Study provides Guidelines to analyze dealership profitability
The 2018 Cost of Doing Business Study is available to North American dealers. The study, recently released by the Western Equipment Dealers Association, is put together from dealer reports by Equipment Dealer Consulting, LLC, the certified public accounting firm affiliated with WEDA.
According to WEDA CEO John Schmeiser, the study represents the most up-to-date comparative financial performance information available anywhere.
“The Cost of Doing Business Study is important to the industry because it is the only financial and business operation study that includes dealers from all brands throughout the United States and Canada,” says Schmeiser. “The study is used by dealers to compare financial performance against other dealers in their region, or at comparable volume levels throughout North America. This valuable tool provides straightforward guidelines for analyzing the profitability of equipment dealerships, thus helping dealers improve their own businesses.”
“Of equal importance, especially if a dealer principal is nearing an exit from the operation, the study is used for valuations, estate planning and mergers across North America,” adds WEDA Chief Financial Officer Curt Kleoppel, who leads the project. “It is also used by WEDA’s Dealer Institute trainers/consultants to establish benchmarks, comparisons and ratios for equipment dealers.”
2018 study highs
- Total equity increased 5.39 percent from a year ago and gross profit margin percentage increased 0.12 percent from last year.
- Total inventory as a percent of assets decreased 4.69 percent, indicating dealers are controlling their new and used inventory.
- Inventory as a percent of total assets decreased in each sales volume category from last year.
- Total equity increased on average 4.23 percent over last year on all three sales volume categories, which is extremely positive.
- Total operating expenses decreased 0.33 percent from a year ago, which increased the income before taxes .33 percent over last year.
- Current liabilities as a percent of total assets decreased on average 4.73 percent (the decrease in inventory is attributed to the corresponding liability).
2018 study lows
- There was a 3.30 percent decrease in sales volume for large-volume dealerships.
- Total sales per dealership decreased an average of $875,000 from a year ago.
- Inventory turnover ratio basically remained unchanged from average of 1.92 times for 2017 and 2.08 times for 2016.
- On average, compared to the sales volume categories, parts productivity decreased 2.25 percent from a year ago, which is considerably disappointing.
- Aftermarket absorption decreased 0.31 percent, which was not expected.
About the study
The 2018 Cost of Doing Business Study is put together in cooperation with other participating dealer associations and their members. Dealers from the associations provide detailed financial and operational information for their individual businesses. This confidential information creates average income statements and balance sheets, in addition to key financial performance indicators. “The 2018 edition includes information from 172 dealerships representing 608 locations,” adds Kleoppel.
Participating associations for the 2018 edition included the Deep South Equipment Dealers Association, Far West Equipment Dealers Association, Iowa-Nebraska Equipment Dealers Association, Midwest-SouthEastern Equipment Dealers Association, Northeast Equipment Dealers Association, United Equipment Dealers Association, and WEDA.
How to obtain the study
To obtain the complete report, contact your state or regional equipment dealer association. The 2018 report has been sent free of charge to equipment dealers who provided their confidential financial reports for compilation. Nonparticipating dealers can purchase the results for $200 ($275 in Canada) if they are association members; the report is $450 ($525 in Canada) for non-members.
Additional Resources
For additional information, contact Lonnie Finch, CPA, Equipment Dealer Consulting, LLC at 800-762-5616 or send an email to lfinch@westerneda.com.
Editor’s note: Iron Solutions sponsored the survey, which was conducted and compiled by the Equipment Dealer Consulting, LLC. The study has been reporting relevant, critical financial and business operations data for independent retail equipment dealerships for more than 16 years.
Article Written By WEDA Staff
