USED BIKE BONANZA
McGrath is no stranger to selling used vehicles; the part owner of three used-car superstores in this area immediately began looking for ways to sell more pre-owned motorcycles when he opened the powersports dealership in 2007.
He discovered his answer in a floral shop on an adjacent lot. Initially, he thought about buying it and converting it into a motorcycle-themed restaurant. But then, he said, he realized he was into gas and oil, not food and beverage. So he bought the building and two acres for about $750,000 and made it into a used vehicle warehouse.
“We didn’t really need that expense, but it was really appealing to get after the used business. Now, nobody in the area can offer the level [of used inventory] that we do,” he says.
While $750,000 might seem like a lot to plunk down for an extra building, it’s paying off nicely, he says. About 30 percent of the dealership’s overall $10 million annual revenue comes from used unit sales (by comparison, 40 percent comes from new vehicle sales).
The one-story building enables McGrath to display about 225 used motorcycles at once. A basement gives him plenty of room to store off-season units. The pre-owned show floor is about 12,000 sq. ft., compared to about 10,000 sq. ft. for the new vehicle showroom next door. McGrath maintains an inventory of about 250 pre-owned units. “We have to get to a critical number to pay for all of this and to make sense of it. But this has always been a strength [of ours.] Our car stores always do about twice as many used as new sales,” he says.
‘DON’T REINVENT THE WHEEL’
Given his car background, it’s not surprising that McGrath draws heavily on lessons he learned in the automobile business. There are similarities, he agrees, but there also are major differences.
“The seasonal trends are way more significant in powersports,” McGrath says. “It’s really important to break up your [operations] year by month for every category [of your business]. It’s pretty meaningful when you have a couple of years of history.”
It’s especially valuable when you plug those numbers into a financial composite spreadsheet built in a 20 Group program. “It’s a fun tool, but an important tool,” McGrath says. The composite used by his group is provided by Spader Business Management.
Although most car dealers belong to a 20 Group, many powersports dealers do not, and that puzzles McGrath. “It just gives you a terrific group of consultants,” he says. “It’s like a board of directors. These are competitors, but we’re not in competing markets. If we’re struggling in an area, I look at the composite to see who’s best in that area. We use it all the time.