This year has started off quite well for the Best Operators Club dealers. In general, floor traffic was down, but the write-ups and sales per customer were up. In addition, margins and profits were up in most areas of the dealerships.
Chart 1 shows a strong total store gross profit margin with an astounding 27 percent increase in margin over last year. Total store sales were up almost 21 percent, and net profits were a positive 2.4 percent. These are great positive indicators — especially since they represent preseason numbers.
In Chart 2 we can see that sales is contributing 27 percent to the overall store gross profit. This is down from the year-end numbers. This is partly due to P&A growth during the period (see Chart 4). As I stated earlier, you can see the logged working contacts increased 22 percent while total unit volume increased 16.4 percent over last year. The 22 percent increase in pre-owned sales as compared with a 14.5 percent increase in new unit sales shows evidence of an increased focus on pre-owned by the dealers in this group. I expect to see the advertising and promotion per vehicle sold to rise as dealers ramp up for the season. Most dealers did not do much traditional advertising in the winter months.
As I stated in the last article, this is the time of year when your sales team has to be following up on the prospects captured on your logs, in your CRM tools, from contest entries and other sources. Sales managers have to set goals for prospect calls and appointments and hold salespeople accountable.
As you can see, Finance gross profit is up quite a bit in Chart 3. At $425 and $1,112, the dollars per vehicle sold and per vehicle financed (respectively) are looking more like the old days. A lot of the improvements here can be attributed to the long-awaited growth of finance penetration. It is now at 52 percent, a 15 percent improvement over last year. This is partly due to the lenders opening up a bit, but it is also due to dealers becoming more aggressive about seeking lenders and building relationships with them. The value of the latter cannot be overstated. A well-trained F&I professional should be able to help you accomplish this.
P&A is alive and well! P&A contributes nearly 48 percent to the total store gross profit — notice the 19.5 percent increase in sales. The $1,800 per vehicle sold is a 3.2 percent increase over last year as well. The margins in Chart 4 are healthy and are well above last year. With accessories margins at nearly 38 percent, these dealers have obviously figured out how to compete with the Internet. One way they are doing it is by reducing the number of suppliers so they can take better advantage of quantity discounts.
Obsolescence is still way too high. This is an opportunity for improvement in nearly every dealership. The goal is to get it as close to 10 percent or less if possible. Obsolescence ties up funds that could be spent on high-turn items. It costs you a lot of money to store this “dead” stock in the long run.
Chart 5 contains the results for their service operations. The service contribution is good at 15.7 percent, gross profit is up almost 14 percent and the labor margin is a home run at 77 percent. That means they have held tech compensation to 23 percent. Of course, we have to remember that this is the slow time of the season, and many dealers have only kept the “cream of the crop” techs through the winter. This is supported by the very good productivity number (the benchmark is 85 percent) and the excellent efficiency number (the benchmark is 100 percent). These guys are beating flat rate and cranking the work! This is also reflected in the increase in billed hours per repair order, up to 4.21, and the $131 in labor sales per repair order.
What this should say to you, Mr. Dealer, is that you have to have the right people in place to accomplish the job and make a profit in your service department. If you are unable to get close to these numbers, you need to pay attention to who is running this department for you and who they have hired. Get an “A” team in place to get the right results.
The goal for these articles is to get you thinking about the performance you should be achieving in your dealership. If you have any questions, or would like to discuss the help we can provide, please contact me.
At GSA we track current powersports dealer benchmarks through our involvement with our dealer 20-groups. The data comes from reports compiled from the dealers’ input into our real-time, web-based data reporting system.
Steve Jones, GSA senior projects manager, outlines dealership best business practices to boost margins, increase profitability and retain employees. His monthly column recaps critical measurements used by the leading 20-group dealers. GSA is recognized as the industry’s #1 authority on dealer profitability.
Our Voyager data reporting and analysis system is available for any dealership to use for a very nominal fee. For more information on our data reporting system, dealer 20-groups, on-site consulting or training, drop Steve an email at [email protected] or visit www.gartsutton.com.
