Dealer Lab: Destination Powersports has slow start to 2012

Publish Date: 
Apr 2, 2012

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.

AT DESTINATION POWERSPORTS, total revenues and net income dropped in January when compared to the same month in 2011. However, the service department at the Punta Gorda, Fla., dealership turned in a strong performance, with the number of jobs climbing 135 percent over January 2011.

Dealership income was off about $2,000, or 9.5 percent, slipping from $21,109 to $19,108 as total revenues dropped from $455,731 to $399,326, or 12.4 percent. Machine revenues in January dropped from $358,866 to $298,175, or 20.3 percent. Unit revenues were down in spite of the fact that the dealership sold 35 percent more units in January than it did in the same month in 2011 — 43 units sold, compared to 34 units in January 2011.

Sales also had a strong increase in customer contact and in delivered deals. The dealership had seven more customers per day through service and two more per day through parts in January than it did last year. “We also have a phone line that allows us to monitor incoming calls, and last year we were getting around 60 to 70 calls per week,” says Bill Shenk. “This year, we are up to about 80 incoming calls per week.”

“Our average revenue per unit sold last year was $11,962, compared to $7,848 this year,” he adds. “Last year in January, the dealership’s average unit revenue was way above the individual Top Gun average.” The dealership’s mix of business this year in January was pretty close to the industry average, with the average revenue per unit at $7,848, compared to the Top Gun figure of $7,957.

“In sales, you work every deal for every profit dollar,” Shenk explains. “Last year, we had a couple of used jet boats we were able to purchase substantially under market value. On one deal, we had a $6,000 profit. These happen every year, but not every month.”

Overall, it was another big growth month, despite the revenue and income figures. According to Shenk’s analysis:

• There were more service and parts customers each day.
• There were 15 percent more incoming calls on the monitored lines.
• The number of units sold increased from 34 in 2011 to 43 in 2012.
• Motorcycle sales penetration increased in the dealership’s market county. In January 2011, there were eight new and used Hondas sold, one Kawasaki, one Suzuki, and six Yamahas registered for a total of 16 metric motorcycles sold. Destination Powersports sold 13. In 2012, there were five Hondas, two Kawasakis, two Suzukis, and no Yamahas registered, for a total of nine metric motorcycles sold. In January 2012, Destination Powersports sold 27 at a profit. That’s huge sales department growth in a market that declined in 2012, dropping from nine to five metric motorcycles.

Net profit percent of sales increased from 4.6 percent to 4.8 percent. The dealership’s “non-income producing expenses” dropped from $46,974 to $42,529.

“My biggest concern,” Shenk says, “was parts and accessories business, which only had a 10 percent increase in customers at the sales counter, even though this is good by most standards.” The store’s average transaction remained pretty strong at $57.22. This compares to $57.12 in January 2011.

Service was up significantly in January, going from 111 customer jobs completed in 2011 to 261 completed in January 2012. Customer labor revenues climbed to $24,020, up 36.8 percent from $17,559 in January 2011.

“Service created more than twice as many opportunities for the rest of the dealership in 2012 than it did in January 2011,” Shenk says.

“At mid-month, one of the service writers commented that it seemed like 75 percent of all service work were new service customers.” This required more time to build relationships and required that all unit and customer information be loaded into the computer to create the repair order, since the store had no history from a previous visit to auto load.

“The biggest and most costly mistake I see related to service in powersports is trainers who don’t understand the industry,” Shenk says. “They make the techs the bad guys by focusing on productivity. This causes many dealers to not take responsibility for what it really takes to be great in powersports service. Productivity is a piece of the puzzle and if used properly can give a small bit of information as to the health and potential of the service department. The most important indicators are things like the number of customer jobs, the labor dollars per vehicle sold, the type of work being done, the amount of work scheduled versus the amount of work being done right, and done right now, and the amount of items bought by service customers that did not need installing by the techs.

“These are all way more important in determining the strength of a winning powersports service department than simply looking at the number of hours that are billed compared to the number of billable hours that are available.”

Revenues in F&I and parts and accessories were about flat for the month, but revenues in the service department were up 12.3 percent, climbing $3,412, from $27,905 to $31,317.

“I would have loved to have had a stronger bottom-line, but just like drag racing, there is no substitute for cubic inches [customers],” Shenk says. “With our net profit going from 4.6 percent of sales to 4.8 percent, the business that we did do was stronger overall. With continued customer growth, I’m betting we can still run a 10 percent net profit store even in this so-called new economy.”

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 powersports industry since 1976. Shenk purchased his first dealership in 1987 and started PowerHouse in 2000. He purchased the “Dealer Lab” dealership to show the industry that even in these extreme times you can turn around a failing dealership by using the proper best practices. Eventually, “Dealer Lab” will be used as a real-world training facility for PowerHouse clients across the country. To join a PHD 20 Group and take your dealership to Top Gun status, contact Shenk at 877-PHD-0911 or Bill@phdservices.com.

 


 

This story originally appeared in the Dealernews April 2012 issue.