by JJS » Mon Mar 25, 2019 6:45 pm
I pretty much agree with the others but if your looking for a formula here's the one I'm familiar with.
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. Unless you sell from cost up and use a fixed percentage many parts typically will sell for a higher percent and many will sell for a lower 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 figure out what percentage of your total sales is 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 expenses, you might want to reconsider your wholesale philosophy.
Once you have this number, which I have found over the years (at least in my area) 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 your market. Some dealers have left wholesale completely and eliminate the expenses related to it; such as a delivery vehicle, a driver, liability, counter persons(s), computer expense, inventory holding cost, storage and the big one managing all the returns especially with domestic dealers who tend to be a little closer to each other.