Especially in a downturn market, absorption rate is a popular topic. Everyone is looking for the answer to the question, “How can we improve our sales and increase our cash flow during these depressing times in our business?” More importantly, Absorption Rate is a measurement that should be reviewed monthly by equipment dealerships’ owners and all department managers—and not just during market downturns. If that is the case, then it may be too late for your dealership.
Successful dealers understand it is smart business to push Absorption Rate as high as possible. The guideline is 100%, but there is nothing that says it should stop there. I know of many dealers who have pushed it as high as 150% to 160%!