Dealer Lab: 2011 dealer revenues top $5,000,000

Publish Date: 
Mar 30, 2012
By Joe Delmont

Editor’s note: The Dealer Lab project is a joint effort between Dealernews and PowerHouse Dealer Services, a consulting firm run by dealer Bill Shenk, detailing his efforts to return Florida Motorsports to profitability. When he took over management of the two stores — located in Naples and Punta Gorda, Fla., — in July 2009, the Punta Gorda store had been losing money. Shenk and a partner have purchased the Punta Gorda store and renamed it Destination Powersports. Shenk no longer is involved in the Naples location.

The financial information in this report is taken from the dealership’s Composite Report supplied by Shenk and is prepared as part of the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is produced from the store’s monthly financial report. In preparing these Dealer Lab reports, Dealernews reviews the dealership’s unaudited P&L statement and Balance Sheet and its Composite Report.

What a difference a couple of years makes in the life of a business. Look at Destination Powersports, the Punta Gorda, Fla., Dealer Lab project. In 2009, the store lost $283,455. Last year, it earned $225,333, a turnaround of $508,788.

Total revenues for the store increased by more than $2.6 million from 2009 through 2011, increasing from $2.5 million to $5.2 million. Gross Profit doubled, climbing $673,115, from $669,076 to $1.3 million last year. The turnaround is even more impressive when one considers that it came in a down economy when many previously successful powersports dealerships closed their doors in Florida and across the country.

2011 was the first full year under Bill Shenk’s ownership and management. Shenk and a partner purchased the store in February 2010 and reopened it the next month. During the 10 months of 2010 and the full year in 2011, Shenk and his team made major changes in staffing, cleaning up inventories of machines and PG&A, and adding processes and programs at the dealership, including bringing in the important Polaris and Victory franchises.

Getting the right staff in place was a huge process. There were 86 different employees that have worked at the dealership in three years (a full staff is about 13 persons.).

Read the complete report on the dealership’s turnaround in the February 2012 issue of Dealernews magazine. A copy of the report also is available in Shop Talk at www.dealernews.com.

The dealership closed out the year with another strong performance in December, posting a net operating profit of $34,594 on total revenues of $629,168. This compares with earnings of $12,690 on revenues of $341,000 in the previous December.

Unit sales revenues were $493,321 on 55 total units, up sharply from the $241,483 revenues and 38 units the dealership sold in December 2010. Interestingly, the dealership sold 17 used motorcycles during the month, compared to 11 used bikes in December 2010.

Advertising expense at the dealership in December was only $2,345; for the year, it was $66,189. The bulk of this cost was for Internet-related activities, such as developing a new website, Google adwords, and selling products on eBay and other Internet sites. Very little was spent on traditional media. “Mass media is not the place to be,” Shenk says.

Service remained strong in December, and for the year, service was the star with the greatest increase over 2010. “With tech productivity at 78 percent for the month and 83 percent for the year, we have the opportunity for an additional 20 percent growth without adding anymore technicians,” Shenk says.

For 2010, the percent of tech available hours sold was 59 percent. “In other words, if we would have been able to sell every tech hour we had available in 2010, it would have been another $180,454 in labor revenues,” he says. “For 2011, our growth used up 85 percent of those available hours, resulting in a year over year labor sales increase of $153,075. We will continue to stay slightly overstaffed to ensure our opportunity to grow in the future.”

Service is an important profit generator and can stimulate growth throughout the dealership. We’ll have a more detailed discussion of service department operations in next month’s report.

Parts and accessories revenues also were very strong in December, totaling $77,939, compared to $54,706 in December 2010. Gross profit for parts was $11,652 and accessories was $14,500 in December. That compares with $9,701 for parts and $8,771 for accessories in December 2010.

The big gain here was two often overlooked opportunities. First, increase service and you always increase parts and accessories. And, second, increase the “desirability” of your inventory and staff with more effective commissioned sales people.

“We had gains in both but the big gain was the second one,” Shenk says. “We increased parts and accessories sold to walk-in customers by a whopping 50 percent, from $22,857 to $34,108, and our number of transactions [customers] was 498 vs. 549, or only up 10 percent. And the increase in average transaction went from $45.90 to $62.13.”

Another improved performer in December was the F&I operation. Revenues were $21,248, or $386 per vehicle sold (PVS), up from revenues of $11,073, $291 PVS in the previous year. “That’s better, but it’s still the weakest area of the dealership,” he says. “We should be at $500-plus PVS, that’s $120 more per vehicle sold. $120 times the 55 units that were sold, equalling $6,600 in real lost gross profit.”

So, the bottom line is that the dealership had a very good year in 2011 and has made substantial progress from 2009. It will be interesting to watch the progress of this project in 2012.

Bill Shenk is owner and 20 Group moderator of PowerHouse Dealer services, a dealership 20 Group provider and consulting/training company. He has worked full time in the industry since 1976, and purchased his first dealership in 1987.