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Using information to help you budget for growth

end of life vehicles
Steve explains how you can tell if you need to buy more stock.
Steve Tapner may be a consultant based in Australia, but what many of you may not know is that Australian dismantlers are big users of technology, and in particular, Pinnacle. For the benefit of Pinnacle users in the UK, Steve shares with us the easy way to use their Inventory Management System to help you budget for growth.

If you are using Pinnacle and you think your business could sell more parts, then the easiest way to be sure is to go to Management > Dynamic System Stats. Set the date range for the Last 180 Days and look in the Searches Data on the left side of the screen. There you will see searches data and the number and percentage of parts Found or parts Not Found for the period.

As a general dismantler if the Parts Found percentage is 50% or less you probably have the opportunity to buy more cars as a source of stock that will prove profitable. If you are a specialist the percentage may be a little higher but you should still consider buying more.

Whilst you’re in this screen in Pinnacle change the drop down in the middle of the screen so that the table, pie chart or bar chart on the right shows you Model Searches. This will show you which models of car you are getting most requests for and so give you some guidance on which cars to buy as a source of the parts your customers are asking for.

Steve Tapner
Steve Tapner is as a past owner of a dismantling business in Australia but more recently (since 2004) he has worked with Actual Systems which then became Hollander International Australia, following its acquisition by Solera Inc. This period saw the introduction of the Pinnacle inventory and management software to the Australian market - from the first sites in late 2004 to 100 plus sites in Australia and New Zealand by late 2014. Since that time Steve has been working as a trainer and independent consultant to the industry.

We're hoping that Steve will be presenting at CARS 2016 which will be a great opportunity for us all to benefit from his experience. If you have any questions or would like to ask Steve anything, then contact him by email here.
That answers one question when you are thinking of buying more cars but leaves a couple more to consider such as how many is the right number of cars for your business?

To decide on the right number begin by using your B1 Vehicle Profitability Report to establish your “Historic Cost of Goods” figure. This can be found in the B1 (it is the value in the second column in from the RHS of the report) if you run the report for a group of cars that have had time to make a profit. Choosing last calendar years cars would be okay at this time of year for example.

Then use the S30 Sales by Month report to establish the percentage of the total sales that come from selling dismantled parts.

From that calculate how much you NEED to spend each month on car buying to achieve the outcomes you have decided on.

This is an example based on some fairly standard figures for a small dismantler (sorry they're in $ but the principle's the same):
  • 60% of my $1m turnover came from cars dismantled. That is $600k.
  • From the B1 Report I know that my cars cost me 45% of the sales they create: 45% of $600k is $270k.
  • These are annual figures so divide $270k by 12.
  • I need to spend $22,500 per month on buying cars to sustain the current sales level.
  • So the right number of cars is the number $22,500 will buy. Back to the B1 and my average cost of vehicles is $822 per car. So currently 27 cars per month on average.
You may find that you do sell more each month than these figures show that you should, this comes about when you sell older stock. But we are not budgeting for these sales.

So if I want to grow my sales of dismantled parts then I will need to buy (and process) more cars. Using the example above and looking to increase dismantled part sales by 15% I will need to spend nearly $26,000 per month - an increase of $3,500.

So the third question we want to answer if we are thinking of growing the business is how much extra cash is needed to fund that growth? If we now know how much to spend each month we can begin to budget but to do that we also need to know how long it takes us to get the investment in each car back in our bank account. The B1 Report also provides us with this information by way of the Days to Break Even value for each car and as an average for all cars at the bottom of the report.

So if it typically takes us 90 days to “Break Even” and another 30 Days for our customers to pay us we are going to need to have 4 x $3,500 ($14,000) to invest in growth before we begin to get a sustainable return on our extra stock purchases.

I am not sure I have made this sound as simple as I meant it to sound, but this is a calculation worth doing if you want to plan growth or maintain consistent sales in your dismantling business.

November 2015

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