A pro forma is like a plan that shows how much money a car seller expects to make and spend. It helps them know if their business will work before they start selling cars.
A retail dealership is a place where people buy cars. They sell cars directly to customers and have to manage things like advertising and money carefully.
A buy here, pay here store is a car dealer that lets people buy cars and pay for them directly to the dealer, which helps people who might not get loans from banks.
Third party lenders are banks or companies outside the car dealer that give people loans to buy cars.
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Hey everyone, welcome to the Monday Minute from Podium, our new friends Jeff and quick
reset to help you lead better, think clearer and build your dealership with intention.
But before we get started, make sure you look through the newsletter, Jeff.
The newsletter lays out the full thing for the week, the why behind it,
and a simple exercises that you can work through with your team.
The Monday Minute is the mindset, the newsletter is the roadmap.
All right, Jeff, let's get going. What are we talking about this week?
Okay, so this one is going to be before you do anything, before you buy your first car,
before you put up your first banner, before you hire a salesperson,
you want to build your dealership out on paper. So if you're starting a dealership or even if
you're trying to level up the one you already have, which is what most of us today are trying to
do, right? It's the pro forma is an optional, it's your actual blueprint of what you're going to do.
So too many dealers just open with excitement and optimism and not enough math. We all hear about
just, well, I love cars, so I decided I'm going to start selling them. But the hard truth is that
you don't know your numbers before you start, you're going to lose control after you start.
So a real pro forma, it answers a few simple but powerful questions. How many cars
can you realistically stock and sell each month? What is the true average front-end grossed?
And what are you actually going to make, right? Like what's my back-end income?
What's my front-end income? What are my warranty products I'm going to sell?
And then you would want a realistic outline of all your fixed expenses. What's my rent?
What's my payroll going to be in that situation? What are my utilities, my insurance,
my different subscriptions I have to carry? There's a lot to it and a pro forma can be
as in detailed as you want it to be, which I would highly recommend you get absolutely as
granular as possible. But what it's going to do is if you can get realistic with it, it's going to
let you know what your break-even point is, right? Not just your dream numbers of what you think
you're going to make because I'm going to sell 50 cars. I'm going to make five grand on each one.
What is your actual survivable number, right? So let's say you have overhead of like 80 grand
and you have an average total gross of say $2,500 a car, front and back gross, let's say,
you need to sell 32 cars just to break even, right? 32, that's a lot. How are you going to do that
if it's just you or just you and your buddy or just you and your wife? So it's important to have
that kind of clarity. And the point is that this clarity is going to create discipline around how
you structure and how you operate your dealership. Yeah, Jeff, actually, I spent time this week doing
this modeling a retail dealership because we're kind of moving into doing that. And so, you know,
most people go wrong here because they don't do the research they need. They assume every car
they sell is going to be all run. They underestimate recondition, they forget about charge backs,
they ignore marketing. But a strong performance, very conservative, assumes friction,
plans for setbacks, you know, it's reality. You know, and in a buy here, pay here store,
you'll talk about cash flow. Cash flow is way more important than gross profit because you can get
in trouble quickly. And if you use the third party lenders, you got to understand all of their fees
if they charge back. What is your real per copy revenue? Here's the mindset. A performer isn't
just for the bank, it's for you. It forces you to think like an operator, not just act like a car
sales guy. And even, you know, even if you've been in business for years, when was the last time you
did this? Rebuild it from scratch. Make sure that you're doing it the right way because markets
change, expenses change. We know that gross is shift. And if you're, if you haven't been
revisiting your math, you may not be making as much money as you think. Yeah, it's very easy.
So that's going to be the assignment this week, guys, is go back and pull your numbers. So look
at historical averages. What is your normal gross front and back per car sale? And then just kind
of challenge some of the assumptions that you have, even for those of us that have existing
dealerships, do I need to have this much overhead? You know, does this pro forma pencil out long term?
If I cut back a little bit here, and even did the same amount of volume with maybe one last
person, one last person on payroll, how does that translate out over 12 months,
you know, to make me more money or keep the dealership doors open? So build it on paper first
because discipline dealers, they don't gamble, they calculate, they take calculated risks and
then move forward with action. Right, Luke? That's awesome, buddy. I love it. Let's build this thing together.
About this episode
Dive into the essentials of building a realistic dealership pro forma to guide your business decisions before launching or scaling your dealership. The hosts emphasize the importance of detailed financial planning, including realistic sales projections, gross profit calculations, and fixed expenses. They discuss common pitfalls like underestimating costs and ignoring cash flow, especially in buy-here-pay-here models. The episode encourages revisiting and updating your pro forma regularly to maintain profitability and discipline, turning enthusiasm into calculated, strategic action.
Welcome to the Monday Minute, brought to you by Podium — your weekly reset to lead better, think clearer, and build your dealership with intention.Before you buy a single car or hire your first salesperson, build your dealership on paper. In this episode, Luke and Jeff break down why a proforma is not optional — it is your blueprint. If you do not know your numbers before you start, you will lose control after you start. Markets change, expenses shift, and grosses move. Disciplined dealers do not gamble. They calculate.Review this week's Sunday newsletter at TheIndependentDealer.com for the full theme and exercises. Not subscribed yet? Sign up now. Let's build this together.SPONSORED BY PODIUM: www.podium.com
