FEATURE STORY
By Jim Yount
Five keystone pillars of profit (Part III)
Cost of goods and product gross profit performance
I
n the second article of this series
in November 2013 Outdoor Power
Equipment, you may recall that I
referenced a case history taken from
Jim Yount Success Dynamics (JYSD)
consulting files. Because of the ongoing
recession, I determined the subject would
be best served by selecting a dealer/
retailer prior to the year 2008.
I am pleased to report that the case
history dealer we selected had followed
his personalized JYSD strategic business
plan. He made recommended adjustments
and began tracking results to confirm
profit margins were improving. At the end
of four years, he had enjoyed sales growth
of nearly 50 percent.
Reviewing Product Performance and
Net Sales Mix Ratio pages from the case
16
history, which were completed during
the process of developing a personalized
Strategic Business Plan, we at JYSD were
able to create the following analysis.
Together, let's expand the analysis of
items listed in article two and discuss how
to make a difference. Remember in article
two, annual NET SALES (No brand ID)
were $3,400,000. By combining the actual
cost of equipment, parts and accessories,
COST OF GOODS (which is the second
"keystone pillar of profit") sold totaled
$2,400,000, or 70.59 percent of NET
SALES.
Since there are no cost of goods
directly related to tech service dollars
earned, tech salary/wages are accounted
for in the total cost of payroll. At JYSD,
we track service department labor
OUTDOOR POWER EQUIPMENT
earnings as 100-percent profit. Cost of
parts and accessories associated with
completing service department work
orders are accounted for in the cost of
total parts and accessories sold. Service
department numbers are not included
in this analysis. The service department
is a stand-alone subject. As we progress,
remember: "The only way to keep
score in business is to count the
money."
When counting and dividing most
things for distribution, we use percentages.
The total amount of that which is being
divided becomes 100 percent. Here is a
mathematical example of dividing and
spending money.You sell an item for
$100.00. The item costs $65.00. The gross
profit is $35.00. What percent is $35.00
www.outdoorpowerequipment.com
Image ©istockphoto.com/ozgurdonmaz
Third article in a series
