Chapter 6: Depending on New Equipment Sales
One thing is clear from studying the performance of OPE dealers in the United Equipment Dealers Assn.’s Cost of Doing Business Study in the 2012-2016 period: On average, dealers remain highly dependent on new wholegood sales to remain solvent and to be profitable. Parts absorption improved slightly (2.6%) during this period, service absorption actually declined from a peak of 32.3% in 2013 to 28% in 2015 before recovering somewhat to 29.1% in 2016.
In other words, OPE dealers should be looking to reduce their dependence on new and used wholegoods sales and develop a more balanced revenue mix. As shown earlier in this report, on average, more than 70% of OPE dealers’ revenue comes from new and used equipment, a little less than 20% from parts and less than 10% from service.
One dealer who replied to the Rural Lifestyle Dealer survey said, “We strive to be strong in parts and service. Our goal is 60% wholegoods, 25% parts and 15% service breakdown.”
Keep this sixth set of numbers handy — and share with your team — by downloading Measuring Up Chapter Six: Depending on New Equipment Sales