Critique my business idea - specialty auto sales and services (length warning)

So, I plan to get a license again and go back into auto sales, focusing on the "emerging collectible" market from roughly '73 to '90. Target demo is enthusiasts age 45-55. Their nests are empty, they are are entering peak earnings years and can afford the cars they wanted or had back in the day. These rides are still affordable but better examples are getting harder to come by.

Think 3rd-gen Camaro/Firebird and WS6 or GTA Trans Am, 4th-gen WS6, Firehawk and Camaro SS, Nissan Z-cars, Mustangs, '73-87 Cutlass/Monte Carlo/Grand Prix/Regal, 70s Chevelles and Malibus, early MR2s, 240SX, Civic Si and CRX, Preludes, GM A-bodies, the odd Mercedes 116 chassis or Porsche 944/951, full size pickups, Blazers and Broncos, rubber-bumper C3 and most C4 Corvettes.

The cars will be stock or stock-appearing and nice but not so nice as to have already turned too far north in value. I'm not trying to sell grade 1 or 2 cars that are fully restored or museum pieces. The 60s stuff has been run up already by the 55-up buyers who made their money and the pro-touring, restored or exquisitely preserved stuff is getting out of reach.

The side hustles: CO2 cleaning, consignments and later-model inventory to pay the bills, especially in the early going.

CO2 cleaning: We've talked about about CO2 blasting - it's awesome for detailing. I plan to use CO2 on much of the inventory, especially undercarriage and engine bays. I'll also hook up with clubs and offer CO2 cleaning to collectors and enthusiasts for an additional revenue stream. I'll use a smaller machine with minimal air requirements - 35-50 cfm instead of 150-250 - which cuts the equipment buy-in to under $10k instead of $20k/up.

Consignment: I'll have working capital to purchase inventory but will also offer consignment sales just like the established shops who do high-end sales. Consignments will generate sales income without limiting my inventory to what I have the cash to buy outright.

Later-model sales: think Camry, Accord and small/mid SUVs 3-10 years old. Family stuff, nothing high line or too complicated. Absolutely no Mercedes, Audi or BMW but maybe the odd Lexus.

Location: I'm looking hard at Texas. My criteria include a large-ish metropolitan area, economic vitality, a business-friendly regulatory and tax environment, in the Southeast or South-central US, and proximity to higher learning including medical school(s) (family reasons for the last one).

The ALEC-Laffer State Economic Index (link here) offers great insights about the relative economic vitality of each state. Worth a look if you're interested in taxes, particularly. In the target area:

FL is out because I don't want to live in Miami or Tampa. GA is mostly out because I like Atlanta but don't want to live there on a modest income. SC and NC are out because the med schools aren't in the largest metro areas. VA is out because can't afford. TN is out because I can't afford to live in Nashville and it isn't a big enough market for the business. AR, MS and LA are out - sorry guys, median income isn't high enough. Birmingham was a possibility but in a 2nd-tier kind of way.

Which leads to Texas. TX is somewhat geographically limited in terms of selling up the eastern seaboard, but its economic vitality means there are lots of people in DFW with the means to have a car hobby. The business could succeed there without relying as much on selling cars to salt-state buyers.

Speaking of which, marketing is selective print, lots of internet, and heavy marketing to local enthusiasts and clubs. Go to the cruise-ins, SCCA and NASA meets, do some modest sponsorship, etc. Physical location is light-industrial warehouse with and office a couple of lifts and indoor display - no car lot or outdoor storage. The plan is to do light repairs and reconditioning myself, hire skilled trades when needed, and one day grow into a Wheeler-Dealer outfit with in-house wrenches, body and maybe paint. Not looking to do customs, there are lots of really talented guys already competing for those dollars.

I think Dallas is a good idea. There is a lot of money sloshing around and Texans are very willing to travel a bit. You could easily draw business from Houston and Austin. I'll be interested to see if the margins on these cars are high enough to make it work. Let us know when you get set up, I'll stop by and take a look see and can get you the contact info for all of the clubs in Houston and Dallas and College Station.

