Auto Dealerships KPI and Financial Measurement

KPI (Key Performance Indicators)

Key performance indicators (KPIs) are a way to benchmark your dealership against its past performance and against other dealerships.

These financial measures allow you to chart successes and pinpoint deficiencies. KPIs provide a snapshot of your dealership at a particular point in time and, when gathered regularly, an ongoing report card on its health.

Q: How does bench-marking with KPIs work?

A: One of your dealership’s overall KPIs might be PBT (Profit Before Tax) per employee per month. For this category, you’d record metrics for

1. your own dealership,
2. The average per dealership in your franchise
3. The average for all dealerships

For example:

If your dealership has an average gross profit per employee of Rs.6,200, while the average for other like dealership franchises is Rs.6,600, you may have excess personnel. Further analysis by department will point you in the direction of where a reduction in headcount might be needed.

Q: How should you develop your KPIs?

A: When deciding which KPIs to use for your store, it’s helpful to ask the question, “What’s really important to my dealership’s stakeholders: the owners, customers and employees?” Your KPI focus needs to be on what matters to these different groups. Also, strive to get participation from all departments. Some employees might dislike the idea of having their performance measured — and fear what might happen if they’re not up to par. So be prepared for a challenge. But most employees will buy in if they understand how the information collected will help your dealership be successful and meet its long-term goals.

Q: What should you measure?

A: Develop KPIs for your overall dealership and for individual departments or functions. Here are some potentially useful KPIs for your dealership as a whole:

• Net income as a percentage of sales
• Employee expenses as a percentage of sales
• Employee expenses as a percentage of PBT (Profit Before Tax)
• Total advertising expenses as a percentage of PBT
• Fixed expenses as a percentage of PBT
• Total expenses as a percentage of PBT
• New vehicles sold to used vehicles sold

Financial Measurement

Dealership need to be first split to various Profit Centers.

1. New Car Sale
2. Pre Owned Car Sale
3. Workshop
4. Spare

Each of these profit Centers will be sub divide for their individual Key Parameters like

1. New Car Sales
2. Pre-Owned

Sales Value — Cost of Sales = Gross Margin from Vehicle sales.

Identify product mix with maximum margin and sufficient volume

Apply ABC analysis for Inventory

1. A category 30 days
2. B category 15 days
3. C as per order

Find the possibilities of other income ( accessories sales, commission from Insurance/Finance etc)

Another source of income will be the Incentive offered by Manufacturer, In addition to sales commission

Major Overheads of dealership are

1. Employee Cost
2. Interest
3. Sales Commission
4. Pre-Delivery Inspection Charges
5. Advertisement & Sales Promotion Expenses
6. Rent & Power

Workshop — Categories of vehicle inflow

1. Free Service
2. Paid Service
3. Running Repair
4. Body-shop

Segregate the revenue contribution among the above categories

Spares — identify and monitor in terms of

1. ABC (Based on consumption)
2. FMS (Based on movement)

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