The new-year budget process is one of a dealership manager’s most important annual duties.
It should include financial goals and a detailed plan of how to reach them. This includes not only retail and wholesale sales volumes, but gross profits on a per-unit-sold basis and the personnel that will be required to make budget.
What is the difference between a forecast and a budget? Forecasting is an informed guess, while budgeting is a stated expectation.
Your challenge is to determine accurate information as it applies to your departmental gross profits and your ability to manage the expenses.
While auto sales currently are strong, there are challenges with gross profit margins. Will we be able to identify new gross profit opportunities, such as improved performance in F&I?
To assist you in completing your budget, the National Automobile Dealers Assn. has generously provided data for your use in comparing your performance based on this information from their Dealer 20 Groups.
|
July 2015 Year-to-Date |
ALL MEMBERS |
Domestic |
High-Line Import |
Imports Non High-Line |
|
New Vehicle Gross % Total Dealership Gross |
29.48% |
30.34% |
25.63% |
29.86% |
|
Used Vehicle Gross % Total Dealership Gross |
25.68% |
28.24% |
18.35% |
25.00% |
|
Service Gross % Total Dealership Gross |
25.09% |
21.52% |
33.00% |
27.04% |
|
P & A Gross % Total Dealership Gross |
16.42% |
15.81% |
21.25% |
15.24% |
|
Body Shop Gross % Total Dealership Gross |
3.28% |
4.00% |
1.75% |
2.87% |
|
Productive Employees % Total Employees |
67.40% |
67.60% |
63.79% |
68.42% |
|
Total Dealership Personnel Expense % Gross |
38.33% |
39.54% |
39.14% |
36.14% |
|
Total Dealership Gross Per Employee |
$8,154 |
$8,169 |
$9,847 |
$8,252 |
|
New Retail Gross PNVR |
$1,143 |
$1,273 |
$1,748 |
$852 |
|
Used Retail Gross PUVR |
$1,574 |
$1,677 |
$1,778 |
$1,356 |
|
Used Wholesale Gross Per Unit |
$47 |
$32 |
$134 |
$45 |
|
Total Service Gross % Sales |
67.51% |
65.13% |
70.84% |
68.82% |
|
Total Parts Gross % Sales |
30.92% |
30.45% |
32.39% |
30.81% |
|
Total Body Shop Gross % Sales |
51.53% |
51.77% |
52.02% |
50.90% |
|
Fixed Coverage (Svc,Pts,Body Absorption %) |
49.87% |
47.10% |
60.06% |
49.35% |
|
New & Used Advertising % Gross |
11.12% |
10.20% |
9.06% |
13.34% |
|
New Net Floor Plan Interest % Gross |
-6.39% |
-6.37% |
-6.93% |
-6.23% |
|
New Retail Gross PNVR |
2014 |
2015 |
|
Domestics |
$1,269 |
$1,273 |
|
Highline Imports |
$1,942 |
$1,748 |
|
Non‐High Imports |
$939 |
$852 |
|
Used Retail Gross PUVR |
2014 |
2015 |
|
Domestics |
$1,706 |
$1,677 |
|
Highline Imports |
$1,832 |
$1,778 |
|
Non‐High Imports |
$1,422 |
$1,356 |
|
Used Whsle Gross PUVW |
2014 |
2015 |
|
Domestics |
$65 |
$32 |
|
Highline Imports |
$220 |
$134 |
|
Non‐High Imports |
$92 |
$45 |
|
Service Gross % Sales |
2014 |
2015 |
|
Domestics |
64.65% |
65.13% |
|
Highline Imports |
70.41% |
70.84% |
|
Non‐High Imports |
68.86% |
68.82% |
|
Parts Gross % Sales |
2014 |
2015 |
|
Domestics |
29.75% |
30.45% |
|
Highline Imports |
32.19% |
32.39% |
|
Non‐High Imports |
30.65% |
30.81% |
|
Body Gross % Sales |
2014 |
2015 |
|
Domestics |
51.94% |
51.77% |
|
Highline Imports |
52.13% |
52.02% |
|
Non‐High Imports |
51.57% |
50.90% |
|
Fixed Coverage/Absorption % |
2014 |
2015 |
|
Domestics |
47.66% |
47.10% |
|
Highline Imports |
60.05% |
60.06% |
|
Non‐High Imports |
49.13% |
49.35% |
When completing the expense portion of the budget, I’ve always found that using a factory statement helps me ensure that all expenses are taken into account, by category and then individually within the category.
As an example, using a Toyota statement, Total Dealership Expense % Gross, I determine my sales expense percentage, and then assign a percentage to each expense. Follow the same routine for your operating and total overhead expenses.
|
Sales Compensation |
15.0% |
|
Sales Compensation Scion |
0.14% |
|
Supervision Compensation |
8.90% |
|
Supervision Compensation Scion Only |
0.20% |
|
Delivery Expense |
.60% |
|
Finance, Ins and Svc Contract Commissions |
3.50% |
|
Advertising Departmental |
6.35% |
|
Interest Floor Plan |
-1.5% |
|
Total Selling Expenses |
33.19% |
This example is for the expense as a percentage to the total dealership gross. If there are expenses that cannot be categorized, you should determine an amount based on an allocation using one on the four allocation methods,
One last item to address: personnel. Three trends I always watch as it relates to employment is productive employee percentage, gross per employee and total dealership personnel expense as a percentage of total gross. The NADA trend is as follows:
|
Productive Employee % |
2014 |
2015 |
|
Domestic |
69.04% |
67.60% |
|
Highline |
63.53% |
63.79% |
|
Import Non-Highline |
68.95% |
68.42% |
|
Total |
68.30% |
67.40% |
|
Gross Per Employee |
2014 |
2015 |
|
Domestic |
$7,980 |
$8,169 |
|
Highline |
$9,867 |
$9,847 |
|
Import Non-Highline |
$8,298 |
$8,252 |
|
Total |
$8,332 |
$8.154 |
|
Total Employee Exp. % Gross |
2014 |
2015 |
|
Domestic |
39.57% |
39.54% |
|
Highline |
38.75% |
39.14% |
|
Import Non-Highline |
35.56% |
36.14% |
|
Total |
38.07% |
38.33% |
Compared to this year, I expect 2016 to present certain challenges. But as is always the case, good dealers find ways to perform at top levels. Keep concentrating on expense management, asset management, cash management and employee productivity.
Good selling!
Tony Noland of Tony Noland & Associates is a veteran dealership consultant. He can be reached at tonynolandandassociates.com.
