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If you decided you wanted to open your own Manufactured/Modular Housing Retail Dealership, what would it cost to open the doors?
- FLOORING - Flooring Companies are looking to approve individuals with high credit scores, who have significant time in the industry as business owners and also have a substantial net worth. In addition to these requirements, most of the time, in order to obtain a credit line, the Flooring Lender will require a cash deposit equivalent to 30 to 40 percent of the flooring line requested. To operate a full-fledged retail sales center, a Dealer would need a flooring line of around $500,000.00. That would give room for 6 (6 at $50,000.00 per home = $300,000.00) stock units and the rest of the line ($200,000.00) would be available for RSO’s flooring commitments. A manufacturer will not build an RSO without a flooring commitment from the flooring company for the particular home.
30% of $500,000.00 is $150,000.00. This cash deposit would go to the Flooring Company and be held until the Dealer pays off all the homes and owes no money whatsoever to the Flooring Company. As there is no easy exit strategy for a Dealer who has flooring to go out of business, more than likely the $150,000.00 being held would be used up in discounts to sell off remaining inventory in order to go out of business.
- COST FOR AN OFFICE - A Dealer who goes out to find a place to locate his or her business may be lucky enough to locate a piece of land with an existing office, but normally that is not the case. A decent office is going to cost at least $40,000.00, which would include set up of the office, a/c, skirting and the appropriate decks.
- LOT COSTS – Hopefully an individual could locate an actual up and running sales center. If not, it could cost anywhere from $10,000.00 to $100,000.00 to improve a bare piece of land in order to be suitable for a Dealership. Let’s say the lot is improved, but there will likely be costs involved to bring the lot up to speed. Items such as additional paving, resealing paving and filling pot holes, fencing, grading, weed control, etc. Just a few of these items could cost a minimum of $5,000.00.
- FURNISH THE OFFICE – Desks, chairs, entryway couches, computers, filing cabinets, supplies, etc. will cost $3,000.00.
- BUSINESS SIGN - If a Dealer is lucky enough to find a location with an existing sign then maybe $2,000.00 will be enough to paint over the existing lettering or replace the inserts. If a sign needs to be installed, it will cost anywhere from $5,000.00 up to $15,000.00.
- COST TO SET INVENTORY – The cost to lot set six multi-sectional homes will range anywhere from $8,000.00 to $20,000.00. The higher end of the spectrum for set up costs will occur if any of the six homes are Off or On Frame Modulars, Hinged Rafter Homes, Cape Cods or etc.
- COSTS FOR LICENSING, BONDING, ETC. – Incorporating, obtaining a Bond, licensing fees, Open Lot Insurance Policy, Liability Insurance Policy, utility and phone connection fees. By the time all is said and done another $5,000.00 will be spent.
Let’s total up the costs an individual would incur to open a street Dealership:
| FLOORING |
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$150,000.00 |
| COST FOR AN OFFICE |
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$ 40,000.00 |
| LOT COSTS |
|
$ 5,000.00 |
| FURNISH THE OFFICE |
|
$ 3,000.00 |
| BUSINESS SIGN |
|
$ 5,000.00 |
| COST TO SET INVENTORY |
|
$ 8,000.00 |
| COSTS FOR LICENSING, ETC. |
|
$ 5,000.00 |
| TOTAL COSTS TO OPEN A LOT |
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$ 215,000.00 Min |
TOTAL COSTS TO OPEN A LOT - $215,000.00 MINIMUM! COULD BE AS HIGH AS $300,000!
There of course would be other costs involved that are not listed here. These costs obviously do not include monthly overhead costs not included in the ASSOCIATED DEALERS, INC. (“ADI”) program such as lease payments ($3,500.00 monthly), flooring costs ($3,000.00 monthly), open lot insurance costs ($500.00 monthly) and curtailments on inventory.
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Now let’s take the same individual who was looking to open their own Dealership from the ground up and compare the costs with what their costs would be with the ADI program.
- FLOORING - ADI furnishes unlimited flooring to the Dealer. There is no up front cost for flooring. No $150,000.00 of the Dealer’s money being held by the flooring company. Costs to the Dealer - $0.00.
- COST FOR AN OFFICE - ADI attempts to lease properties with existing offices, skirting, decks and A/C. Costs to the Dealer - $0.00. If ADI is unable to locate a sales center with an existing office, Dealer will be responsible to furnish the office and amenities.
- LOT COSTS – As the lease or the land is ADI’s, the Dealer has no costs to incur in lot costs. Costs to the Dealer - $0.00.
- FURNISH THE OFFICE – The Dealer’s costs would be the same. Desks, chairs, entryway couches and furnishing, computers, filing cabinets, supplies, etc. will cost around $3,000.00.
- BUSINESS SIGN - ADI sales centers have existing signage. Dealer should only have to pay a maximum of $2,000.00 to paint over the existing lettering or replace the inserts.
- COST TO SET INVENTORY – Dealer will be responsible to set all new inventory. Costs to the Dealer - $8,000.00.
- COSTS FOR LICENSING, BONDING, ETC. – These costs would be lower as ADI furnishes the Open Lot coverage on the new home inventory, but will include incorporating, obtaining a Bond, licensing fees, Liability Insurance Policy, and utility and phone connection fees. By the time all is said and done another $4,500.00 will be spent.
Let’s total up the costs an individual would incur to open a street Dealership:
| FLOORING |
|
$0.00 |
| COST FOR AN OFFICE |
|
$ 0.00 |
| LOT COSTS |
|
$ 0.00 |
| FURNISH THE OFFICE |
|
$ 3,000.00 |
| BUSINESS SIGN |
|
$ 2,000.00 |
| COST TO SET INVENTORY |
|
$ 8,000.00 |
| COSTS FOR LICENSING, ETC. |
|
$ 4,500.00 |
| TOTAL COSTS TO OPEN A LOT |
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$ 17,500.00 |
An ADI sales center is right at a $17,500.00 investment to get up and running compared to spending $215,000.00 to open up a sales center as an independent Dealer!
An independent Dealer could monthly spend $3,500.00 in Lot Rent, $3,000.00 in Flooring, $500.00 in Open Lot Insurance and who knows how much in Curtailments over and above the costs an ADI Dealer would incur! These costs are not incurred under the ADI program and would be in addition to other overhead costs such as utilities, phones, advertising, liability insurance, etc.
An independent Dealer could, if they worked hard, smart and wisely make at least $150,000.00 to $250,000.00 per year on their lot.
An ADI Dealer could, if they worked hard, smart and wisely make at least $150,000.00 to $250,000.00 per year on their lot.
What’s the difference between being an independent and an ADI Dealer? Oh, about $200,000.00 in cash up front, personal guarantees on a flooring line and an extra $7,000.00 in monthly overhead!
The ASSOCIATED DEALERS, INC. Volume Rebate Incentive Program is, without question the greatest opportunity for any individual who desires to be in the manufactured housing industry, period! |
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