How to Start a Small Tractor Dealership
Tractors and their attachments have evolved substantially over the years, making them an absolutely essential element of the farming business. Since a midscale tractor can cost in the range of $25,000 to $50,000, and top-of-the-line models can cost several hundred thousand dollars, it appears that there’s a lot of money to make by entering the tractor sales market.
The business may seem daunting because of the amount of upfront investment required, but by following some basic rules of new-business management, you can minimize the risks and look to maximize your profits.
Launching directly into tractor sales will inevitably leave you dead in the water thanks in part to staggering upfront tractor dealership costs. First, you’ll need to make decisions on what kind of business you’re looking to run and then plan it out and make it legal. You’ll have a series of questions you need to answer before you can build a solid business plan, such as:
- Are you looking to sell locally? If so, what’s your local target market like? Are there competitors?
- Are you looking to sell online to a bigger audience? If so, what’s your target market there? How will you handle the logistics of sales outside your own local space? Are you looking at crossing state lines?
- Do you want to build a business with a team of employees? Will you hire salespeople to contact potential customers and try to sell them on your products? Will you hire customer service and maintenance people to handle issues and service the tractors?
- Will you run the business out of your own home, or will you have floor space that people can visit? Where will you store and show your tractors?
From here, you’ll want to identify any potential opportunities you find in the market, determine who your biggest competitors will be and make some initial estimates as to what you can expect for sales and expenditures in your first few years.
Generally, it is recommended that tractor and farm machinery salespeople take a 10% profit over the cost of the machine, but this could vary based on your competition and your local market. You’ll want to run a few variations to make sure your business can be sustainable and competitive.
You’ll want to make sure you legally register and incorporate your business as required by state and national laws. Each state has a slightly different approach, but in general, you’ll need to submit certain informational documents to your state department in order to get your business registered and on file. You'll also need proper insurance, especially to cover safety since you'll be dealing with machinery.
You may need a loan in order to get the business rolling, and for that, you’ll need your business plan. You’ll want to obtain whatever business space you require, and you’ll need to get insurance to cover your physical assets.
Since most farmers buy equipment using loans rather than direct cash up front, you’ll also want to look into potential partnerships with local banks or credit unions so that you can offer financing while making the sale.
Reach out to tractor production companies to introduce yourself as a new business owner and purchase whatever models and accessories you’ve decided to sell.
Once you have all of your documentation in place, have a space from which you can sell whatever models you’ve chosen to have in stock and everything else is ready to go, it’s time to launch your business and start looking for leads.
You and/or your sales team should start reaching out to farmers in your target market, determine what their needs might be and push the models and accessories you’ve chosen. Since each individual sale can ring up a good chunk of money, some tractor dealership profits can be significant, and owners may earn $200,000 per year if all goes well.