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Business Management

May 2012 Overall Dealership Status Report

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This month, we’ll compare May 2012 total dealership data from one of our metric dealer’s 20-groups against the National Norm numbers (overall averages for all our metric 20-groups) and the average of the Top 5 performing dealers in each category.

 

In Chart 1 we see that the group’s average dealership revenue stream through May was $3.6 million, which is close to the National Norm average for all our groups. The Top 5 dealers averaged $5.8 million during the same period. Total store sales for the group and NN dealers went up by around 20 percent, which is respectable. It is really nice to see the growth continuing. However, the Top 5 dealers “nailed” it with more than a 40 percent increase in sales revenue! This is a phenomenal improvement in anybody’s book. 

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Wow. Chart 2 shows us that the Top 5 not only grew their revenue, they held a strong 26.5 percent overall margin while doing it. However, they did drop close to a point-and-a-half compared with last year at this time. The group and National Norm dealers also lost a bit of margin, and they are shy of the target margin of 25 percent overall gross profit. The general consensus is that unless you can get close to this number, it is hard to pay all your bills and have any net profit to put into your retirement fund – you do have a retirement fund, don’t you? 

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The next few lines point out one of the reasons the Top 5 are holding a strong margin – they are controlling their expenses better than most dealers. The end result was an 8 percent total store operating profit as compared with 4 percent and 4.5 percent for the group and National Norm dealers, respectively.

 

Have you ever wondered how the various departments should compare in relation to the success of your overall store? In Chart 3, we take a look at the contribution of each department as a percentage of the total store’s gross profit. This really points out some differences in business philosophy between the Top 5 and the rest of the dealers. The Top 5 are more focused on used units than new – they are getting more than twice as much contribution from used. Why? Because that is where the greater profit is. Hmm.

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Compared with the other dealers, the Top 5 are 4 percent stronger in F&I and 6 percent in P&A sales, which are also high-profit areas. Perhaps more significantly, they are picking up a very decent 20 percent of their overall gross profit from their service departments. This is no small feat. It takes hard work and dedicated, well-trained service managers to make this happen. Keep in mind that service is the single biggest factor influencing your customer’s decision to purchase their next bike from your store. I can’t overstress the importance of having your act together in this department.

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I’ve thrown in some more useful indicators in Chart 4. The percent of change in door swings continues to grow, showing the increase in floor traffic. You can certainly tell the Top 5 dealers are not just sitting around waiting for this to happen. All of this floor traffic came with a price. They spent more to get them in the door (cost per door swing), but it paid off handsomely. They are going after the business. Relate this to their huge increase in revenue – more bodies = more sales. None of these dealers are slacking when it comes to capturing the customer’s information either. Financed deals have increased nicely for all of these dealers, but the Top 5 are still holding the mark to hit with a 50 percent increase. 

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Take a long, hard look at your dealership. Compare your data with these numbers. (Hang on for the cliché.) You have to measure it to manage it effectively. Are you doing this? As always, feel free to contact me for information, explanation or to discuss how we can help you grow your business profitably. 

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