Driving profits in the auto industry

© Savvy Numbers Pty Ltd 2014Liability limited by a scheme approved under Professional Standards Legislation

DRIVING PROFITS IN THE AUTOMOTIVE INDUSTRY


DO YOU HAVE THE FINANCIAL SOLUTIONS TO HELP YOUR BUSINESS ACCELERATE TO ITS FULL POTENTIAL?


FINANCIAL DISCIPLINE IS CRITICAL


50% of businesses fail in the first 3 years –

72% fail because they run out of cash.


On average, 450 businesses in the industry close every year.

Autoskills Australia 2013


REFLECTION ON 2014


IS YOUR FINANCIAL GPS TAKING YOU TO YOUR DESTINATION?


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


BUDGETS!

• Sales Budgets• Expense Budgets• Capital Expenditure

Forecasts• Cashflow Forecasts


BUDGET SETTING

• Historical information• Benchmark information• Opportunities for savings


BENCHMARKS

• Your overheads• Your resources• Your targets

Liability limited by a scheme approved under Professional Standards Legislation

DISCOUNT POLICY

© Savvy Numbers Pty Ltd 2014


Australia’s top seller


RRP $23,232 drive away *

Discount this to $21,990

$1,242 = 5% discount

* Figures used for illustrative purposes only.

Liability limited by a scheme approved under Professional Standards Legislation © Savvy Numbers Pty Ltd 2014

Originally gross of $2,091

assuming the upper benchmark of 9%

At the discounted price, Gross = $849


Sales = 500 units Discount - $100 ea

($50,000) given away


HOW ARE YOU GOING TO LURE IN LOYAL CUSTOMERS?



New39%

Used15%

Parts14%

Service32%

New Used Parts Service

PRODUCT MIX – DEALERSHIP ORIENTATION

Source:Deloitte Motor Industry Services Benchmarks 2014


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 %



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



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?


COST CONTROL

• Control Overheads



COST CONTROL

• Fraud – manage your risk!



COST CONTROL

• Improve Systems



BALANCE SHEET

Cash is King!



Optimise stock holding



Debtor Management

“Pay us so we can pay them and they can pay you!”



Creditor Management



YOU CAN’T MANAGE WHAT YOU DON’T MEASURE


WHAT KPIs ARE CRITICAL TO YOUR BUSINESS?


• 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


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



• 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.



• Technology ChangesoImpacts to independent repairers – cost of diagnostic tooling

oImpacts to panel repair industry – anti crash technology

oSelf driven cars – what demographic will ‘drive’



•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



•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!



•Online sales leads / virtual showroomsoMoore Stephens 2020 dealerships

oReduced showroom requirements

oGreater online marketing requirements

oGreater CRM requirements


Source:http://www.moorestephens.com.au/resources/first-its-kind-research-automotive-industry-highlights-growth-profitability-and-business-m


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Driving profits in the auto industry

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