DealersEdge Professional Forums

Does anyone have a procedure/form/template for doing a wholesale analysis? I would like to know if we are making a profit or just having a good time. Please assist.

Hi Neil,

Since I'm not familiar with the complexity of your parts operation number of franchises, number of locations, etc. - barring detailed analysis of your wholesale performance, here is a quick procedure you can perform which may shed some light.

Concentrate your analysis efforts on four key areas for percent of change, over previous reporting periods,since the wholesale program was started: (1) Wholesale sales increase; (2) Wholesale gross profit increase; (3) Personnel and Semi-fixed expense increase; (4) Net profit increase. Then examine inventory true turnover and wholesale accounts receivable aging.

Obviously, there should be an increase in sales. While the actual percentage of gross profit to sales is fairly consistent - because it's based on your selling price - there should be a comparable increase in gross profits proportionate to the sales increase. Total operating expenses - personnel, semi-fixed - as a percent of wholesale gross profit, necessary to accomodate the wholesale operation, should be less than 80 percent. If all is well there should be an increase in net profit before taxes. All this information should be available from your departments income statement.

Since you probably added to your inventory and possibly beefed up some on-hand quantities, examining true inventory turns will tell you if the profitability of the inventory increased, stayed the same, or declined. Since the measurement of true turns ignores all inventory purchases, except those made for stock replenishment, any decrease could signify a loss of profitability relative to the wholesale program.

Finally, accounts receivable, an often over looked area, could cost the dealership money. Say for example from the time the wholesale customer purchased the part until the bill was paid in full 60 days lapsed. This is possible without the customer being past due. The result would be an approximate loss of ten cents on every dollar. According to the U. S. Department of Commerce a 60 day account is worth $0.90 per dollar.

To assess the affects of inventory turnover and receivables on the wholesale performance you would need the help of your dealerships accountant or CFO, but this must be done to properly evaluate wholesale profitability.

Hope this helps.

Gary