1) Every business should undergo an annual strategic profit-planning process. This is where the plans meet the budget and accommodations are made to find the success you deserve. For those companies looking to get serious about planning for their success, here are four key components to getting you there.
Forecast all income and expenses on an annual basis first, before breaking them down into monthly amounts.
2) Project sales and gross margins
a. Boat sales should be projected at least by brand, but I recommend projecting them down to the model. Include sales, gross margin percentages and gross margin dollars, in addition to unit counts and average unit selling price.
b. Parts and accessories should be projected by category, such as over-the-counter purchases, repair orders, sublet and warranty parts. Assign sales dollars and appropriate gross margin percentages and gross margin dollars to each category.
c. Service labor sales should be broken down and projected by, at the very least, retail labor, warranty labor and rigging.
3) Project expenses by comparing line-by-line costs from the prior year’s financials to expectations for the coming year. It is helpful to break these down into major categories.
a. Personnel expenses should be projected for each employee. Be sure to take into account salary increases, promotions, bonuses, as well as the other costs such as payroll taxes, health insurance, workman’s compensation insurance, uniforms, etc.
b. Marketing, covering such categories as boat shows, print, billboard, Internet, radio, and television advertising; in-house events; and keeping in mind any co-op expectations. Plug in the amounts you expect to spend each month in each of these categories.
c. Floor-plan interest, which can be projected by estimating the average inventory amounts each month and applying an interest factor to it. Be sure to take into account the free floor-plan months.
d. Fixed expenses, including rent, depreciation, commercial insurance, vehicle and equipment interest, etc.
e. Semi-fixed expenses, which are items that do not fall into the other categories
4) Non-operating income and expenses, which include finance and insurance, along with bad debts, gain or loss on the sale of assets, etc.
If you’d like to go into more detail with the practical application of this concept, I recommend all of my clients attend Spader Business Management’s 5-Day Total Management Workshop.