Issue link: https://read.dmtmag.com/i/671713
May 2016 | Boating Industry | 35 [ Building a better budget ] www.BoatingIndustry.com Dealers also use marine management systems like IDS as a main budgetary collection tool and tracking system. "I think that it really helps us react and to adjust the way we're managing on an almost daily basis. It gives us a guide on what we should be doing [and] focusing on," said John Jay Irwin, vice president and parts & accessories director of Irwin Marine. (Find a list of budgeting resources on p. 36) Planning out your year Dealers should begin planning for the upcoming fiscal year a couple months before the current fis- cal year-end, whether year-end is a calendar or non-calendar fiscal year. "It gives us some runway for the inevitable de- lays that will happen: people traveling and those kinds of things. By the time we really get a prelimi- nary budget together, it could be mid-November by then. It gives us more planning time and time for contingencies," said Majewski. The owners and accountants, if you have them, should work together to create a budget, but it is also important to involve the managers of all departments across the dealership. Handing these managers numbers at the beginning of the year that they didn't have any part in creating al- lows them to deflect if those numbers aren't met. "They're intimately involved in their business and you want their buy-in in the creation of that budget. You want them to own those numbers they're coming up with," said Parker. "It would be a lot easier just to sit down and have the general manager come up with a bud- get, but it wouldn't mean anything unless you share that and have people totally involved in that whole process," added Irwin. Start with last year's actuals to create the bud- get and manage every number month to month. This acts as your base point, which gives you more confidence in projecting for the next year. It is also beneficial to look at monthly trends to help create a cohesive budget for the upcoming fiscal year. Irwin Marine often looks at monthly trends in a period of three or five years. Developing sales trends by month makes it easy for dealers to use those trends to project next year's sales. "We were introduced to that by Spader a long time ago, and really taking a look at it on a yearly [basis] gives you a little bit of inaccuracy. But hav- ing three years trending really gives you a big ad- vantage," said Irwin. "What we wind up with at the end of the year has been pretty close almost down to the last dollar. It's pretty amazing how that works out." This is useful particularly in the seasonality of a boat business, as creating your monthly budget is not as simple as taking your yearly sales and dividing by 12. "If you take and average your monthly sales – in other words, the month of January is [for ex- ample] 2.5 percent – if you will average the dollar amounts by month as a percentage of the total, you can total those up for three to five years and get a really solid amount for each month as to what your monthly sales trends will be for that department," Parker said. "And then you add it up and do it for the whole company as well." Majewski is a bit unique in that he keeps up to 10 years of data. This could come from his ac- counting experience, but he says it also stems from what he has learned about the boating industry. "What I've learned about this industry is it seems to run in long-term, up-and-down cycles," he said. Pre-recession, the industry was doing a great job and when the recession did hit, many dealers bottomed out. However, in the past few years dealers have started to make a comeback. "Now we find it almost useful to look at what we were doing pre-recession again to [ask] are we seeing the same kind of margins we see in a good market? We know we're doing better than at the bottom of the recession [but] that's not our bench- mark," said Majewski. "We want to know how do we do when we are really doing well?" Track, track, track At minimum, dealers should be tracking their budget monthly. In fact, in some cases, dealers can track budgets more often, such as for unit sales and the sales of labor. Dealers can take a weekly budget 20 GROUPS MAKE BUDGETING EASIER For dealers who are a part of a 20 group, it comes as no surprise to hear that being a 20 group member can exponentially improve how you create, manage and review a bud- get. The non-competing dealers in these groups have the opportunity to learn from one another's budgeting processes and see how one dealer is getting five points more for the same boats they're selling. "Then you find out the system or process they're using in order to be able to get those higher margins. Many times it's just asking for it," said Parker. "It's that outside influ- ence that can explain to [dealers] how others are doing [budgeting] and doing better than [they] are in [certain] areas. It gives them the ability to change their system. You change the system, you'll change your financials." Irwin Marine is part of Spader 20 groups, which meet for three days three times a year, and 1.5 days of that time is spent reviewing every- one's numbers, looking at trends and making comparisons. "Different people in the group will come up with different ways to look at things," said Irwin. "It gives you all kinds of perspectives: what your expense ratios are for employ- ees, what you should be spending for each department and for each account, [etc.]." "It would be a lot easier just to ... come up with a budget, but it wouldn't mean anything unless you share that and have people totally involved in that whole process." — John Jay Irwin, vice president and parts & accessories director of Irwin Marine