You might be surprised to know that historically, in the US, the auto parts market has grown at a rate of about 3.5% to 3.9% per year, even during times of economic slump.
There are about 287 million registered vehicles in the US. There are countless opportunities for businesses to profit from automobile parts. In addition, even with huge companies, smaller businesses, such as the parts industry and the automotive industry, can still flourish by adopting the right way of doing business.
If you’re thinking of starting up your own auto parts storefront, it’s essential to know the auto parts industry trends to determine where to start.
Here, we’ll give you an idea of what steps to take to help you on the road to starting an auto parts business.
What Auto Parts Market Are You Targeting?
If you want to make a successful start in your new business, you have to research which markets are best for the products you will supply.
In this respect, you will have to make some serious decisions, such as deciding:
- What products you would like to focus on
- Your physical area of business
- Who you are targeting
- Size of your business
Researching the target market will help you determine what kind of products your clients prefer to purchase.
There are three ways to start a business in the auto parts market: a storefront shop, an automotive eCommerce business, or a franchise store.
To ensure that your auto-spare business plan covers all the bases, you need to study the market demand in the area you plan to be based in. Look at things like whether or not there are any competitors in the area, as well as if they carry the same spare range you plan to have.
A Business Plan Is Crucial
What is a business plan, and why is it crucial for start-up businesses? A business plan summarises your past, present, and future position in the business start-up.
A typical business plan includes the following aspects.
This gives a short overview of your business’s essence and the needs or requirements that you plan to meet. The executive summary also summarizes your products and services, customers, and suppliers.
Business Description and Structure
This is where you explain why you’re going into this business and what your unique service proposition is. What sets you apart?
If you are going to be selling a product or a range of products, describe them. If you are manufacturing your products, briefly explain the process, source, and availability of raw materials, how you plan to handle inventory and fulfillment, and other operational differentiators.
If you plan to provide services, describe their value proposition to customers and how you determined that.
Include other details such as strategic and tactical partnerships, any contracts you have in place, intellectual property you may own or plan to use, and your company’s legal structure, including the company directorship and any other investors.
Market Research and Strategies
Take some time explaining how you did your market analysis and if you used any third parties to help you.
Taking your new company to the market is vital. Explain the intended marketing strategy, advertising, public relations, and how you stack up against your competition.
If you are using your business plan to pitch to investors, throughout your five-minute pitch, make sure your investors have a clear picture of all assumptions, as well as where you haven’t been able to produce substantiated data.
Management and Personnel
Provide biographies of your company executive stakeholders. Share their backgrounds and experience, and explain how they will help you meet your new business’s goals.
You are unlikely to have time to get to detailed financials. Include in your document a high-level turnover forecast, an estimated cost of sale, and how you have calculated that.
Round the numbers to the thousands or millions and present your gross profit into the pitch as a percentage.
Investors need to evaluate risk. So giving them an exact, well-articulated pitch that covers what we have just described will undoubtedly help.
Register and Licence Your Business
The local Small Business Administration can also assist you with the process of getting your business registered.
Once you have a legal business structure, you have a few options to apply for a business tax ID number. These are through your accountant, the tax line, manually, and online.
It would be best if you had it to pay federal taxes, hire employees, open a bank account, and apply for business licenses and permits.
Your auto parts business plan should have included strategies for the sourcing of parts. Depending on the needs of your customers, you should contemplate the following areas.
Vehicle Spare Parts Wholesalers
Search for companies that trade through distributors, such as wholesalers. Then, speak to them and make an agreement to purchase directly from them.
Focus your efforts on attending as many auto auctions as possible for used and difficult to find parts. You may also meet clients’ special requests by searching and using a public auction website.
You may want to do business with a dropshipping company that specializes in automobile parts. Dropshippers do not sell car parts directly to consumers.
After you type in “dropshipping companies auto parts” on a major search engine, you will end up getting a lengthy list of search results.
Dropshipping deliveries save you money by not keeping potential ‘dead’ stock and saving you valuable space on the shelves for other faster-moving parts.
Before starting your business, it’s a good idea to try to learn about the cars owned by the people who you’re hoping to serve. Attend car club meetings to get to know ‘car speak’ people and, of course, to drum up future business.
There is a myriad of magazines out there devoted to vehicles and drivers. Advertise your auto parts business in them, again to drum up business.
Starting an Auto Parts Business
While vehicles are on the road, vehicle repair will be necessary. That goes hand in hand with developing an auto parts market.
Building a business from scratch can be extremely exciting and scary at the same time. If you are unsure of the process, it pays to get help to handle the many challenges of setting up a new business.
In most communities, you can find a Small Business Administration department. They will have professionals who can guide you and help you with the many steps mentioned above with your start-up business’s successful set-up.
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