DealerLAB, Sept 2013: Earnings up 103 percent YTD

Publish Date: 
Dec 1, 2013
By Joe Delmont

It was all systems go in September 2013 at Destination Powersports in Punta Gorda, Fla. Unit sales exploded to $428,090, up from $223,229 in September 2012. Gross profit jumped to $133,093 from $85,949 one year earlier, and net profit climbed from a loss of $10,843 last year to $29,560 in the black this year.

Unit sales were up 47 percent, increasing to 50 units vs. 34 sold in September 2012. New and used motorcycle sales climbed to 31 units from 19 last year.

Gross profit for the month was 24.9 percent of sales, beating the PowerHouse Dealer Services Top Gun number of 23 percent.

Why the strong performance? Shenk actually doesn’t take too much credit. “I believe it has much to do with the fact that powersports sales have finally strengthened a bit in Florida and that our three sales teams (parts, service, units) are doing a better job this year than last sharing the customer opportunities between the departments.”

F&I revenue followed unit sales, hitting $25,181, up from $15,654 last year.

Service revenue gains were huge at $29,168, a 61.6 percent increase from the $18,043 posted in September 2012. Parts revenues increased — $29,563 vs. $28,579 last year — while accessories slipped slightly, $22,625 this year vs. $24,370 in September 2012.

Revenue per employee in the sales department was $73,809, up from $40,587 posted last September. Even better, gross profit per employee for the month climbed to $14,461 from $9,933 one year earlier.

Productivity in the service department soared: The number of hours sold compared to the number of hours available hit 107 percent, compared to only 58 percent last September.  For the first nine months of 2013, then, service productivity was 87 percent compared to 62 percent in the first nine months of 2012.

How can you sell more than 100 percent of a tech’s hours? “It is possible to sell more than 120 percent of each tech’s time (9.6 hours per day),” Shenk explains. “You can do this because it’s not just the tech that is doing the job. On a typical repair, you involve many other people in the dealership outside of service. The amount of the bill must cover all time invested regardless of job title, and there needs to be some left over for overhead and profit.

“If you take the amount charged and divide it by the labor rate and then compare that to the number of hours the tech spent on the job, you will often come up with more hours sold than the tech spent,” Shenk adds. “If you are in a growth mode, you will often have extra techs on hand so that you have the production capability to handle growth. One additional tech is about 2,400 hours per year additional labor sales opportunity.”

Shenk says the dealership will be adding another tech to ensure it has enough production capability to handle future growth. “But at the same time, we’re always mindful that by adding those available hours we are adding the responsibility of more payroll to cover. It’s always a balancing act,” he notes.

Shenk credits gains in the service department to its manager, who just celebrated his one-year anniversary with the dealership. “The complete change credit goes to Rob Cortez, our service manager,” he says.


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Room for improvement remains

For the nine-month period ended Sept. 30, the dealership earned $234,417, up 102.7 percent from the $115,693 it earned in the same period last year. If you compare the current figure to the dealership’s performance two years ago (first nine months of 2011) when it lost $46,413, it means the store gained more than $280,000. How’s that for a nice turnaround in a soft market?

Inventories for the month were down, 235 units from a previous 270 ($2.2 million compared to $2.4 million), so there was a savings of more than $5,000 in flooring. That and occupancy costs (which dropped almost $7,000), were the big savings on the expense side. Savings were partially offset by an increase in sales payroll, which climbed more than $10,500. Overall, expenses were down about $3,000 from September 2012.

The sales department continued to perform well for the year, posting a gross profit of $516,811, compared to $461,643 last year, a gain of nearly 12 percent. Sales revenue for the nine months was $4.5 million, up 7.4 percent from $4.2 million last year.

Gross profit from unit sales in September was $58,694, much better than the $38,977 posted last September. Gross profit for the year was $516,811, up 12 percent from $461,643 last year.

Traffic was up slightly in September but conversions were much better compared to September 2012. This year, the sales staff closed 59 of 104 customers, a ratio of 57 percent. Last year, it closed only 38 of 98 customers for a ratio of 39 percent.

While the improved closing ratio seems to be a cause for celebration, Shenk isn’t too happy about it. “Actually that’s a red flag,” he says. “No sales department delivers 57 percent of opportunities. A much more real closing number is 30 percent of opportunities.

“That means that we should have documented close to 200 opportunities. It’s a sign that our management is lax and that we have either training, staffing or coaching issues. I believe it is a bit of all three. Remember: If you are going to grow, there is nothing more important to know than, ‘Who did not buy and why.’”

Meanwhile, as Destination Powersports team continues to improve its performance in the existing small facility, construction nears completion on the new store down the road and they’re on schedule for a December opening.  

 

EDITOR’S NOTE: The Dealer LAB project is a joint effort between Dealernews and PowerHouse Dealer Services, a consulting firm operated by former dealer Bill Shenk. The Dealer LAB details his efforts to return a Florida powersports dealership to profitability after purchasing it in mid-2009. The dealership now has several lines, including Yamaha (motorcycle, ATV, UTV and PWC), Kawasaki (motorcycle, ATV, UTV and PWC),Suzuki (motorcycle and ATV), BRP (Sea-Doo PWC and Can-Am ATV) and Polaris (ATV, UTV and Victory).

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.