How to determine wholesale break even point?

[LOWAIRD1964]

Basically a new gm came in to our dealership and wants us to "pickup" our wholesale. I have been here for almost 10 years and we never really where real big into wholesale. There are 2 big wholesale dealers within 20 miles who run the area. I took over as manager about a year ago and not that I dont want to pickup some new accounts as well I want to know how much of a discount we should be giving away. I really dont want to give away the store but some new accounts would be nice. I know there is a way to figure out a break even point. Anyone know how to figure it out?

[tcollins]

Scot Strong originally posted this somewhere:

"Take your total sales and subtract the gross profit -- this result is your total "cost of sales". Next, divide your total expenses by the cost of sales. This result is technically what percentage you need to mark every part you sell up just to break even. Many parts will sell for a higher percent, many will sell for a lesser percent -- this is an average.
Next, take your wholesale sales and subtract wholesale gross profit -- this equals the "cost of sales" for your wholesale business. Multiply this times the "percentage to break even" you calculated above. The result is how much gross profit you needed to generate on wholesale to break even. Now then, figure out what percent of your total sales was wholesale. Multiply this percent times your purchase discounts -- this is the amount of discount that is attributable to wholesale.
Add your gross profit on wholesale to this percent of purchase discount -- this is how much gross profit you actually generated against that portion of the expenses. If you generated less gross and purchase discount than the calculated portion of expense, you might want to reconsider your wholesale philosophy."

Once you have this number, which I have found over the years to run between 15-25% depending on how much debt the DP expects the parts department to carry, you have to decide what percentage above this is a reasonable return to the dealer as well as what percentage is competitive in the market. There is a growing trend with dealers to leave wholesale completely and eliminate the expenses related to it (such as a truck, driver, liability, counter person(s), computer expense, inventory holding, storage, etc) because the margins have become so slim, particularly with the domestics because there are so many of them so close together. You should find this very enlightening and can use the same formula for calculating break even on any type of sale such as internals. Hope it helps.

[CTSVOWNER]

We don't do wholesale as there is a dealership 60 miles away that will sell for much less than our boss is willing to. Back when we did do wholesale we had a few shops that would have us order everything on the insurance estimate. Then after a week would end up trying to return that radiator support for the Pontiac Vibe (were Chevrolet only) and that one piece would loose all of our profit.
Make sure you establish return policy rules, and stick with them.