How would you rate your performance this year for sales, gross profit and — most important — net profit?
If we, as an organization, have not performed at the level we planned, what were contributing factors, both internally and externally? Was our business plan sound and, if so, where did it break down?
These are questions to ask as you prepare a new budget plan. When we begin a budget process, we must remind ourselves what we want to accomplish.
A budget is a summary statement of plans expressed in quantitative terms, according to Alpha Financial Consulting, Inc.'s Understanding Budgeting.
A budget is simply a business plan restated in dollars and cents.
Without a narrative plan with goals, objectives, strategies and tactics, there is nothing to budget. The plan indicates where a business is now, where it wants to be and how it will get there. A budget quantifies “how it will get there.”
Prior to beginning the actual budgeting process for 2008, have each manager present an objective overview of his or her department's performance during 2007.
Was the year's budget reached and, if not, what specific steps could have improved the results? This isn't a time for finger pointing or jeopardizing one's job. We just want to improve performance.
An overly optimistic budget that fails to consider an existing business climate, might be a reason (not an excuse) we failed to hit our budget.
There are consequences for being too optimistic. A perfect example is the new-vehicle department maintaining an inventory level out of line with business conditions, thereby creating excess costs.
I prefer having all departmental management present during this review. Not only does it help everyone feel more a part of the organization, it allows them the opportunity to offer input.
Near the end of November, take your team away from the dealership to allow them an undistracting environment for preparing their department's realistic and obtainable 2008 budgets.
Prior to beginning this exercise, the dealer should discuss 2007's performance and the possibilities or expectations for 2008. Part of 2008's performance discussion should incorporate any anticipated local and national economic issues, such as the November 2008 election and its potential impact on the retail auto business, if any.
Once each department has completed this task, each manager will give a verbal report and forecast for 2008. The comptroller will enter all of the information. When all departments have made their presentation, you will have your 2008 departmental budget. The only other item, “other income/deductions,” will be submitted by the dealer.
To assist you in your planning and budget preparation, the chart above is a series of performance Benchmarks® from the NCM Client database
A solid business plan followed by proper execution will ensure your organization's success in 2008. Good selling!
Tony Noland is the president and CEO of NCM Associates, Inc. He is at [email protected]
Questions or comments about this column? Send us an e-mail at [email protected].
| Category | Domestic | Regular Import | Highline Import | My Dealership |
|---|---|---|---|---|
| Productivity - Gross Per Employee Avg Mo | $8322 | $9569 | $12565 | $ |
| Productive Employee % Total Employees | 53.9% | 57.0% | 53.8% | % |
| Gross PNVR Excluding F&I | $1534 | $1321 | $3174 | $ |
| Net F&I/Access Pre-Compensation PNVR | $895 | $837 | $891 | $ |
| Gross PUVR Excluding F&I | $1843 | $1729 | $2165 | $ |
| Gross PUV Wholesale | $56 | $92 | $109 | $ |
| Net F&I/Access Pre-Compensation PUVR | $807 | $918 | $913 | $ |
| Advertising As % Retail Gross New (Net) | 11.3% | 13.4% | 6.5% | % |
| Advertising As % Retail Gross Used (Net) | 13.9% | 12.7% | 10.7% | % |
| Floor Plan Int. (Net) as % N/V Retail Gross | 11.3% | 7.4% | 1.8% | % |
| Total N/V Expenses as % Total N/V Gross | 94.6% | 81.1% | 65.9% | % |
| Total U/V Expenses as % Total U/V Gross | 75.8% | 76.4% | 82.6% | % |
| Total Expense as % Total Parts Gross | 58.9% | 65.4% | 54.6% | % |
| Total Expense as % Total Service Gross | 86.6% | 75.9% | 76.6% | % |
| Total Expense as % Total Body Gross | 98.1% | 87.5% | 94.7% | % |
