Planning for profit in 2021
While Tire shops experience a drastic decline in business come January there is an opportunity to make very good use of this time.
Reflecting on your previous years’ performance is one of them. This is the foundation of a forecast for your up-coming year.
If you had a terrible year in 2020, then great it’s now behind you. You have the opportunity to learn from the experience and the ability to analyze the impact of your decisions.
Looking at prior years’ financial performance is hindsight that can be used as foresight, you now have hindsight 20/20 vision to leverage your shops performance for 2021.
A budget is a guide of what to expect in the future; however, our industry (the accounting profession) is moving away from the static budget and embracing the dynamic rolling forecast.
The difference with a rolling forecast is the fact that we create a basis for our future year, broken down by month and smoothed out over a quarter (since weather tends to fluctuate over the season, quarters are the perfect smoothing timeframe for a tire shop forecast) and we change it as new information arises.
Changes like a global pandemic on the closing of the first quarter in 2020!
How to create your forecast for 2021
Print out your 2020 monthly income statements/profit and loss statement, for March and April use 2019 data.
Apply goals to each month, based on consultant or franchisor provided figures, if you don’t have any you can request my Ideal Tire Shop Benchmarks.
Go to https://pdcauto.com/ enter your information in the section that says “Download our free financial benchmark diagnostic” and it will be delivered right to your inbox.
Now it’s easy as 1, 2, 3…
- If you don’t meet the best gross profit margin % targets on parts and tires start with bumping up those sales figures based on achieving those targets (that’s just leveraging better markup with existing customer work)
- Increasing sales by factoring in more work sold on inspections and
- New customers.
Additional considerations
At year-end I always ask owners to evaluate their Capital Assets.
- Is machinery in the shop in good shape?
- Do you need new hoists or other expensive equipment?
- Does the shop need any repairs or maintenance?
Considering record low interest rates I recommend funding these acquisitions on credit.
If you have existing loans, evaluate refinancing plans; speak to your banker and and possibly other institutions to shop your business around and obtain the best rate and financing plans for your business needs.
***Note also that considering the impact of Covid on 2020 financials, I’ve been having success submitting future forecasts as an additional consideration on lending applications. ***
Same for your business insurance, with rates expected to increase now is the time to shop around.
Cheers to a successful 2021!
P.S. – If you want to learn the secret to maximizing the bottom line of your business while working less hours in it, then join me Thursday January 21, 2021 for a complimentary live webinar.
This 45 minute investment of your time has the potential to radically improve your shops financial performance and your personal life.