Why should I measure this?
This indicator allows the dealership to understand profitability per currency unit of revenue. It takes the dealership’s pre-tax earnings and divides them by sales.
At the second level, this indicator is broken down for more detailed information:
- Monthly ROS evolution.
- Business ROS considers only the direct results of the dealership’s core activities, including sales, costs, and expenses related to parts, services, and vehicles. It excludes administrative expenses related to support activities, such as human resources or accounting firm expenses. This indicator helps determine whether the core business is healthy or not.
- Operational ROS includes necessary operational expenses, such as administrative costs. The percentage difference between Operational ROS and Business ROS corresponds to the necessary administrative costs to keep the business running. For example, if the Operational ROS exceeds the desired target but drops when necessary operational expenses are included, it indicates other results, such as the sale of an asset or a poor investment, which further decrease the ROS.
If the Operational ROS is strong, the Business ROS is also strong, but if the Total ROS is weak, it is essential to identify the other expenses unrelated to the dealership’s core activities that caused the loss. As mentioned earlier, this could be due to a poor investment in the stock market (e.g., buying/selling shares) that negatively impacts the overall result. However, excluding that poor investment, the dealership’s core business remains healthy.
Which dashboard is this KPI on?
Managers
What department does it affect?
Dealership. In a future version, it will also be broken down by department.
Measurement frequency
Monthly
Target
A target value defined by the dealership, which remains consistent each month.
What happens if it is green?
The desired profitability per currency unit of revenue was achieved.
What happens if it is red?
The desired profitability per currency unit of revenue was not achieved.
Improvement Strategies
- When revenue increases, analyze not the variable expenses (which should normally rise), but ensure fixed expenses do not increase. Higher revenue with the same level of fixed expenses should lead to an increase in dealership profits and total ROS.
- Each department should conduct a comprehensive review of sales composition, costs, and expenses.
- Analyze expense allocations. This is crucial because some departments may absorb costs that do not entirely belong to them.
Relationship with other indicators
This indicator is linked to Revenue indicators because, under normal conditions, an increase in revenue should lead to an increase in ROS. If this does not happen when revenue increases, it could be because fixed expenses that were thought to be fixed actually rose (due to a classification error) or additional personnel were hired to support the increased revenue, leading to a direct increase in fixed costs.
Formula
Dealership Pre-Tax Earnings / Sales
Dealership Management Taken to the Next Level
