How to MAKE MORE MONEY This Season

We are about to enter into the most critical 4 to 5 months of the year - when Marine and Motorsports dealers will either make it or break it when it comes to profitability goals.  The show room has a new coat of paint and all your new models and accessories are well displayed.  The staff have new logo'd shirts and you can eat off the service department floor.  The bathroom has even got a thorough scrubbing.  But what about your financial house – is it in order? Read what you need to do NOW!

A great sales season can only be realized if you have your finances ready to support your profit goals.  I analyze dozens of ratios and percentages when I complete a financial performance analysis, but here are 5 key components of your business that you should review and potentially adjust before the season starts.

Sales vs. Salaries:
In a recent article I wrote about the importance of maintaining a key ratio between salaries and sales.  Salaries are most likely the biggest expense your company must manage and so it is critical you employ the appropriate number of staff to achieve the right ratio between sales and salaries.  You can enjoy a great sales season, but if your salaries are not hitting the right target your profit is out the window.

Interest Expense:
Floor plan and operating credit line interest expense will speak volumes about the management of your business.  The careful planning of inventory purchases in conjunction with your sales projections and free floor plan programs will minimize your carryover and floor plan interest expense. 

 You should also know what interest rate you are paying to your bank and finance company.  Depending on your credit status and collateral you may be in a position to negotiate a better rate.  Interest expense is unavoidable, but there is an acceptable target as a percent of sales that top performing dealers maintain to maximize profit.

Inventory Turns:
The number of times your inventory turns in a fiscal year speaks directly to your floor plan interest expense. Most successful dealers are turning their inventory 3.5 to 4 times per year.  Dealers who are strictly Marine will traditionally show a turn ratio of 2.5 to 3 times per year.  If you are only turning the combination of parts, accessories, new and used units 1 or 2 times per year, I guarantee you are paying too much interest and maxing out your credit lines, making it difficult to purchase new inventory and probably suffering on your sales margins.

Working Capital:
Working Capital - which is current assets minus current liabilities - as a ratio to Sales, is another good indication as to whether or not you have adequate capital to service the sales volume.  If you do not have adequate working capital you will not be able to reach your sales potential due to your inability to purchase inventory and pay expenses.  You can't effectively run a business or provide customer satisfaction if you are not able to purchase inventory or pay your suppliers on a timely basis.

Margin Analysis:
Understanding your market and the margins you have achieved in previous selling seasons is critical to maximizing your profitability.  You deserve a reasonable return on the great product you sell and the investment you have made in your company. So never be satisfied with a gross margin that is below your expectations.  Challenge your sales staff to maximize the margin on every sale, whether it is parts, accessories or units.  Knowing what top performing dealers are achieving is always a good bench mark for your gross margin objectives.

 Applying these ratios to your business and making key adjustments based on the knowledge they provide will maximize your profit opportunity during this important selling season. Don't wait, do it NOW!

 Need help?  Contact me for a confidential complimentary tele-consult.  Contact Me


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