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Sales Commissions

Sales Commissions

Sales Commission ÷ Gross Profit (x100)

Guideline: Own Policy

Description:

This KPI establishes the average amount of Sales Commission that is paid to you sales team.

When the Sales Commissions are expressed as an average per unit or a percentage of Turnover, they are more useful to handle when comparing your performance with someone else and they can be found within the Variable Expenses of your management accounts.

The values of Sales Commission vary considerably across the country because they are dependent upon salary structures and incentive schemes. However, you will find it useful to measure the trend within your own business in order to keep them under control.

Example:

A) Sales Commissions = R68,208
B) Department Turnover = R7,432,165
C) Vehicles Sold = 784
D) Sales Commission p/unit = R87 (A ÷ C)
E) Sales Commission % = 0.9% (A ÷ B X 100)

Discussion:

As an alternative measurement, some reports illustrate Sales Commissions as a percentage of Gross Profit as opposed to Turnover and some reports separate the amounts paid for new and used vehicles.

Related Terminology:

Selling Efficiency % (Bodyshop)

Selling Efficiency % (Bodyshop)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% x 95%

Description:

This statistic tells you how much of the Productives Attended time is actually spent working productively.

In more simplistic terms, each Productive usually clocks in and is available for eight hours each day, but how much of that time is spent spray-gun-in-hand or panel beating, working on hours that can be charged out to the customer? Selling Efficiency gives you the answer to this question.

Selling Efficiency

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Selling Efficiency = 92% (A ÷ B X 100)

Discussion:

This example shows that the Productives have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

This KPI is also known as Utilisation, Labour Utilisation and Labour Efficiency.

Selling Efficiency % (Service Department)

Selling Efficiency % (Service Department)

Hours Worked ÷ Hours Attended (x100)

Benchmark: 85% to 95%

Description:

This statistic tells you how much of the Technicians Attended time is actually spent working productively.

In more simplistic terms, each Technician usually clocks in and is available for eight hours each day, but how much of that time is spent spanner-in-hand, head-under-bonnet, working on hours that can be charged out to the customer? Selling Efficiency gives you the answer to this question.

Selling Efficiency

Example:

A) Hours Worked = 957
B) Hours Attended = 1,040
C) Selling Efficiency = 92% (A ÷ B X 100)

Discussion:

This example shows that the Technicians have attended 1,040 hours at the dealership of which 92% of that time has been spent working productively. The remaining 8% will be shown in your expenses as Idle Time.

Related Terminology:

This KPI is also known as Utilisation, Labour Utilisation and Labour Efficiency.

Semi-Fixed Expenses (Bodyshop)

Semi-Fixed Expenses (Bodyshop)

Semi-Fixed Expenses ÷ Total Turnover (x100)

Guideline: Own Policy

Description:

Semi-Fixed Expenses are those expenses that are not directly linked to the number of vehicles that you conduct.

They represent those expenses that you have to pay to keep the Bodyshop running whether you sell anything or not.

A good example here is non-productive salaries. If you do not sell anything, you still have to pay the Receptionist, Administrator and Bodyshop Manager.

Typically, Semi-Fixed expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of Departmental Turnover.

Example:

A) Semi-Fixed Expenses = R143,272
B) Total Turnover = R573,088
C) Semi-Fixed Expense % = 25% (A ÷ B X 100)

Discussion:

The reason that they are called Semi-Fixed is that they are fixed each month irrespective of sales volume, but the Directors of the business decide at what value those expenses are fixed.

The important thing to note here is that these expenses are not linked to sales volume.

Related Terminology:


Semi-Fixed Expenses (Parts Department)

Semi-Fixed Expenses (Parts Department)

Semi-Fixed Expenses ÷ Turnover (x100)

Benchmark: < 8%

Description:

the Semi-Fixed Expenses of the Parts Department refer to the total expenses incurred. As there are no expenses that are directly linked to the Parts Sales volume within the Parts Department, Variable Expenses) then all expenses are classified as semi-Fixed.

Typically, Semi-Fixed expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of Departmental Gross Profit.

