Why Motorcycle Dealerships Go Out Of Business

There are a number of mistakes a motorcycle dealership makes that can result in going out of business.

Motorcycles are a luxury item for most people. Dealers need to understand that they are in the business of selling a “want” and not a “need.” There are common mistakes that can be avoided to keep the dealership open.

Misuse of the Floor Plan

Most vehicle dealerships, including motorcycle dealerships, operate on a floor finance plan. The floor finance plan is a mini-loan on each vehicle that is on the lot. The dealer borrows the funding from a lender to keep a motorcycle on the lot for a fixed period of time. When consumer spending slows, the dealerships with the largest inventories are paying to keep motorcycles that are not selling.

Discounting

Part of the history and culture of purchasing vehicles is the art of haggling the price of the vehicle with the salesman. For the motorcycle dealership, however, the profit margins often disappear when they attempt to discount the price in the same way car dealerships do.

Basic Accounting Errors

Improper accounting is one reason a number of different types of businesses close. There is a delicate balance in remaining competitive in pricing and charging enough to turn a profit. You may thrill at the idea of a $1,500 profit on each bike, but you need to take into account salaries paid, lot rent, floor finance plans and utilities. Fixed expenses must be paid whether or not a profit is being made, so they must be accounted for.