Hi Sara,
Our sales numbers for the dealership look solid, but we’re always tight on cash. I don’t feel like I have a clear picture of what’s really going on financially. How do I figure out if I’m actually making money?
This is one of the most important questions a dealer can ask. The fact that you’re asking means you’re already heading in the right direction.
In The Dealership Equation, we talk about a simple framework that helps dealership owners and managers finally make sense of their dealership financials. It all comes down to three key questions:
1. What do you touch?
2. What does it cost you to touch it?
3. What do you keep after all that touching?
Okay, that might sound a little awkward, but let’s break it down.
Start with What You Touch
This is your total dealership revenue, every dollar that flows through your dealership from equipment sales, parts sales, and service work. It’s the big number that shows up on your financials and usually makes people feel pretty good. A lot of dealers look at $3 million in revenue and assume they’re crushing it.
But revenue is only one piece of the story. High revenue with low profit margins or bloated operating expenses can still leave you broke.
So yes, know how much money is moving through your business. Just don’t confuse that number with actual dealership profitability.
Know What It Costs to Touch It
This is where things get real. Every dollar you spend to run your dealership, from parts cost and technician pay to utilities, rent, and surprise expenses, lives in this category. These are your dealership operating costs.
If you want to improve profit margins in your dealership, you need to know your gross profit by department. That means looking at how much you’re keeping after the direct costs in sales, parts, and service. Don’t lump everything together. Break it out. That’s how you find out if one department is carrying the others or quietly draining the business.
For example, a $50,000 service department revenue sounds great. But if you’re only keeping $2,000 of that after paying techs and covering costs, you’ve got a problem that a few more oil changes won’t fix. This is where you need to track the profitability of the service department and the efficiency of technicians.
Focus on What You Keep
This is the number that really matters: your net profit. What’s left after you pay everyone and everything else? That’s what you actually keep. That’s what pays for growth, rainy days, and your kid’s braces.
We recommend aiming for 10 percent net profitability in your dealership. If you touch $2 million in revenue, you should be keeping $200,000. If you’re only holding on to $12.63 and a shop rag, it’s time to look closer at where the
money is going.
Your financial reports should be helping you make better decisions. They should show you whether your pricing, staffing, and processes are actually working or whether something needs to change.
You Don’t Have to Figure It Out Alone
If all this sounds like a lot, I promise it doesn’t have to be. Here are some ways we can help:
1. Join our Dealer Success Groups – If you’re ready for ongoing support, monthly accountability, and hands-on help making your dealership more profitable, this is for you. Every month, we help you look at the right numbers, make sense of your financial statements, and create a plan to improve them.
👉 Click here to learn more about Dealer Success Groups
2. Read The Dealership Equation – If your financials feel confusing (or downright painful), this book will help you make sense of it all. It’s the exact framework we use with dealers in our programs to improve cash flow and profitability.
👉 Grab your copy here
3. Keep Reading These Emails – Every week, we answer real questions from real dealers with no fluff and no corporate-speak. Just straight talk to help you run a more profitable, less stressful business.
You work too hard to wonder where the money went. Let’s make sure your dealership financials are clear, your profit margins are strong, and your efforts actually show up on the bottom line.
– Sara