One of the more fleshed out business plans I have read here. I agree that Texas is a good choice. My distant memories of living in Dallas was that it was a fast paced society with a short attention span, to the inventory will be in constant play; people who get in and out of the car hobby are like most amateur investors in that they tend to buy in high and sell out low. You can count on selling the same car a few times.

I think you are a bit off on the demographic in that those people tend to be in the middle of getting the kid(s) through college, not yet empty nesters. May or may not matter to your plans.

What kind of staff do you forsee?

There are so many of these "specialty" dealers in Austin already. I know of 5 just off the top of my head.

The hard part is getting the inventory. These are not auction type cars. You have to really have a serious of connections and let's face it, northerners have been poaching Texas for years and there are not a huge amount of these cars left on the ground here with a lot of competition to get what is there. Same thing goes for Florida. It's not often to run across any of the cars listed for sale at all any more.

I can tell you from knowing a lot of these small lot guys here in Austin, it's a tough gig. You are either there all of the time or moving a ton of volume. On top of that, make sure you budget for a admin person to work all of the paperwork. Hard to sell and be at the DMV all of the time.

Oh and I'd keep the appliance sales separate from the specialty sales. You need to keep the branding and marketing separate. No one will usually look at toys at an appliance lot. You won't get a lot of $$$ from each of the appliance sales so plan on big volume.

The demographic of Texas is switching rapidly. In the 14 years I've been here, It's gone from good ole boy to very Asian and Hispanic. The white middle class is the minority now and going even further from the mainstream daily. Just something to consider for the long term growth. As mentioned, Your target demographic is 50-65 not 45-55. 45 is typically the most expensive time from a family perspective with kids in college.

The concept does fail the one litmus test that I developed after owning my brewery for 8 years: "Can anyone with money buy themselves this gig?"

If the answer is "Yes" then give careful consideration to how you are going to differentiate your outfit from everyone else out there.

If I were looking to start an automotive venture, I would open a shop that specialized in two separate niche vehicles with a large number of customers in the field: Mustangs and Miatas. The reason for two brands is that you have a more stable business. The reason for limiting the models is that you get good at fixing them. As one or the other fades away, you can replace it with an equivalent say FRS or whatever the 10 year old flavour of the decade is.

Here is the issue that I see.

Someone who has a classic something in the driveway and will sell it for cheap is almost always selling a basketcase. You're not staffing for a restoration shop here, so basically you're only buying creampuffs or things which are already in good shape, which means you're buying high. Can you buy high and sell higher? Basically every classic car I've seen is either a total mess, an untouched survivor, or some attempt at being restored (which can be excellent or awful). The only untouched survivors left from those eras are going to be the undesirable ones or the really expensive ones, either the 9 mile 89 Z28 or the 83 six cylinder automatic.

So... how will you get decent inventory that you didn't pay through the nose for?

Can you divulge your plan for acquiring these specialty vehicles?

I live in a different part of the country than you're considering, but there's a similar dealer not far from me. They have a pretty large facility. When they opened, they had mostly vintage American iron. After being open for a couple of years, the inventory has grown, but it's noticeably less full of classics and interesting things, and the number of "appliances" has gone up several hundred percent. Either they're not selling enough old stuff to keep the lights on, or they can't find enough in decent shape to make it worth their while. They do still have some interesting things from time to time, but I get the impression that it's not really what pays the bills there.

Just to give you some numbers. You would have to move basically a car every day or 2 to keep any sort of nice facility open as a sole source of income with a small staff. That's assuming you have a decently nice facility and target about a 100K a year income pre-tax for you and about 30-40K for the people that work for you. That's assuming you can manage to average 1K per unit in gross margin which is tougher to do now with the internet.

In Dallas, You would be competing against folks like Richard Rawlings and crew along with 10-20 other such lots big and small. So there are a lot of people on the street doing similar things that have pretty deep pockets.

