March '20

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106 • RV PRO • March 2020 rv-pro.com RV I N S I G H T The 4-1-1 on R.O.A.I. The best dealerships know what it is and why it's important. Do you? RV inventories on dealerships' lots have reduced year over year. Great job to all of you for working on one of the key factors when running a business. But are your inventories really working for you? In order to know the answer to that ques- tion, you should find out what your R.O.A.I. is. R.O.A.I. stands for Return On Average Inven- tory. In other words, for the inventory I have on my lot (on average), did I get a good return? So, how much available income, or gross margin, did you make over the past 12 months, and how much (average) inventory did you keep? To calculate your R.O.A.I., divide your available income on your new unit sales over the past 12 months by your average new inven- tory amount for the same period (see Figure 1 on page 107 to see how this displays). If you had an average of $3 million of new inventory over the past 12 months, and your available income that you made selling new units during that same period was $1.2 mil- lion, then your R.O.A.I. on new inventory was 40 percent. So, if your R.O.A.I. is less than 40 percent, then while you may have done an excellent job in reducing your inventory, you may still not be getting a good return on it. Spader Business Management does an excellent job for dealers in providing this measurement. Because of that, we know that a good R.O.A.I percentage on new is 40 percent plus. Let's look at used inventory. This is a very different situation, where sev- eral dealers are getting in excess of 100 percent return on average inventory. If you are not doing this, then I would guess that your low performance with used units is hampering your new sales. If you aren't suc- cessful with used, you are not going to be very excited about taking in any more trades, and will thereby miss a lot of opportunities. So, what are the dealers doing to have such good numbers when it comes to R.O.A.I.? For used, they have a tight process for taking the used units in on trade – firm valuation process with detailed valuation forms. Then, when the unit comes in, they have a process to inspect the unit, comparing it to the eval- uation sheet done previously – this is done by either a manager or even a technician (not the salesperson, whose deal it is). Any discrepancies will involve showing the customer the findings and renegotiating the deal as necessary. Next, the used unit will go through the service department and made ready for sale – everything fixed as per the dealership's policy, A good, solid sales process will help improve your R.OA.I. on both new and used inventory. By Michael Rees Michael Rees is the president of A Word of Training, a Valrico, Fla.- based firm that provides parts, service, sales, F&I and management training to industry professionals in the RV, auto and marine industries. Rees also facilitates some Spader Business Management groups. For more information, visit https:// aworldoftraining.com.

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