Why should I measure this?
This KPI allows the dealership to monitor the evolution of fixed and variable operational expenses in relation to sales. It shows how much of the revenue is consumed by expenses. There is a second level of analysis to view the KPI for each department within the dealership. For example, if you select Parts, you’ll see the expense-to-sales ratio for that department. It’s highly recommended to review this KPI for each business unit to identify if any unit is not meeting its targets.
Observations: The “Other Departments” option refers to accounting entries assigned to sales and expenses not related to parts, services, or units. Some dealerships have additional business areas with specific sales, cost, and expense accounts, such as tire sales. Since these sales should not be included in parts or services, they are assigned to “Other Departments.”
“Other Concepts” include remaining departmental expenses that do not generate sales but must be considered in the global indicator, such as administrative expenses like HR department salaries.
Which dashboard is this KPI on?
Managers
What department does it affect?
Can be measured at the dealership level and, at the second level, by each department.
Measurement frequency
Monthly, using accumulated data from the last 12 months.
Target
A fixed value defined by the dealership.
What happens if it is green?
The level of expenses relative to total revenue is healthy; it is below the established target.
What happens if it is red?
The ratio of expenses to revenue exceeds the planned amount, meaning more was spent than planned, which affects profit margins. Expenses are higher per peso sold than initially budgeted.
Improvement Strategies
Improve this KPI by analyzing the composition of expenses in each department. For example, by selecting a business unit, you can view the expense composition and the contribution of each expense to total revenue. Start analysis with the largest expenses and prioritize addressing them.
Relationship with other indicators
- This KPI is related to the Absorption Factor because controlling expenses in the Parts and Service departments will impact this KPI. If expenses are under control, improving the Absorption Factor will only require focusing on sales and their costs.
- It is also linked to Revenue indicators. As the formula is expenses/revenue, increasing revenue while keeping expenses the same will result in a lower KPI value.
Formula
Expenses / Sales
Dealership Management Taken to the Next Level
