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10 Checklist Items for Dealers

I'm often asked my opinion on the key areas dealers and general managers should monitor on a monthly basis. Here's my top 10 lists of what to focus on: Cash. As we've learned firsthand recently, cash management and cash flow have never been more critical concerns than today. Morningstar Report says if net income is much larger than cash flow from operations, it's a sign the earnings quality is questionable.

I'm often asked my opinion on the key areas dealers and general managers should monitor on a monthly basis.

Here's my top 10 lists of what to focus on:

  1. Cash. As we've learned firsthand recently, cash management and cash flow have never been more critical concerns than today.

    Morningstar Report says if net income is much larger than cash flow from operations, it's a sign the earnings quality is questionable. But if cash flow from operations exceeds net income, the firm may be much healthier that its net income suggests.

    Bottom line: Each month, have your controller prepare a cash flow statement, and review each line entry to ensure you are making the best use of and maximizing your cash.

  2. Total Personnel Expenses. Both as a percentage of departmental gross and total gross. Obviously, the key reference here is your gross production.

  3. Total Dealership Advertising (net). As a percentage of total dealership gross as well as individual departmental expenditures as a percentage of their gross.

  4. Floor Plan Expenses. Net departmental interest expenditure(s) as a percentage of their total gross.

  5. Dealership Net Profit. Both actual dollars as well as the net profit (pre-tax) percentage.

  6. Individual Department's Total Gross Profit.

  7. Individual Department's Retained Income. A.C.E. (After controllable expense is defined as selling expenses and total personnel expenses including benefits.)

  8. Total Departmental Expense. As a percentage of each individual department's gross.

  9. Personnel Productivity. Total dealership gross divided by the total personnel count and also each department's gross divided by the actual departmental employee count including fractions.

  10. Asset Management. While asset management is a key component of cash management, the expression of month-ending inventory levels on a dollar day's supply and unit day's supply should be noted and managed. Also calculate your actual individual inventory turn rates for the month and compare it to previous months.

Below are certain 2008 year-ending measurements. This information is taken from the NCM database and includes both benchmark® and average client information. Contact me should you have questions regarding this information.

Good selling!

Tony Noland is the president and CEO of NCM Associates, Inc. He is at [email protected].

Franchise Classification Domestic Highline Import Import
Category Benchmark® Average Benchmark® Average Benchmark® Average
Ttl Personnel Expense % Ttl Dealership Gross 38.4% 40.9% 33.1% 35.4% 35.1% 37.5%
Ttl Net Dealership Advert. % Ttl Dlrshp Gross 7.4% 8.6% 5.1% 5.8% 7.9% 9.1%
Floor Plan Net % Total NV Gross .32% 3.87% 3.57% 4.78% 0.95% 2.30%
Total Dealership Expense % Ttl Dealership Gross 89.7% 98.7% 79.8% 87.5% 85.6% 94.7%
Productive Personnel as % of Total 54.7% 54.1% 55.2% 53.8% 57.1% 55.5%
Gross Per Dealership Employee $8,015 $7,010 $11,917 $10,256 $9,318 $7,676
Retained Income ACE
New Vehicle Department
33.5% 16.4% 47.8% 37.7% 37.7% 25.2%
Retained Income ACE
Used Vehicle Department
37.3% 25.8% 35.2% 22.8% 37.3% 26.2%
Retained Income ACE
Parts Department
63.5% 56.0% 67.1% 58.8% 61.6% 54.9%
Retained Income ACE
Mech. Service Department
40.9% 33.2% 49.2% 41.9% 46.0% 39.2%
Annual Turn U/Car Inv'y 4.8 6 6
Annual Turn U/Truck Inv'y 7.2 4.8 7.2
TAGS: Dealers Retail
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