.

And what do you know. He gets called on the carpet and he disappears.