I am a really big fan of the month of January. You get the best of both worlds. You get to look behind at the full year that we just completed while being able to plan for the 12 months that we are about to embark on.
Failure to understand how we arrived were we are is a big problem. We need to look at a couple of key numbers. What did we spend on parts vehicles during 2017? How many units did that equate to? What is the average vehicle cost? How much did you sell from your own inventory? How many vehicles did you dismantle? What did you spend in labor to do all of this? What did the rest of your expenses total up to? The sum of all of these numbers equals the profit for the company.
This is the basics of looking back and if those results were acceptable then how do you repeat them in 2018. If they can be improved this is the time to identify what areas are the easiest to improve. One of the great things about January is that we truly break things back down to the basics. Inventory tends to be the number one driving factor of our in stock sales. The more we buy the more we sell tends to be true for most all of us. If sales are flat the first question to ask is did we spend more or less on salvage? It tends to be a strange tendency that sales go down when we spend less on vehicles or have a large decrease in average car cost.
In order to maximize the operation we need to process vehicles that ultimately produce part sales, as in engines and transmissions. The more of those parts that we have ready the better we will perform on in stock sales. Remember that electronic parts locating allows demand to find you an overwhelming percentage of the time. The idea is to balance purchasing and dismantling at a peak performance level. Having your past performance in dismantling in front of you forces you to look at how you performed and how can you get a little bit more out of that department. After all you did have a back log of vehicles that were purchased in 2017 but did not get dismantled in 2017.
Labor is one of the few expenses that you have direct control of. The idea is to increase the amount of money everyone makes while decreasing the percentage of sales it represents. Another way to look at it is how much sales can your labor support? We have to make money and need people to accomplish this but keeping things in the proper balance is required.
Looking over the rest of your expenses as they tell an interesting story. Between misclassifications and general creep the total expenses can easily sneak up to unacceptable levels. Looking at a calendar year’s worth of expenses should have taken everything that happens into account. This is also a great time to look over your accounts receivable. The time of looking forward involved paying up for past sins and poor decisions on who to charge to or whatever bad deals that we do not want to credit need dealt with. It keeps you focused on doing better to make sure that the problems do not repeat themselves.
January is a great time to work on your business instead of just in your business. We should have rested and recharged over the holiday periods and winter weather should be in full effect for everyone. The good days of selling are upon us and the amount of salvage available should be trending up. Make a plan on how your 2018 is going to go and then go about doing the things to make it happen. Write down your goals and the steps required to make them happen. Assign deadlines for these things to happen and celebrate your successes when they happen and make up for lost time when you come up short.
Mike Kunkel Bill Stevens
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