Dealer Budget Focus: Forecasting Success

Making the jump into a new year, it would be rare to find a dealer who isn’t planning to improve business operation. The most important aspect of improving a business is the planning forecast. Some dealers develop and work within a specific budget, but there are many who don’t. A majority of the dealers who have a budget maintain it due to wholesaling so that suppliers can plan their own production forecasting.

Higher-performing dealers focus on their budget forecast in the same way that they run their business. The process they use includes knowing their customers, implementing revenue sources, assigning responsibility to those accountable, and developing said budget for expenses and assets. Unfortunately, statistics show that only about 5-10% of dealers develop a full forecast to plan for their business.

Those who take the time for planning generally produce better results than the dealers who don’t. For a dealer, it’s worthwhile to understand how these forecasts are developed and utilized. Key essentials for successful business forecasts are as follows:

Forecast Revenue Sources and Influences on Each

Wholesale goods are the majority of sales in most dealerships and this is what gets most focus when it comes to budget planning. As important as wholesale goods are, focus needs to be put into all streams of revenue such as used, parts, service and rentals. These areas complement each other. For example, selling used will more times than not bring customers back to parts and service.

In order to improve forecasting in all of the different avenues of the business, a strong understanding of the client base and future prospect is highly necessary. Knowing the customer affects the influx of revenue in a positive way.

Know Your Customer and Set Sale Targets

Success comes when dealers know how to anticipate change and by setting high expectations for results because they know these things are parts of management. Goals for employees are necessary and it’s imperative that reachable targets are put in place. It is also important to be held accountable by these goals while still maintaining customer focus.

Heading back to revenue focus, it is recommended to differentiate customers and prospects by way of past purchases, distance from dealership, credit score, brand preference and so on. They can be sorted into categories (A, B, C, D) with each category putting a focus into each revenue source.

For example, “A” customers may purchase the highest percentage of new equipment and buy more regularly and in large volume. It can be considered that “B” customers purchase new but are highly affected by season and business cycles. “C” and “D” customers are a focus on used, parts or service.  When developing a forecast, having categories for the customer-base brings into perspective a more accurate projection for each department as well as driving more focus to the customer.

Dealerships also hold employees (sales, service, parts, etc) accountable for achieving reasonable goals. Individual accountability is a good way for dealers to set and meet the aggressive forecasts.

Profit Planning

Sales and customer forecasting is important, but profit and cash is what goes to the bank. The successful dealers not only forecast their customers and sales, but they also forecast expenses. Expenses should be forecast using benchmarks set by the best performing dealerships that are also similar to yours. There are benefits to comparing expense ratios with other dealers, one of which is to better understand the differences in modifying business practices.

Another important part of “profit planning” is to set productive benchmarks to sales revenue. For example, to sell $12 million in new and uses, how many sales people are required? Or to sell $3 million in service, how many technicians are needed?

Dealerships are sometimes limited in the sales by the number of revenue-producing people they have. Some dealerships can increase revenue by hiring and training more “sellers.” During the planning and forecasting process, considering the expenses needed, an increase in selling staff may increase overall sales.

Statistics show that effective planning and forecasting leads down the path to a more successful dealership. Each department needs a forecast and should include a direct link between the different categories of customers. Projections are needed for a dealership to grow.


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