The art of the deal - Tips for the automotive hustler
Your 9-5 not yielding the growth you desire? Crypto’s in the red for a bit? Here’s a solution, a side hustle for a passionate automotive enthusiast.
When I met our founder Koshiek, one of the strongest statements he made that still rings true in my ears is, “You can only save so much of money, you have to live from the top line, increasing your revenue” - now as seen in many articles on our site before this, we encourage the side hustle, it’s the inevitable road that we all cross at some point in our lives.
“You take the blue pill - the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill - you stay in Wonderland and I show you how deep the rabbit-hole goes.” - Morpheus, The Matrix. 1999.
The big question, will you take the blue pill or the red pill?
Brokerage in the automotive industry is your red pill, your journey down the rabbit hole to discover things you have never before. So, let’s define it to kick it off.
Brokerage in its simplest forms is you being a mediator in a deal between a buyer and a seller of a vehicle and greasing your palm with a little mark up on either end, in some cases, the seller gives you a little commission, or the buyer hands you a finder’s fee for helping them sought out something they ideally wanted. It is advisable to not double dip and accept on both ends, unless you’re a politician because that’s built into their genetic makeup. A little brush up on some terminology;
Commission: a sum, typically a set percentage of the value involved, paid to an agent in a commercial transaction.
Finder’s Fee: A finder's fee, also known as "referral fee", is a commission paid to an intermediary or the facilitator of a transaction. The finder's fee is rewarded because the intermediary discovered the deal and brought it to the attention of interested parties.
Think of the deal as your baby, apply the Banker X principle and put the baby to work because child labour comes cheap - you’ve got to nurture the deal, be flexible and agile, negotiate and secure the bag.
The beauty of broking is how easy it can be to make it a side hustle, but for some in life it has become a full-time job, but let’s dive into how you can benefit from it part-time.
So where do you begin? The dealers!
Dealers are your best friends, they have your “stock”- the golden eggs that you can serve to your patrons of the automotive space. They are your first point of call to head to, have a visit down to a dealer near you, that you can visit frequently without too much cost. You need to put your shoes into being in the mind of the buyer and have a customer experience, look around, see who is willing to assist and gauge the overall environment. If anything, you need to put your feelers out to how it would be to work with the individuals there and what it is like to be a customer - next, follow them on social media if they have a page, keep an eye on their stock offering and the price points, this you can generally find on used car sale sites online. If they are a manufacturer, pay attention to the new models that could be offered in the future.
The next step, relationship - as with many business dealings, it is critical that you build a relationship with both dealers and customers.
For customers, you want to build a relationship where they will trust your advice as a broker, in this you are giving them the whole nine yards, from understanding a model of car, the brand history, the functionality and the longevity and more. You need to be able to act as a curator, where you provide them with as much buying knowledge that is necessary in order for them to make a confident purchase through you.
Telling your customer to buy something just because it is going to benefit your pocket is not going to be the long-term relationship builder in order to have repeat business.
For the dealer, the relationship built here is key, as discussed earlier they have the golden egg, when a new car is released or something rare pops up, you expect that they would be buzzing you first - think of it like an IPO, you are being offered the beautiful lamb chops before anyone else has the opportunity to get their hands on it.
Negotiation becomes critical on both sides of the fence, you want to get the dealer the best price that benefits their profitability, you want your customer to get the best deal, by that, the lowest or the one that offers the most intrinsic value, and on top of that you want to make sure there is enough margin for you to make a buck! No free lunch in the wild town of car broking.
Negotiation power can be defined as "the ability of the negotiator to influence the behavior of another. One negotiator that stands out for me in car broking is Ed Bolian, otherwise known as the shrewd negotiator who provides us with a comical example of when he bought a Lamborghini from a sex worker, a wild story where he speaks about her walking into the showroom wearing, as what he describes, a basketball net, the conversation went like so, “I talked to her and offered $30k for the Lambo but she wanted $75k. She was a shrewd negotiator, so we met right in the middle at $30k.” - Ed Bolian, The Professional Shrewd Negotiator.
The power of your negotiation skills will also be critical when you have to discuss your cut with the dealer. Many brokers have a flat rate, for example, some brokers work off the % of the gross profit of the car, this way, when you broker high value, high margin cars, you walk away, high...ly flushed. Alternatively, a fixed rate of R500-R2000 is sort of the space you can work on negotiating as being a broker, young in the game, as you upgrade to MVP level you will be able to strong arm your way to better butter, in the classic car game, such as 50s and 60s cars, like the Ferrari 275 GTB or Ford GT, some brokers are walking clean with $100k - bear in mind, these cars are fetching millions of dollars.
So, we have gone through the basic bits you need to know, so let’s work it into a real-life scenario:
Let’s take a 2020 Mercedes-Benz C200, a fairly popular car in the South African market, selling approximately 2,250 new units in 2020.
The average used going rate for that car is about R700k, the dealers margin is about R30k to R50k depending on the spec, as the amount of extras added on a car is proportional to the margins, many thing the value is in the base, the real money is in the add ons.
You have a dealer, which you have made a brokerage agreement with, you have a customer who has requested your services, how much can you make?
Gross Profit: R50 000
Agreed Commission: 2% of gross profit.
R50 000 x 2% = R 1 000 - quick math!
You manage to broker 3-5 cars; you have made a little bit of change in a month. This is just the start up- the luxury, high-end and classic car market has massive opportunity but comes with trial, error and rejection.
Rejection is something you will face day in and day out with car brokerage. A lot of people see it as glamorous but don’t understand the hard work searching for the right car, the hours on the phone and the frustration when your dealer or customer does not come to the party.
Even experienced brokers get rejected or denied deals, day in and day out, so just work on cracking it open and enjoying the success of closing. When it all comes together, it goes straight to the veins, and drives you to the next one.
But this is a wild ride, which if you focus, grind and put in the work, can bring you reward and respect. Good luck out there and go for it - Broker X!