Post on 12-Jul-2015
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DRIVING PROFITS IN THE AUTOMOTIVE INDUSTRY
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DO YOU HAVE THE FINANCIAL SOLUTIONS TO HELP YOUR BUSINESS ACCELERATE TO ITS FULL POTENTIAL?
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FINANCIAL DISCIPLINE IS CRITICAL
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50% of businesses fail in the first 3 years –
72% fail because they run out of cash.
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On average, 450 businesses in the industry close every year.
Autoskills Australia 2013
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REFLECTION ON 2014
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IS YOUR FINANCIAL GPS TAKING YOU TO YOUR DESTINATION?
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TONIGHT’S ROAD MAP
1. Why budgets shouldn’t be a dirty word2. How a $100 discount can cost you
THOUSANDS3. Developing a solid product/customer mix4. Good cost control5. Checking the balance to ensure cashflow6. You can’t manage what you don’t monitor7. Industry Developments
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BUDGETS!
• Sales Budgets• Expense Budgets• Capital Expenditure
Forecasts• Cashflow Forecasts
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BUDGET SETTING
• Historical information• Benchmark information• Opportunities for savings
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BENCHMARKS
• Your overheads• Your resources• Your targets
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DISCOUNT POLICY
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Australia’s top seller
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RRP $23,232 drive away *
Discount this to $21,990
$1,242 = 5% discount
* Figures used for illustrative purposes only.
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Originally gross of $2,091
assuming the upper benchmark of 9%
At the discounted price, Gross = $849
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Sales = 500 units Discount - $100 ea
($50,000) given away
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HOW ARE YOU GOING TO LURE IN LOYAL CUSTOMERS?
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New39%
Used15%
Parts14%
Service32%
New Used Parts Service
PRODUCT MIX – DEALERSHIP ORIENTATION
Source:Deloitte Motor Industry Services Benchmarks 2014
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PRODUCT MIX
7%
14%
23%
63%
9%
16%
27%
67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
New Used Parts Service
GP %
GP Lower Range % GP Upper Range %
Source:Deloitte Motor Industry Services Benchmarks 2014
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Gross / unit Gross Margin NEW
Net Business Margin
New units / sales staff / month
Volume $2,600 7% - 9% 3.3% - 3.6% 15
Prestige $2,800 7% - 9% 3.6% - 3.9% 15
Luxury $4,200 8% - 10% 3.3% - 3.6% 11
Product mix
Source:Deloitte Motor Industry Services Benchmarks 2014
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0
1
2
3
4
5
6
Private ABN Fleet GOVT
Profit / Volume
Volume
Customer Mix
What strategies do you have in place to target the right customers?
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COST CONTROL
• Control Overheads
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COST CONTROL
• Fraud – manage your risk!
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COST CONTROL
• Improve Systems
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BALANCE SHEET
Cash is King!
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Optimise stock holding
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Debtor Management
“Pay us so we can pay them and they can pay you!”
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Creditor Management
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YOU CAN’T MANAGE WHAT YOU DON’T MEASURE
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WHAT KPIs ARE CRITICAL TO YOUR BUSINESS?
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• Profit & Loss report (MTD and year to date)
• Balance Sheet• 12-month detailed
sales and expense budgets• 12 month cash flow forecast
MINIMUM FINANCIAL REPORTS
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Key Drivers of Profit & CashflowCashflow Effect Profit & Loss Effect
Turnover $ 1,000,000 $ 1,000,000
Sales No change $ -
Cost of Goods Sold Decrease by 1% $ 9,872 $ 9,872
Overheads Decrease by 6% $ 19,286 $ 19,286
Collections Decrease by 11 days $ 32,257
Decrease Inventory & W.I.P Decrease by 10 days $ 20,557 $ 20,557
No discounts given and 2% increase in price Increase by 2% $ 18,321 $ 18,321
Payables Steady No change $ -
Cash-flow Improvement $ 100,293 $ 68,036
Industry Developments
•Grey importsoIncreased age of national fleet a safety concern
oThreat or opportunity to dealers / distributors
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Industry Developments
• FCAI Code of practice
oGives franchised dealers & distributors the option to provide resources to independent repairers
oAAA concerned that independents will be left without tools, computers, knowledge to service customers
oToyota committed to providing such resources for a membership fee.
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Industry Developments
• Technology ChangesoImpacts to independent repairers – cost of diagnostic tooling
oImpacts to panel repair industry – anti crash technology
oSelf driven cars – what demographic will ‘drive’
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Industry Developments
•Car Sharing vs OwnershipoAs seen in the USA and Europe, car sharing through a membership
program is gaining popularity.
oAllows the changing of models to suit needs.
oRelies on partnerships with rental companies
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Industry Developments
•Change in ownership structuresoMore businesses will be large or public entities
oAccording to Moore Stephens and Autoskills Australia surveys 2013
oGrowth by acquisition – build value now!
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Industry Developments
•Online sales leads / virtual showroomsoMoore Stephens 2020 dealerships
oReduced showroom requirements
oGreater online marketing requirements
oGreater CRM requirements
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Source:http://www.moorestephens.com.au/resources/first-its-kind-research-automotive-industry-highlights-growth-profitability-and-business-m
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What Next?
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Question time