What Needs to Be on Every Dealership’s P&L Report

Dealer principals today must stay on top of their business’ financial performance. Simply knowing your financial stats can make the difference between mediocre and excellent profitability at your dealership. 

While the accounting and bookkeeping aspects of dealership operations may not be the aspects of your business that get your blood flowing, they can be very useful for telling you exactly where you stand, where you have leverage in your business, and what decisions you need to make to put your dealership on the path to greater profitability.

There is, as we all know, one financial document that can be most useful to dealers who want to grow their business or turn their dealership into an attractive acquisition target for a deep-pocketed buyer. That document is the P&L report.

Your Profit and Loss statement, also called an Income Statement, is a financial statement that displays your dealership’s revenue, its expenses, and as a result, its level of profitability (either net income or loss). It outlines all parts of the formula: Revenue – Expenses = Profit

A P&L report represents business operations within a specific period, which can be a month, a quarter, a year, or any other informative timespan.

But it’s not quite that simple

P&L for an automobile dealership can get complicated, because one dealership has multiple distinct departments, each of which has its own revenue and expense profile. These business units include:

• New car sales
• New vehicle leasing
• Used car sales
• Service and parts
• Body shop (if you have one)

Each performs differently from the others, so you must know how they all perform over time, separately and together, to make decisions that will improve your overall business.

Related: Will The Used Car Market Crash?

Within the general categories of revenue and expenses, there are many subcategories, all of which should be listed on your dealership’s P&L report. Here’s an overview:

Your total revenue is your “top line.” Subtract all expenses to get your “bottom line” or “net income.” A healthy bottom line is advantageous, not just for you, but also for attracting potential buyers if you plan to sell your dealership.

There may be other categories and expenses that can impact your bottom line.  For example, some dealerships are utilizing partnerships with ride share services such as Lyft to reduce the need to have so many loaner cars, and thus reducing costs in buying, running, and maintaining their own fleet of loaner cars.

Your total revenue is your “top line.” Subtract all expenses to get your “bottom line” or “net income.” A healthy bottom line is advantageous, not just for you, but also for attracting potential buyers if you plan to sell your dealership.

Your P&L can tell you a lot about how well – and how profitably – your auto dealership is operating. Red flags that may pop up on your P&L report can point you towards serious problem areas that need to be fixed. These warning signs can include:

• Sagging sales
• Declining profits
• Reduced profit margins on products and services
• Unexplained increases in expenses
• Inconsistent growth over time

Your car dealership’s P&L statement lets you see exactly where you need to increase sales, improve profitability, reduce costs, or pursue some combination of these strategies.

While you need to have an accurate and up-to-date P&L report to monitor the ongoing status of your dealership, it can also be a great tool if you have any present or future plans to buy another dealership or sell the business. Every item on the P&L statement is worthy of analysis. Taken both individually and together, these P&L items can reveal how well the business is operating.

If you are considering buying an additional dealership, an accurate P&L report from your profitable, growing auto dealership will show both the seller and your potential lenders that you are fully capable of managing the additional debt needed to finance the transaction. Your P&L is a symbol of your creditworthiness and proof that you have the skills to run your new dealership in the same capable and profitable way.

If you have plans to sell your dealership, that same profit-heavy P&L statement demonstrates that your dealership has the right people and management systems in place to continue successfully into the future, long after the sale has concluded. Even if the buying entity plans to come in with its own team and systems, your P&L report will show that the business has the inherent ability to operate profitably. As such, your P&L report can help you get a more competitive price for your dealership sale.

If you have plans to sell your dealership, that same profit-heavy P&L statement demonstrates that your dealership has the right people and management systems in place to continue successfully into the future, long after the sale has been concluded. Even if the buying entity plans to come in with its own team and systems, your P&L report will show that your business has the inherent ability to be operated profitably. As such, your P&L report can help you get a more competitive price for your dealership sale.

DCG knows how important an accurate P&L report is when presenting your dealership to both potential buyers and sellers. Rock-solid P&L numbers will make the case that you’ve run your dealership properly and profitably, with no red flags to create uncertainty.

We are an advisory and full-service mergers and acquisitions company in every sense of the term. Our M&A Advisors are there for you, from the moment you begin considering a purchase or sale through the closing of the transaction and beyond. We can provide advisory services as you start to explore your opportunities, and we walk with you through an M&A process from the beginning through the final signatures on the agreement. Our decades of established resources and relationships ensure strong value in our consulting services and the success of your new acquisition.

DCG has an impeccable reputation and a long track record of proven results, because we’re committed to being your trusted advisor before, during, and beyond the sale. Our team has personally closed billions in transactions to date. Our experienced experts consistently provide sound guidance and manage efficient, high-return dealership transactions.

Speak directly with an Automotive M&A specialist and learn how our expertise can help you start to explore your possibilities or get the most out of your next dealership sale or purchase.

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