Recently I’ve received lots of questions from dealers asking the best way to determine which brands they should keep and which ones should go. There’s a lot that goes into this question as it’s not only the front-side profitability that comes into play, but other things like finance opportunities, fixed operations support, relationships with the brand (is the OEM a partner in your business, or just a vendor) and future opportunities.
While all of those components matter, in the powersports industry we have the ability to make money on the vehicles we sell, and we should exercise that right. If we can’t make money on the sale of the vehicle, I’m not as interested in the other areas of profitability associated with those brands.
The simplest metric to rate brand viability is a simple Return On Average Inventory (ROAI) calculation. Calculate the front side Gross Profit generated over the last 12 months (by brand) and divide that by your average inventory values for that brand over the same time period. Rate all the brands you sell and then see if your gut aligns with the data. Any brands in the single digits are suspect.
How do you determine if a brand is carrying its weight?
#dealership #motorcycles #powersports #dealers