Protecting Profitability in the Ever-Changing Automotive Industry

By Stephanie Martz

The automotive industry landscape is continually evolving. With the recent declaration that dealers are facing a 'Return to Normal,' it is crucial to understand the implications and strategies needed to maintain profitability. After several years of supply constraints leading to big grosses and record profits, the resurgence of inventory, increased expenses, and the return of incentives have tightened margins.

Dealers now face the challenge of protecting their profitability and avoiding the so-called 'Return to Normal.' This involves a keen focus on every opportunity for gross profit while identifying and eliminating areas of waste to ensure all departments remain profitable.

Maximizing Sales Department Profitability

In a competitive gross environment, the Sales Department must adopt several disciplined approaches:

• Inventory Acquisition: Focus on acquiring the right inventory that meets market demand.
• Inventory Aging: Manage inventory aging diligently to avoid depreciation losses.
• Finance Department Opportunities: Maximize every opportunity in the Finance Department to boost gross profit on each sale.
• Sales Staff Training: Implement a back-to-basics approach in reviewing processes and procedures, thereby identifying training opportunities and ensuring sales staff are proactive rather than reactive.

The Vital Role of Fixed Operations

In challenging car sales environments, strong Fixed Operations are essential. Increasing fixed coverage involves:

• Labor and Retention Rates: Regularly review and adjust labor and retention rates to ensure efficiency.
• Parts to Labor Sales: Focus on improving parts to labor sales ratios.
• Productivity and Capacity: Enhance productivity and capacity to better serve customers and increase revenue.

Expense Control for Profit Improvement

Expense control is critical for improving fixed coverage and protecting profitability. Start with the big three expenses:

• People: Review staffing levels and pay structures to optimize labor costs.
• Advertising: Assess marketing spend and its effectiveness to ensure a good return on investment.
• Floorplan: Develop inventory strategies that minimize floorplan costs.

Furthermore, review other expense line items, rebid contracts, and compare prices with competitors to find additional savings. Eliminating waste and controlling costs directly improves the bottom line.

Leveraging Expertise for Profit Enhancement

Identifying areas for profit improvement requires time and expertise. Dealers often need help finding the time to step back from day-to-day operations to analyze gross opportunities, excess spending, and expenses thoroughly. This is where Boyer & Ritter can help.

With over 400 clients regionally and our Auto Dealer BI reporting product, Boyer & Ritter understands dealerships. Our reporting capabilities allow us to compare your operational results to regional averages. Combined with our experienced staff in dealership operations, we can analyze your results and uncover profit opportunities.

For more information or assistance, please contact Stephanie Martz at smartz@cpabr.com.

Stephanie Martz is a Manager at Boyer & Ritter. She has over 27 years of vast Dealership experience in accounting and operations, having served as Financial Controller, CFO, General Manager, and eventually President of the automotive group. Contact Stephanie at 717-761-7210 or smartz@cpabr.com.