To illustrate the returns a strong accessories department can generate, dealership consultant and 20 Group moderator David Parker, president of Parker Business Planning, shared this example from one of the dealers he works with.
The dealership does about $4.5 million in new and used boat sales with an additional 15 percent of that in its accessories/pro shop. Here are his insights into this:
$4.5 million x 15% = $675,000
That’s their pro shop and accessories sales in that dealership. If you multiply that times a 35-percent margin, that gives you gross margin dollars of $236,250. If you back out the wages for the personnel to run that department — in this case we’re going to round it to $86,250, that includes other personnel expense — that leaves $150,000 contribution to overhead coming out of that department.
Now that’s pretty significant, $150,000 of gross margin — what I call contribution to overhead — is pretty significant.
On a separate line, take that
$675,000 x 35%,
again that’s the $236,250, the gross margin dollars, subtract that from the $675,000 and you get cost of sales of $438,750. If you get three turns on that, that’s $146,250 — an investment of capital of roughly $150,000 is all it takes.
But you see what we just said, we invested $150,000 in cash and we got $150,000 contribution to overhead, I’d say that’s definitely worthwhile. If you’re looking at cash-on-cash return, that’s pretty significant.