Net-to-Gross at a Dealership: The 20% Bar
Net-to-gross is the share of every gross profit dollar a dealership keeps as net profit. For the whole store, 20% is the healthy bar and 30% is best in class (Pocket20 benchmark).
The formula
Net-to-gross = net profit ÷ total gross profit
Example (hypothetical round numbers): a store with $6.0 million of gross profit and $1.0 million of net profit year to date keeps 1.0 ÷ 6.0 = 16.7%. At the 20% bar, the same gross would leave $1.2 million of net, so the store is about $200,000 short, and the answer is in the expenses.
Benchmarks
Whole store: 20% healthy, 30% best in class (Pocket20 benchmark).
Departments run higher. Service and parts each keep a much bigger share of their own gross. Never hold a single department to the 20% whole-store bar.
Why it is the headline number
Net-to-gross answers the question owners care about most: of all the gross the store worked to earn, how much did it keep? It separates two different problems:
Low gross, normal net-to-gross: the store spends sensibly but doesn't produce enough gross. Look at per-unit gross and fixed ops.
Normal gross, low net-to-gross: the store produces gross but spends too much of it. Look at expenses as a percent of gross: personnel, advertising, floor plan and the rest.
How to find it on the statement
Total gross profit and net profit both print on the income summary, for the month and year to date.
Use the year to date. One month can swing on a single deal or an accounting adjustment.
What moves it
Expense lines as a percent of gross. Personnel and selling expense is the biggest. See Personnel expense as a percent of gross.
Advertising per unit. See Dealership advertising cost per vehicle.
Floor plan on aged units. See Floor plan interest.
Net profit as a percent of sales tells a related story. See Dealership net profit percent of sales.
See it on your own statement
Pocket20 makes net-to-gross the headline of every read and shows which expense lines pull it down, in dollars. Get a free read or see a sample read.