Roughly 80% of U.S. franchise dealers CAN be more profitable. Grab last month’s financial statement and find out if you have a profitability problem and just how big it really is (it’s free and easy).
Find out if your dealership has a problem holding gross and calculate how much gross ($) you could be bringing to the dealership.
Find out if your dealership is plagued with overspending, including stats on your three most controllable expenses.
Get an estimate of your total profit potential per month and year if gross and expense margins were improved.
Between 2015 and 2017, U.S. franchise dealership operating profit margins dropped from 7.2% to an abysmal 1.4% (all while vehicle sales and service hit record levels). Many external forces impacted recent margin compression that were out of dealer control but operational inefficiencies have contributed to lost profits for decades. We have to work smarter. Let’s face it, we aren’t going to sell our way into more profits (especially as the market demand continues to fall).
The first step in reversing margin compression is to understand where your issues lie in the dealership. Does it lie in gross? Or is it an expense issue?
Your managers may not even know the dealership has the potential to make more money. The first step is to understand if you have a profitability problem and estimate just how big it really is.
Our June 2019 financial statement showed Total Dealership Net Profit Margin BIT (to sales) YTD was .65% compared to the average U.S. domestic franchise dealership net profit margin BIT of 2% in 2018. The spread is only 1.35% but that multiplied by our total annual sales YTD of $30,741,410 totals $415,000. Folks - that means we could have made $415,000 more in net profit during Q1 and Q2.
Let’s say the rest of the year goes the same. If we could just increase our net profit margin to the average dealer, our dealership’s profit potential for 2019 would total $830,000. Want to be really ambitious? Let’s say you could perform at the same level as the top U.S. franchised dealers and obtain a net profit margin of 4% (yes, there are dealers that do this). For my dealership, that would be an annual profit addition of $1,700,000. And like most of us, I did the big expense slashing but still couldn’t get to the average profit margin. That clued me in that I have issues with operational efficiency in gross and/or getting the most out of our expenditures. It’s this last part that is so hard to fix because we don’t have the culture or technology to make it manageable day-to-day. . . . cue Blacktop.Read More
We launched a profitability initiative within our dealership to recoup $800K. Follow our progress as we bring data, processes, people, culture, organizational change and technology together to plug our profit leaks.