100% AbsorptionPosted: February 24, 2010
What is 100% absorption? I looked up in Wikipedia and found that it has more to do with atoms than dealerships. To a dealer owner, absorption is something quite different. Dealers call it a percentage of total running costs by fixed operation income. That means, the higher the better. Parts and service should be able to support the entire dealership.
Sales income becomes gravy. So why when sales are down, dealers panic? It’s because dealers do not have a good absorption rate. Too much overhead can kill your absorption rate.
When a dealership achieves a 100% absorption rate, they are essentially bullet proof from car sales dips.
How do you achieve your 100%?