Parts Department ROI
Posted: Wed Jul 14, 1999 11:07 amIs there a generally accepted formula for accuratly calculating a Parts Departments monthly, YTD and annual ROI?
Tommy....
The quick answer to "accepted method" is "No"! But, there is a method that you could use to measure your progress, and possibly satisfy yourself and/or your dealer. Determine from your Controller, the Total Investment in the Parts Department. This would include Inventories, Total Receivables, and Allocated Furniture, Fixtures, Vehicles, and Equipment. The "Return" is the Departmental Net Profit (if that can be reasonably accurately determined). "ROI" is obviously the "Return" divided by the "Investment". "ROI" is always annualized; so the purest form of calculation is the Annual Departmental Net Profit divided by the "Average" Monthly Investment for the 12 Month Period; You can, however, guage your progress or "pace" by taking a "Monthly" Net Profit x 12 Months, and dividing by your Average Monthly Investment; or by taking your YTD Net Profit divided by No. of Months in YTD Period x 12 Months, and dividing by your Average Monthly Investment. I hope this helps and isn't too confusing.
Garry House
NCM Consulting Division
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