Consultant Jim Enter likes to say a rep must sell at least $2.5 million per year to earn his keep. That’s too high a number to be useful at many yards. So he crafted a formula that measures any rep’s return on investment (ROI).
Let’s say Mary and Joe work at a yard that netted $133,454 on sales of $1.8 million and recorded $285,986 in expenses. Joe outsold Mary, but at lower margins. On the other hand, Joe gets a guaranteed minimum salary if his earnings don’t top that level, as happened here.
Cost of Goods Sold covers credit used to buy the goods plus the price of holding them in inventory. Each rep then is charged an equal amount for the dealer’s other sales-related costs.
Add the rep’s earnings to those costs and you get the total investment per rep. Then subtract that number from the gross profit, divide it by the total investment, and you get the ROI.
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