Diversifying Your Sales For Success – Tip Of The Month

In the Marine and Motorsports industry it is only natural that we focus on the major unit sales as your key planning strategy each year.  Boats, outboard motors, water vehicles ATV’s, motorcycles, snowmobiles and lawn & garden products forge the basis for your annual sales objectives.  Is this enough to secure your profit goals? Read more.

While not to underestimate the importance of new unit sales in your business plan, what about the other sales departments in your dealership?  How much attention do you give to the planning and execution of your market strategy for what I call, the backend of your business?

Some of these backend departments that we need to consider in our business plan are as follows:

  1. Parts
  2. Accessories
  3. Service
  4. Used Units
  5. Finance & Insurance
  6. Storage
  7. Dockage

The common practice or assumption is that these backend departments are simply a derivative of your major unit sales.  It stands to reason that volume in parts, accessories, service etc. are directly related to how many new unit sales you achieve in your various product groups.  However, do you know what your volume and gross margin targets should be in these departments?  Do you develop a strategy to maximize these sales?

As a result of analyzing thousands of dealer statements throughout my career, it has become apparent that there are some good hard targets that the most profitable dealers are achieving on an annual basis.  Consequently, one of the key segments of my Financial Performance Analysis is to calculate what the percentage share each of the dealer’s backend departments is of gross sales.

For example, if I calculate a dealer is selling 12.5% of the gross sales in parts and accessories, I know that there is probably lost opportunity for profit.  Why?  Because, the most profitable dealers in the industry are selling between 25% and 30% of gross sales in their P & A department.  We can therefore consider that more effort should be put into marketing parts and accessories for this dealership, since other dealers have proven that the opportunity is there for increased sales volume and profit.

The same can be said for the service department.  Again, analysis has proven that top performing dealers are selling between 9% and 11% of gross sales in their service department.  If your volume is below this mark, then consider whether you are giving enough attention to your marketing of this product.  Do your customers trust your service or are they going elsewhere?  Are you running marketing campaigns on service tune-ups and storage specials etc.?

The bottom line is your backend departments are the most profitable areas in your dealership, so give them their due respect.  Try these calculations on your financial statements and see if you have opportunities for growth.  Simply take your total sales in parts, for example, and divide it by your total gross sales times 100.

If you want to compare your results or know more about this part of your financial analysis contact me for a free consultation and we will explore your opportunities for enhanced profitability.   

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