For as long as I con remember, we hove all been trying to grow our individual businesses and gain o larger portion of the market shore. It hos always been about turnover, and it is still about turnover (the speed of money) today.
Hove you ever wondered how one of your competitors always seems to be able to deliver more vehicles than you, how someone in your 20 Group was continuously selling 1-to-1 (or more) used vehicles to new, or how they grossed more per unit than you? What about those who were able to experience little or no “wholesale pain”? It’s all about the turn. It’s no secret. We all know that the “quick turners” gross more. That goes for both the new vehicle deportment os well as the used.
The term, “Maximum Turn Guide” refers to the amount of time in days when your best return on investment happens. We all know used vehicles ore o depreciating asset from the moment of acquisition and the time held hos o direct correlation to the amount of return we generate.
In all of the studies I hove ever seen or conducted, the first 30 cloys of life on the lot ore, by for, the days of our best retail opportunity. As any used vehicle monoger knows, on important port of their job is to continually put vehicles on the lot that retail quickly. The more of this that con be accomplished, the better off the store is. Oftentimes, however, we end up choosing to (or having to) retail out of o unit tho! didn’t turn as quickly as we hod hoped. You ore better off toking a wholesale loss, and re-investing the money in o quick turner than to try to ovoid a wholesale loss by retailing out of o vehicle that was probably wrong for your inventory on day one.
When we retail out of o vehicle, we o loke a good cuslomer and put togelher a poor deal to cover the mistake that we made on the day of acquisition. Big box retailers hove long known the speed of money concept and you will not find inventory in these stores that does not move at reloil. The “shelf space” is for too voluoble. If on item moves well, they stock more of ii. If it doesn’t move well, they phase it out and try something else. This is o continual process.
Look at the two examples on the right to see how quickly your money grows when you make the decision to wholesale o vehicle that is not moving. The first example illustrates the individual who keeps hoping !hot the unit will sell and doesn’t wont to toke a wholesale loss at any cost.
The second example illuslrotes a much more complicated scenario of ongoing soles, both wholesale and retail, in the some time period, all of which hove to be added together for a full comparison of the speed of money.
As you con see, the cash flow gain by concentrating on turning the money puts you ahead in this simple example by olmosl $3,200 in the some time period. It is not always about the profit, but it is always about the turn. The speed of your money will determine how much profit there will be. Increase the speed of the money and you will definitely increase your profit.
Increasing the “speed of your money” is simply having more of the right product on the lot more of the time and less of the wrong product toking up shelf space. This sounds easy, and with a well though! out system, it con be accomplished.
Develop and implement a system that will separate your soles, gross and inventory by categories of vehicles (small cars, mid size cars, Sporty Cars, etc), and by model years within each category (used vehicles) or specific model numbers within each new vehicle soles category. Your stocking guide should include your target supply number for each type of vehicle (45-doy supply for used and 60-doy supply for new) based on the actual soles rote, not a forecast.
This stocking guide number should then be compared to the actual total availability for each category. If you ore long or short in any category, develop on action plan with your managers to correct the condition. Doily vigilance in seeing that your action plan is being implemenled is vilol. In reality, most managers say they are “too busy” to manage, or even look at, such a system. They “don’t wont to get bogged down in details.” If that is the case in your slore, make a change in the manager, the current process, the manager’s thinking, or invest in on inventory management system !that will be believed in and used. The benefits of !his type of investment will for outweigh the cost, and increasing the speed of your money will be the result.