Benchmarking Helps When Budgeting

​The new-year budget process is one of a dealership manager’s most important annual duties.

It should include financial goals and a detailed plan of how to reach them. This includes not only retail and wholesale sales volumes, but gross profits on a per-unit-sold basis and the personnel that will be required to make budget.

What is the difference between a forecast and a budget? Forecasting is an informed guess, while budgeting is a stated expectation.

Your challenge is to determine accurate information as it applies to your departmental gross profits and your ability to manage the expenses. 

While auto sales currently are strong, there are challenges with gross profit margins. Will we be able to identify new gross profit opportunities, such as improved performance in F&I?  

To assist you in completing your budget, the National Automobile Dealers Assn. has generously provided data for your use in comparing your performance based on this information from their Dealer 20 Groups.

When completing the expense portion of the budget, I’ve always found that using a factory statement helps me ensure that all expenses are taken into account, by category and then individually within the category.

As an example, using a Toyota statement, Total Dealership Expense % Gross, I determine my sales expense percentage, and then assign a percentage to each expense.  Follow the same routine for your operating and total overhead expenses. 

This example is for the expense as a percentage to the total dealership gross.  If there are expenses that cannot be categorized, you should determine an amount based on an allocation using one on the four allocation methods,

One last item to address: personnel. Three trends I always watch as it relates to employment is productive employee percentage, gross per employee and total dealership personnel expense as a percentage of total gross. The NADA trend is as follows:

Compared to this year, I expect 2016 to present certain challenges. But as is always the case, good dealers find ways to perform at top levels. Keep concentrating on expense management, asset management, cash management and employee productivity.  

Good selling!

Tony Noland of Tony Noland & Associates is a veteran dealership consultant. He can be reached at tonynolandandassociates.com.