By Karen Millwood, Account Executive
The ever-changing auto remarketing industry has seen more changes in recent years than ever before. Today more than ever, having a floor plan partner is very important to the small business owners’ vitality. If you are looking to grow an existing business, or beginning the journey of business ownership, it is important to have a good inventory finance partner to assist in expanding or getting your new business off the ground. A floor plan can ensure you have fluid cash flow, a variety of inventory to increase your consumer base, and can make buying inventory a simpler process.
Why a Floor Plan Company?
There are several things you should know and take into consideration when choosing a business partner in inventory finance. An inventory finance plan, known as a “floor plan,” can increase your cash flow. A floor plan gives you the option and the freedom to use your money where it is needed most, instead of being tied up in inventory on your lot. It provides the flexibility to purchase a variety of inventory that can drive more consumers to your lot.
As your consumer base widens, so do your profits! With cutting edge technology now offered by floor plan companies today, it has never been faster or easier. Now you are able
to manage your account from your computer, tablet or smartphone. This includes making
payments, viewing titles and reviewing key performance indicators specific to your account.
These tools can provide insight on potential market opportunities to develop your business
and improve income opportunities.
Know Your Numbers
When researching which floor plan partner is right for you, it is very important to know your numbers. A good floor plan company will ask you in detail about your business model before quoting you term plan fees. Every business model is different, catering to various demographics: specific locations, types of consumer (cash vs. financing), etc. Other factors, such as average price, turn time, retail, wholesale, specialty units, power sports units, etc. may be considered in the equation as well.
Know Your Business Model
When the time comes to have this conversation with a prospective floor plan partner, it is important to know your business model and be well-versed in presenting it. What is your average inventory turn time? How many cars must you sell per month to pay your operating expenses (your break even number)? What are your operating expenses? What is your average profit margin per car? These are all key questions a good business person should know. Knowing these numbers and reviewing them on a consistent basis is key in establishing where you were, where you should be, where you are going, and how long it’s going to take to get you where you need to be.
Keep in mind that floor plan companies are discretionary lenders. The less risk you appear to be, the more likely you are to get that great term plan fee structure and the amount of money your business needs. Be proud to share your numbers with your floor plan company. Let them check inventory and see your financials when asked. They aren’t just trying to be nosy. Their review can factor in to determining your fee structure and the line of credit you qualify for. Also, you should know your credit score and any hiccups on your credit, as this could negatively affect the term plan you qualify for. It doesn’t necessarily mean you would not qualify for a floor plan line of credit. However, it could affect how much you pay for one initially.
Know Your Needs
Last but not least, once approved, don’t use the entire line of credit all at once. It is important to maintain discipline and floor plan responsibly. Space your purchases out over a period of time. Loading up a quarter of a million dollars worth of inventory in a single week could be a huge mistake. The payoff on that inventory will come due at the same time and if they haven’t sold, you will be paying a considerable amount of money all at once. This is important to keep in mind as you are flooring inventory.
You work hard, so make your money work for you! Focus on developing and perfecting your operation and take care in choosing the business partners and tools you work with. To shift your business into the NextGear of growth and development, a floor plan may provide the buying power you need to sustain a thriving business model. Buy wisely, increase your cash flow, and be aware of your numbers. You’ll make more money in so doing. It’s time to shift!