Example:

A) Departmental Expenses = R13,524
B) Total Turnover = R187,836
C) Semi-Fixed Expense % = 7.2% (A ÷ B X 100)

Discussion:

Related Terminology:


Semi-Fixed Expenses (Sales Department)

Semi-Fixed Expenses (Sales Department)

Semi-Fixed Expenses ÷ Department Turnover (x100)

Guideline: Franchise Specific

Description:

Semi-Fixed Expenses are those expenses that are not directly linked to the number of vehicles that you sell. They represent those expenses that you have to pay to keep the department running whether you sell anything or not.

A good example here is basic salaries or advertising. If you do not sell any vehicles, you still have to pay for advertising and the basic salary for each Salesperson and the Sales Manager.

Typically, Semi-Fixed expenses are shown as a monetary value per unit sold and also as a percentage of Sales Department Turnover.

Example:

A) Semi-Fixed Expenses = R280,326
B) Department Turnover = R7,432,165
C) Vehicles Sold = 784
D) Semi-Fixed Expenses p/unit = R358 (A ÷ C)
E) Semi-Fixed Expense % = 3.7% (A ÷ B X 100)

Discussion:

The reason that they are called Semi-Fixed is that they are fixed each month irrespective of sales volume, but the Directors of the business decide at what value those expenses are fixed.

The important thing to note here is that these expenses are not linked to sales volume.

Related Terminology:

Semi-Fixed Expenses (Service Department)

Semi-Fixed Expenses (Service Department)

Semi-Fixed Expenses ÷ Total Turnover (x100)

Guideline: Own policy

Description:

Semi-Fixed Expenses are those expenses that are not directly linked to the number of vehicles that you conduct.

They represent those expenses that you have to pay to keep the department running whether you sell anything or not.

A good example here is non-productive salaries. If you do not sell anything, you still have to pay the Service Receptionist and Service Manager.

Typically, Semi-Fixed expenses are shown as a monetary value and in order for you to capture meaningful trend analysis you will need to express them as a percentage of Departmental Turnover.

Example:

A) Semi-Fixed Expenses = R92,850
B) Total Turnover = R371,388
C) Semi-Fixed Expense % = 25% (A ÷ B X 100)

Discussion:

The reason that they are called Semi-Fixed is that they are fixed each month irrespective of sales volume, but the Directors of the business decide at what value those expenses are fixed.

The important thing to note here is that these expenses are not linked to sales volume.

Related Terminology:


Service Sales per Parc Unit

Service Sales per Parc Unit

Annualised Labour Sales ÷ Vehicles in Parc

Guideline: Own policy

Description:

This is a key performance indicator to ascertain the value of Service Sales that you are achieving across your vehicle parc.

Example:

A) Annualised Labour Sales = R664,848
B) Vehicle Parc = R1,560
C) Service Sales Per Parc Unit = R426 (A ÷ B)

Different manufacturers account for Vehicle Parc over different spans of time. for instance, some manufacturers use a five-year parc, some use a seven-year parc an others use ten years.

Discussion:

Also note that the age span of vehicle parc for the service Department is often different to that of the Parts Department. Be sure to obtain the correct interpretation from your respective manufacturers.

The example above shows that for every vehicle in the parc there is an average spend of R426. However, a far more useful and accurate method of calculating territory penetration is to measure Vehicle Parc on a year-by-year basis.

Related Terminology:

Please see Vehicle Parc for a more detailed explanation.

Stock Adjustments

Stock Adjustments

Guideline: Own policy

Description:

If there is ne thing in the Motor Industry that is an absolute certainty, it is that your stock suffers the effects of depreciation on a continuous basis.

When you buy parts and sell them within a short period of time, this is when your business makes the most profit.

Obviously, the longer the parts sit in the shelf, the more depreciation, they attract and the chances of selling them become fewer. If they sit there for too long, they fall into the category called Obsolete Stock.

Generally speaking, the Parts Stock holding is reviewed on an annual basis and the parts that have been in stock for some time will have a portion of their cost written off to reduce their price.

This financial write off is deducted from the profits of the Parts department and is shown within the management accounts as an expense called Stock Adjustments.

Example:

Discussion:

aaaSome businesses choose to conduct Stock Adjustments on a monthly basis, some quarterly and some annually.

There are no strict guidelines for this practise, but the more frequently you conduct the exercise, the more your attention will be focussed upon the disposal of slow moving items and of course the trend of True Parts Stock Turn.

