DealerLAB: Modest profit in February, but turnover hurts

Publish Date: 
May 8, 2014
By Joe Delmont

PUNTA GORDA, Fla. — Bill Shenk’s Destination Powersports dealership was hit by a triple whammy early in 2014 but still managed to post a slight profit of $4,953 for February. In January, however, the dealership lost $6,609.

Total revenues for February were $607,530, more than $72,000 up from February 2013. However, gross profit on those sales dropped from $133,487 in 2013 to $120,637 this February. As a percentage, that’s a full four cents less profit on every dollar processed by the dealership.

Gross profit percentage dropped from a Top Gun level of 24.9 percent to19.9 percent.

“When you are selling a part of a vehicle,” Shenk said, “dropping the price 4 percent may not seem like much, but as you can see, once again it’s the little things that make the big differences. If we would have had that extra four cents per dollar, we would have had an additional $24,300 in gross profit, creating approximately $10,000 more in team payroll and quadrupling the dealership’s net profit."

The three big hits suffered by the dealership in early 2014 were:

  1. Loss of income when BRP dropped the dealership. Showroom gross profit from BRP products was $33,280 for January 2013 and $13,845 for February 2013, not including parts and accessories income. This has to be made up with other sales to remain even with last year.
  2. Bad weather. “We have not had weather on our side this year,” Shenk said. Total unit sales were off 21 units from 110 last year, compared to 89 for the first two months of 2014. By comparison, a similar dealer in Florida had 2014 sales of 63 units, down from 99 in 2013. Weather affected sales at a number of dealers in the state, Shenk noted.
  3. Personnel turnover. “This is our biggest problem and a continuing one,” Shenk noted. “I let the sales manager go Jan. 16, and it’s been slow getting the new manager up to speed; he came on board Feb. 1. The new sales manager is struggling to get a solid team trained and to keep up with all the electronic marketing, as well as getting enough of the correct used inventory.”

Shenk also had problems in the service department. “Our service department did not respond to my direction during February, and the manager is gone and being replaced, along with a service writer, who we knew was leaving because of an opportunity to work with his family,” Shenk said.

Problems in service have hurt performance in parts, as well. “Our parts department has a good manager, who is having trouble finding qualified help,” Shenk noted, “and the lack of a service manager is creating so much trouble for him, day-to-day, that he is not getting his staff built.”

The good news, as far as Shenk is concerned, is that the situation is fixable. “We know what to do, and we are making the changes to get where we need to be,” he said. “The hardest part of this business is building three strong teams that work well together, but it’s also where the greatest opportunity lies.”

MORE FEBRUARY HIGHLIGHTS

Even though profits were down for February, there were some bright spots. Sales revenue was $504,159, up 8 percent from $410,288 the previous year. Gross profit from the sales department was also up 8 percent.

However, the revenues from both parts and service were off sharply and that’s a dealership’s highest margin business. Those revenues dropped to $80,991 from $102,273 the previous February, putting a big dent in the dealership’s profitability.

Operational expenses were up more than $20,000, month over month, led by large increases in occupancy, insurance, administration and administration payroll. The additional $8,700 in administration expenses and admin payroll are still one-time increases related to relocation expenses.

The increase of $8,500 in occupancy and the $3,800 in insurance are here to stay and are part of the larger facility opportunity and the new ability to build equity in a facility instead of just tossing out rent money.


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

The dealership has several lines, including Yamaha (MC, ATV, UTV and PWC), Kawasaki (MC, ATV, UTV, and PWC), Suzuki (MC and ATV), and Polaris (ATV, UTV and Victory).

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.

About Powerhouse Dealer Services: 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. Bill 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 Bill at 877-PHD-0911 or Bill@phdservices.com.