The summer is over. It has been a pretty good year for most of you. It’s easy to become complacent when times are good.
Dealers make the most money when they are coming off tough times. When things are tough, dealers get back to the basics and grinding it out. As business gets better they are in a great position to make a lot of money because they have cut out all the fat.
But as business gets better, dealers tend to add this and that to the expense line and get further away from the basics. From where I sit, I’m seeing dealers making good money, but many have started to get lax with spending, processes and their daily disciplines.
The standard in the business has been that we should make at least 2% net profit to sales dollars generated. If you are only making 2% right now while business is good you may be in trouble when business goes south.
Right now you should be making 4 to 6% net to sales. It stands to reason that if you can get the percentage up during the good times then in the worst of times you can still maintain the 2% plus number.
If you’re in the 2% bracket or less, then you are missing something somewhere and need to re-evaluate your operation and do what you have to do to get it fixed.
For example, if you are keeping used vehicles past 60 days, the odds are pretty good that you have a lot of water sitting out there. If you were to liquidate today, your bottom line wouldn’t look so hot. It would be a safe bet to say your net profit to sales percentage is misleading.
Here are some things to think about as we go into the fall and winter:
1. Refine and stick to your basics
2. Don’t get stupid with your expenses
3. Keep the inventory turning
4. Evaluate the inventory on hand vs. anticipated selling rate
5. Get your profits into the 4 to 6% net to sales range
6. Don’t think you have it figured out because you don’t
“We never get it right. There’s always more to do and something to fix.” That’s all I’m gonna say, Tommy Gibbs