Related Terminology:


Stock Turn (Days, Used Vehicles)

Stock Turn (Days, Used Vehicles)

365 ÷ Annual Stock Turn

Baseline: < 45 Days

Description:

The logic and thinking behind this K.P.I is very similar to that of annual Stock Turn except that it is calculated by a slightly different method.

Let's day that you have 54 used vehicles in stock. the example above shows that each one of your vehicles sells every 35 days. Obviously, some of your vehicles will sell quicker than this and some will sell slower, the average being 35 days.

Now let's say that when you sell a vehicle you retain an average Gross Profit of R1,200 per unit. Armed with this information you can say that each of your 54 vehicles will produce a Gross profit of R1,200 every 35 days.

Example:

A) Number of days in 1 year = 365
B) Annual Stock Turn = 10.4
C) Days Stock Turn = 35 days (A ÷ B)

Discussion:

You can now see from this example that the faster your days Stock Turn, the quicker you will get your hands on your profit and therefore less money will be absorbed in costs.

Related Terminology:

Days Supply


Stock Turn (Version 1)

Stock Turn (Version 1)

Annualised Used Unit Sales ÷ Used Units in Stock

Baseline: > 8 times per annum

Description:

Used vehicle Stock Turn tells you the number of times that you turnover your used vehicle stock in 1 year.

When considering the improvement of operational performance with used vehicles, this KPI represents the kingpin around which everything else revolves.

This example below illustrates the used vehicle stock being turned 10.5 times per year. Quite simply, the faster you turn your used vehicle stock, the less money you need to invest and the more profit you will make.

Example:

A) Annualised used vehicle sales = 945
B) Number of units in used vehicle stock = 90
C) Annual Stock Turn = 10.5 (A ÷ B)

Discussion:

Stock Turn affects your business in the two areas that really matter. Improving this KPI tends to increase your profitability in used vehicles and also speeds your company's Circulation of Funds Employed thereby delivering a double benefit.

If you ignore Stock Turn, then all your profits could leak out of your business just as easily as water leaking from a colander because with the passing of time, your costs become larger and your profits smaller.

Related Terminology:

Stock Turn (Version 2)

Stock Turn (Version 2)

Annual Used Sales From Stock ÷ Used Units in Stock

Baseline: > 8 times per annum

Description:

This second version of used vehicle Stock Turn is more accurate than the first for measuring the utilisation of your used vehicle stock. At first glance, version 1 seems to cover everything, that is until you realise that S.O.R. vehicles are not included within your used vehicle stock, but they are included within your sales!

The current trend of the industry is to take more S.O.R. vehicles from the manufacturers and enjoy the benefits of greater selection; smart move and long may it continue.

BUT, you cannot include the sale of these vehicles to evaluate how effective you are with the used vehicle stock that you own because you are creating a huge distortion.

Example:

A) Annual used sales from stock = 657
B) Annual used sales from S.O.R. = 288
C) Annual used sales = 945
D) Number of units in used vehicle stock =   90
E) Annual Stock Turn = 7.30 (A ÷ D)

Discussion:

To calculate your true used vehicle Stock Turn, you must only count those vehicles that have been sold from your stock. All sales from S.O.R. stock should be excluded from the equation.

Related Terminology:


Sub Contract Profitability

Sub Contract Profitability

Sub Contract GP ÷ Sub Contract Sales (x100)

Baseline: >15%

Description:

Sub Contract refers to the jobs that you take in and undertake a 3rd party to conduct on your behalf. An example of this might be the fitting of windscreens for instance.

Example:

A) Sub contract Gross Profit = R784
B) Sub contract Sales = R5,223
C) Gross Profit on Sub Con = 15% (A ÷ B X 100)

Profitability in this area of the business varies greatly between manufacturers. For some truck manufacturers it can be as low as 5% and for some car manufacturers it can be as high as 25%.

There are many reasons for this high tolerance in performance and one of the main reasons being breakdown and recovery.

Discussion:

There are some dealers that do not make any profit margin from Sub Contract sales and research confirms that fear is the key to this shortfall. In other words, the Service Receptionist simply does not add any profit margin to the invoice when recharging the work on to the customer.

This is a thoughtful yet dangerous action to take after all, your dealership is still liable for the work that has been carried out!

Related Terminology: