Positive impact of financial transparency in your dealership
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OVER THE PAST SIX MONTHS, more than 500 parts people have attended the Dealer Institute’s Parts Counter Sales Training Program.

Attendees have ranged from people who had only been on the job a few weeks to seasoned veterans with over 30 years’ experience. When we developed the program, we decided to include education on understanding the basic business metrics, such as gross margins, expenses, net income, inventory controls, and the impact aftermarket has on dealership profitability and cash flow.

During the one-day program, we spend the first two hours helping attendees understand the basic financials of a typical agricultural dealership. The first reaction is usually, “That doesn’t apply to me” or “I have no impact on the financial outcome… why do I need to know this stuff ?”

Many dealers have seen the benefits of sharing their dealership financials with their management team. But why stop there? Perhaps all employees need to see the big picture. As one dealer told me, “If you don’t share the numbers, they will guess, and generally, they will be wrong.”

One of the first questions we ask is, “What do you think the owners take as a net profit on every dollar’s worth of parts sold?” We get answers ranging from 10 to 50 cents. We then ask, “What do you think the owners take as a net profit on every dollar’s worth of total dealership sales?” Again, answers range from 5 to 50 cents. Using the data from WEDA’s Cost of Doing Business study, we can show them a more realistic picture of a typical dealership’s profitability. We help students understand these critical metrics and how the small decisions they make every day can have an effect.

Business financial success boils down to two critical things – profitability and cash flow. Without success in these areas, the business will not survive long term.

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Western Equipment Dealer Magazine Summer 2019 Issue
By Kelly Mathison

 

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