Dealership Net Profit as a Percent of Sales
The Pocket20 benchmark for a franchised dealership's net profit is 4% of total sales, with best-in-class stores at 6.5% or more. Measured against gross instead of sales, a healthy store keeps about 20% of its total gross as net (net-to-gross), and strong stores keep 30%.
The two measures
Net profit % of sales (return on sales) = total dealership net profit ÷ total dealership sales
Net-to-gross = total dealership net profit ÷ total dealership gross profit
Return on sales is the figure most often quoted when stores are compared. Net-to-gross is the one managers can act on, because it shows how much of the gross the store generates survives its expenses.
Net profit % of sales: 4.0% (best-in-class 6.5%+)
Net-to-gross: 20% (best-in-class 30%)
How to find them on the statement
Total sales, total gross and net profit (before or after bonuses and taxes, depending on the manufacturer's format) are on the income summary. Use the same basis every month, and use year-to-date figures.
Where net goes missing
If net-to-gross is under 20%, the gap is in expenses. Check these in order:
Personnel expense as a percent of gross, the largest controllable line.
Advertising per unit and as a percent of gross. See Advertising cost per vehicle.
Floor plan interest net of manufacturer assistance, which grows with aged inventory. See Used car days' supply and aging.
Policy and goodwill. Over about 1% of total gross is worth a look.
Data processing, which now includes the DMS, CRM, website and digital retail tools.
Example (hypothetical round numbers): $8 million of total gross and $1.2 million of net is 15% net-to-gross. At 20%, the same gross would produce $1.6 million of net, a $400,000 net opportunity.
See it on your own statement
Pocket20 reads every expense line on your statement, measures net against benchmarks, and ranks the missed net opportunity in dollars. Get a free read or see a sample read.