I honestly can not think of a place that has truly succeeded as just a specialty car lot. Almost all of them have it as part of either a restoration type business or parts sales and install business. Either that or a car guy that has retired from his day to day work decides to open something for fun.

Jeff Mosing here in Austin lives off the sale of the family business a few years ago and it's more hobby than serious I have to make the bills business. 2 of the corvette specialty places went under recently. There are some places out in East Texas that do classics but it's cheap to operate there. Viper Exchange is only kept going because Keating has a huge number for FCA dealerships. Those are the only 2 semi-standalone type places that I can thing of having been open for a period of time.

Trust me, If there was a way, I wouldn't be here telling you any of this.....I would be your competition.

Closes page and googles CO2 cleaning...

Didn't see any reference to using this for automotive purposes. Looks like a great way to clean electronics, microchips, and sterilization.

Where would one use this on cars? Interior? Exterior?

How about making money shipping rust free trucks from Texas to people around the us.

I think your audience needs to be less local and more "ready to ship" nationwide for the specialty stuff. Obviously local money will help. With a niche and a huge internet audience, you could find the one guy that really wanted that one model of that one trim... the one that got away. Have a phenomenal photo quality/selection package for every car on sale or consigned, so there's no mystery to an out of state buyer, and have preferred shipping options ready to go.

Dry ice blasting. I've used it before in industrial settings. Great stuff.

I also had my roof deck cleaned of mold using it.

NEALSMO wrote: Closes page and googles CO2 cleaning... Didn't see any reference to using this for automotive purposes. Looks like a great way to clean electronics, microchips, and sterilization. Where would one use this on cars? Interior? Exterior?

These guys do it on cars

Local to me in Grand Rapids, Michigan is a guy who from the outside looking in has done quite a good job at building a specialty consignment business GR Auto Gallery. Here's an article on him from the local business journal:

http://www.grbj.com/articles/83235-inside-track-car-guy-builds-on-entrepreneurial-background

business: http://www.grautogallery.com/

You could go to a really out there niche if you don't want much competition, but the more niche the narrower the market.

Teaming up with someone overseas and doing low volume import might be a way to set yourself apart. Bring in cars from Canada or moreso the UK or Australia.

It makes it easier to sell a Holden Commodore ute if your basically the only guy in the country with one to sell.

Or maybe consignment style purchasing is worth a look? Where by a customer comes to you and says "I want a (insert model here)" giving you a list of requirements and you do the leg work to find the appropriate vehicle within budget.

Thanks for the feedback. Pro or con, it all helps. I'd open as an LLC with just me on the staff at first with goal off getting a mechanic on a contract basis within 12 months. DMV paperwork is often filed by a retired DMV clerk who k owe the ropes and will file for a flat fee - we had someone like this in FL at about $25 or $30 a go.

Sorry to hear about the Corvette shops. Given the chance I'd specialize in C4 since I know and love them and learned a wide range of repairs. Sort of a Roger Judski or Corvette Mike on the affordable end of the spectrum. C4s are as cheap as they are going to get. No one is going to rush to pick up a ZR1 very soon, but I put a driver quality 94 in my garage recently for less than 5 figures because I always wanted one and they are left for dead for at least another decade.

I'll for sure have to leverage some geography and hit the road to find the deals. Craigslist and word of mouth are what I'd rely on, for better and for worse. And the plan is definitely to market out of state. You can spot some nice older stuff a better prices if you look in smaller markets like AR and east TX, for example. It would cost a couple hundred bucks to retrieve the unit, but could add a thousand to the deal.

The rust-free pickups to salt states deal was something I'd looked at. The best prices are for short wide GMs. LWB is somewhat unloved.

Xflowgolf, thanks for the links. Will spend some quality time with them.

The target demo is what it is but looks like I missed the age range. I'm thinking of the guys whose kids are finishing school and are looking at having the time and money for a weekend car, but not the high rollers or retirees who have made their fortunes and have serious dough to spend on a true blue chip investment car.

What value are you providing that is currently not in the market?