What is ROI ?From Wikipedia:Return on investment (ROI) also known as “rate of profit”, is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested.
How Does ROI Work With Used Vehicles?■ We often hear ROI coming from many directions relating to used vehicles.■ What does it really mean???■ Its seldom explained in a fashion that we can understand, and compare.■ ROI is a pragmatic perspective of the used vehicle department.■ ROI is a measure of department performance.
What is Profit Per Day – PPD ?■ If a vehicle is in inventory for 20 days.■ At 20 days the vehicle is sold and generates a profit of $ 1,600.■ The profit per day = $ 1,600 divided by 20 days = $ 80 / day
How to Calculate ROI for 1 Unit - Retail■ A vehicle with a cost of sale (COS) of $ 10,000.■ Is sold retail after 25 days in inventory■ The gross profit = $ 1,200.00■ The profit per day (PPD) = $ 1,200 divided by 25 days = $ 48 / day■ The annualized profit = $ 48 times 365 days = $ 17,520■ Annualized profit of 17,520 divided by the cost of sale 10,000. = 175%■ The ROI for this vehicle = 175%
How to Calculate ROI for a Month – Retail •Go to Retail vs Wholesale in the report section.1- Note the average COS in this case 13,617 2- Average profit = 2,233 3- Average days to sell = 19 Profit per day = 2,233 divided by 19 = 118 / day Annualized = 118 times 365 = 43,070 ROI = 43,070 divided by COS of 13,617 = 316%
How to Calculate ROI for a Quarter / Year – Retail •Go to Executive Summary inthe report section and adjust the dates you require. 1- The Average COS =13,043 2- Average Profit = 2,077 3- Average days to sell = 27 In the Executive Summary the PPD is calculated = $ 77/day Annualized = 77 times 365 = 28,105 ROI = 28,105 divided by COS of 13,043 = 215%
ROI CalculatorThe calculator will enable you to ROI Calculator arrive your ROI. Days Annual Avg GPUUR Units GPUUR Sell PPD Profit COS % COS ROI Consider various alternatives. Actual 150 1150 78 15 5381 14487 7.9% 37%Contact me, I will e-mail you the Alt - A 170 1250 68 18 6710 14487 8.6% 46% Excel spreadsheet that is on this slide. Alt - B 165 1280 35 37 13349 14487 8.8% 92% Note: Change the "day to sell" in scenario A or B to arrive at different ROIs Change the "GPUUR" (Gross Profit Unit Retail) to arrive at different ROI
What is the ROI Benchmark in Canada for 2012? After reviewing over 21,000 vehicles retailed in all areas(east-central-west) of Canada by various dealers (small to large) using AAX. The ROI was 78%With an average of 65 days to retail a vehicle.Take a moment, calculate yourROI and see how you compare.
A Thought on PerformanceFrom Tony Noland■ “If asked to give one common characteristic, it is the fact that their organizations are process-driven. These internal processes are well-thought out and consistent. All employees are expected to adhere to them.”■ If we think about processes, it is really no different than what we see when we analyze a successful sports team. It has a solid plan, it is disciplined, it executes the plan and members practice, practice, practice. This is true no matter what the sport.■ By following these steps in business, good process become second nature to your staff. This translates to good customer-satisfaction levels, sales and net profits for the organization. In other words, it becomes a culture.■ “It begins with vision which has to be supported by culture.”
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Take a Moment and Thank You! I truly appreciate your feedback, regarding this refresher. Has it been useful? Would you like to see more?On which components of AAX? How often?