Financial
Performance Benchmarks
for a Customer Based Management Dealership |
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| There are many ways to measure
the financial performance of your dealership but at OCD
Consulting, we believe the measure of
"management performance" is "Department
Return on Assets." First used by the duPont
Corporation, Return on Assets has long been recognized
as an accurate measure of a company's overall performance
because it not only tracks sales, gross margin, and expenses,
but more importantly, measures their relation to
total investment and asset turnover.
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OCD
Consulting has taken ROA a step further and developed
the automotive industry's first convention for measuring your
dealership's ROA performance by each of the operating
departments. By using Departmental ROA, managers can be
held accountable for their own department's contribution
to the overall performance of the dealership.
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| What
are the benchmarks for ROA?
We believe returns should be indexed to risk, and
given the risks inherent in the automotive retail
industry, we want our clients to achieve an overall
ROA of 15%-20%, or better. Surviving in an environment
of consolidation is all about economic
viability. Dealerships earning less than a 10%
overall ROA will soon among the missing. |
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| Calculating
your own overall ROA is easy.
You start by taking the amount of total assets
found on the front page of your factory financial
statement. Subtract
from this amount any “non-operating” assets such as
Owners’ Receivables, Cash Value of Life Insurance, and
excess cash reserves. Now
divide this number into your annualized earnings, before
income taxes and owners compensation.
The resulting percentage is your dealership's overall
ROA. Benchmark performance ranges are as follows: |
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| Unacceptable |
5%
or below |
| Poor |
6%
to 10% |
| Average |
11%
to 15% |
| Good |
16%
to 20% |
| Superior |
21%
or higher |
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| If
you are unhappy with your own results, contact
us and we will be happy to discuss how we can help
you get your dealership’s performance to the Superior
level. |
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