As your busy season kicks off and all hands are on deck selling new equipment, don’t lose track of your other revenue areas. Consistent revenue streams from new as well as used equipment along with parts and service keep your dealership healthy year-long.
Here are some metrics from Rex Collins, head of the Dealership Industry Group at HBK CPAs & Consultants, to help you achieve the right mix. Collins recommends that revenues for OPE dealers should fall in the range of 62-68% for new equipment, 6-7% for used wholegoods, 16-22% for parts and 6-8% for service operations.
Do you consistently achieve that? Is your competition consistently hitting that? The United Equipment Dealers Assn. conducts an annual Cost of Doing Business study and for the years 2012-2016, OPE dealers hit the 62-68% range 2 out of 5 years for new equipment. Similarly, OPE dealers fell within the 6-7% range for used equipment for 2 out of 5 years. (See the chart, OPE Revenue Mix — 2012-16.)
In terms of parts sales, dealers were between 16-22% for 3 out of 5 years and were between 6-8% for 2 out of 5 years for service revenues.
During some of the years when department revenues fell outside the ranges, they were often very close. The idea is not to seek perfection or to be locked into a range just for a number’s sake. Instead, be aware of the industry standard and track how closely your dealership meets that standard. You may find your dealership consistently falls in an area outside of that range, and that’s useful to know as well, so you can identify your own trends.
The numbers in the Cost of Doing Business Study are based on responses from OPE dealers in the four states that make up UEDA’s region, Kentucky, Indiana, Michigan and Ohio.
RLD’s new quick-read “Measuring Up” series will be analyzing other numbers from the study over the last 5 years. You can download additional analysis about revenue mix in Chapter 1 of the “Measuring Up” series.
Keep this first set of numbers handy — and share with your team — by downloading Measuring Up Chapter One: Revenue Mix.
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