Editor’s note: The Dealer LAB is a joint editorial project between Dealernews and PowerHouse Dealer Services, a consulting firm operated by Bill Shenk who is also owner of Destination Powersports in Punta Gorda, Fla. Financial information in this report is sourced from Destination Powersports’ Composite Report (prepared from the dealership’s monthly financial report) which is supplied to Dealernews by Shenk under an exclusive agreement.
Shenk also provides Dealernews contributing editor Joe Delmont with exclusive access to select store and team meetings and other updates; Delmont uses this information as well as interviews with Shenk to develop the monthly Lab report in Dealernews and on Dealernews.com.
The financial information in this report is taken from the dealership’s Composite Report supplied by Shenk and prepared for the dealership’s participation in the PowerHouse Dealer 20-Group. The Composite Report is prepared from the store’s monthly financial report. In preparing these reports, Dealernews reviews the dealership’s unaudited P&L statement and balance sheet, as well as its Composite Report.
The Dealer LAB project is starting to show consistently positive financial results after many months of significant losses. Destination Powersports in Punta Gorda, Fla., posted another net profit in March, giving it a record first-quarter net profit of $56,579. It’s the best first-quarter performance since Dealernews began following this dealership in 2009 (see editor’s note).
For Q1, the dealership rang up total revenues of over $1.2 million, and this includes $930,000 from sales of new and used vehicles. That compares with total revenues of $720,079 during Q1 2010 and $462,000 of that amount coming from unit sales; therefore, our dealership’s first-quarter 2011 performance is a whopping 74 percent up from the same time last year.
Gross profit for Q1 also was impressive: 64 percent quarter over quarter, reflecting a gain of more than $130,000. Most importantly, net profit for the quarter was $56,579 vs. a loss of $54,512 that the dealership incurred during first quarter of last year.
The biggest difference in operations between Q1 2010 and Q1 2011 is that the mix of customers has improved due to the way the dealership has been doing business in all of its departments — meaning that Destination Powersports is attracting buyers with more money to spend.
“We have had a year, now, to get out into the grassroots marketplace and begin building a relationship with ‘Mr. and Mrs. GoodBuyer’,” Shenk says. “We are definitely attracting a more affluent buyer over the last six months. The best customers don’t have the time to risk a poor ownership experience. We have been doing ‘proper’ business in all departments for many months now, but it takes time for the word to get out and for confidence to build regarding the dealership within the powersports marketplace.”
The dealership welcomed back former parts team member Christian Bradshaw, who had moved north a year ago and only recently returned to the Punta Gorda area. “We rehired him in Parts and he texted me a few days later, saying that he could not believe how our mix of customers had changed since he left, and how much more fun and profitable these customers were to deal with, compared to previous customers,” Shenk says.
Unit sales improved in March and in Q1. Quarterly unit sales climbed to 109 units from 73, and March sales improved to 43 new and used from 35 in 2010. Why? The dealership has a smaller but better inventory: the 35 units sold last year averaged $763 PVS, but the 43 sold this year averaged $1,412 PVS.
“It’s easier to make gross selling something your customer wants versus something you gotta sell,” Shenk notes.
Another reason for the improved unit sales is that the dealership now has a commendable Internet presence which is creating many more sales leads. “And finally, we are getting a more credit-worthy customer as we attract better customers through our Parts and Service departments,” Shenk adds.
Flooring costs improved dramatically, dropping to $8,962 during Q1 2011 in comparison to $36,578 during the first quarter of 2010. This reduction was the result of having smaller but more current inventory and the ability to secure better rates from a new lender.
F&I revenue more than doubled, climbing to over $40,000 during first-quarter 2011 versus $20,548 in Q1 2010. In March, F&I net revenue increased by 67 percent, growing to $16,639 from $9,948 in March 2010.
These F&I gains again were the result of selling to a more profitable customer. “And we are getting better with our PowerHouse total delivery process which increases revenues and creates better customer satisfaction index scores,” Shenk says.
Total labor revenue went up dramatically, climbing to more than $100,000 for first quarter 2011 in comparison to about $87,000 this time last year. Contribution to total dealership profit increased as well: $34,548 versus $22,166 in 2010.
“This is the result of grassroots promotions, such as handing out Service coupons at the local bike and ATV events, and word-of-mouth from happy customers,” Shenk explains. “It takes a lot more effort to get a good customer than to retain.”
Administrative costs increased by 31 percent during first-quarter 2011: $53,459 versus $40,926 last year. However, this cost increase is misleading because Destination Powersports changed the way it measured its costs. “We were at 19.6 percent of total gross profit, which was higher than Top Gun, but we now are at 15.9 percent which is better than the Top Gun number,” Shenk says.
MANY LITTLE THINGS
Shenk is a former motorcycle racer. “Just like in racing, it is the proper combination of many little things that add up to the big wins, and that’s reflected in the first-quarter performance. The good news is that we are not done fixing little things yet. We still have more opportunity with the existing customer base, and I am really happy with the progress of each department becoming more and more like a sales department.
“The transition from administrating the components of the lifestyle to selling the lifestyle to our customers has been a joy to watch. This team continues to get better each month.”
This story originally appeared in the Dealernews June 2011 issue.